What is the Trading Floor & How it is done?

Want to learn about the trading floor and all about its activities? A Trading floor is an area where all buying and selling activities of financial instruments such as equity, security, futures, etc happen. 

The Trading floor is basically a literal tangible floor in a building where futures, bonds, equity, options, fixed income, foreign exchange, or commodities trade take place. Flood traders do the buying and selling on behalf of their clients or on behalf of the firm that hires them.

In other words, it is an area where all trading activities related to financial instruments take place. Trading floors operate in various exchanges building such as the Chicago Board of Trade (CBOT) and the New York Stock Exchange (NYSE).

Trading Pit

A trading floor is also known as “the pit” because areas of trading for different securities are generally designed as circular roughly areas where traders have to step down into for execution of a trade. In simple words, the design of the floor was in a circle and traders had to step into it to engage in trading.

How is Trading Done on a Trading Floor?

With the development of E-trading platforms, many of the trading floors have started disappearing one by one, who claimed to be dominant market exchanges once. Now trading is more electronically based.

Trading on the trading floor is done via the “Open outcry” method used by trading and sales professionals. An Open outcry method is perfectly appropriate to the electronic i.e., online trading methods using by modern exchanges.

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