Weekend Reading: The Social Dynamics Of The Trading Desk

Consider the following descriptions:

1. No sooner did you pass the fake fireplace than you heard an ungodly roar, like the roar of a mob... the bond trading room of Pierce & Pierce. It was a vast space, perhaps sixty by eighty feet, but with the same eight-foot ceiling bearing down on your head. It was an oppressive space with a ferocious glare, writhing silhouettes... the arms and torsos of young men... moving in an agitated manner and sweating early in the morning and shouting, which created the roar.
2. It's the size of three aircraft. And the reason for it is that it is a source of pride to the manager. It is difficult to see how traders can communicate shouting at each other across two aircraft carriers. At [Connecticut bank], what you'll find is chaos that looks grand.
3. The key is [to avoid] social awkwardness. Two traders are talking to each other. A third needs a piece of information. He has to interrupt. "Can I interrupt? Can I interrupt?" The key there is the social cost of interruption. Part of my job is to keep those costs down.

Aside from being the descriptions of three totally different types of trading areas, these are among the environments that author Daniel Beunza analyzes to determine how a trader's immediate environment shapes his behavior, his interraction with others, and by implications his trading strategy.

This fascinating paper out of Columbia University which should be mandatory reading for anyone who has ever worked in a hedge fund or plans to run one, provides a scholarly analysis of just how the different things in a trader's daily routine: from the layout of open screens on a Bloomberg terminal, to the desk layout, to the screaming or whispering to discuss new information, to the social hierarchy implications of stacking monitors more than one level high... and so much more.

Focsuing on trading desks including merger arb, index arb, convertible bond arb, statistical arbitrage, and customer sales, there is something in this paper for everyone.

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