Are they talking about the decision makers or the guys on the floor who wore funny colored jackets and flashed what looked like gang signs to each other and then wrote down the trades on paper? The second seemed archaic in the 1970s.
Something in between the decision makers and the guys on the floor of the exchange.
Basically the old model was that there would be a big money manager, say it was at Fidelity. He decides he wants to sell AA and buy AMR. He has a salesman at Goldman Sachs whom he calls and says to do the trade. The salesman calls the cash equity trader. Because it’s such a good customer, maybe the the trader tells the salesman that the trade can be done at certain prices, but he does not go into the market with the transaction, he holds onto both positions, GS is now long of AA and short of AMR. It’s up now to the cash equity trader skilfully to get out of both positions at profitable levels using either Goldman’s sales force, or by trading into the exchanges.
That’s as recent as 10 years ago.
Today, pretty much none of that would happen. Fidelity has its own computers, and its own access to all sorts of off-market exchanges. There, using algorithms to disguise their interest (buy v sell) and the size they want to get done, Fidelity can execute those trades very efficiently without anyone front-running the order and only paying a tiny commission relative to what Goldman would have taken back in the day.
Lots of markets are working this way now. The NYSE conducts a relatively tiny percentage of all trades in NYSE listed stocks.
Something in between the decision makers and the guys on the floor of the exchange.
Basically the old model was that there would be a big money manager, say it was at Fidelity. He decides he wants to sell AA and buy AMR. He has a salesman at Goldman Sachs whom he calls and says to do the trade. The salesman calls the cash equity trader. Because it’s such a good customer, maybe the the trader tells the salesman that the trade can be done at certain prices, but he does not go into the market with the transaction, he holds onto both positions, GS is now long of AA and short of AMR. It’s up now to the cash equity trader skilfully to get out of both positions at profitable levels using either Goldman’s sales force, or by trading into the exchanges.
That’s as recent as 10 years ago.
Today, pretty much none of that would happen. Fidelity has its own computers, and its own access to all sorts of off-market exchanges. There, using algorithms to disguise their interest (buy v sell) and the size they want to get done, Fidelity can execute those trades very efficiently without anyone front-running the order and only paying a tiny commission relative to what Goldman would have taken back in the day.
Lots of markets are working this way now. The NYSE conducts a relatively tiny percentage of all trades in NYSE listed stocks.