Stock exchange floor and floor trading – definition & examples

Long before computers existed, people were already shares were already traded. At that time, the purchase and sale of shares was carried out exclusively the purchase and sale of shares at that time was carried out exclusively with the help of floor trading, which is also known as floor trading. The latter expresses that it is a trade with local presence. Likewise, in earlier times, the term ring trading was used to designate the location within the exchangener of the stock exchange. Traders must visit the exchange floor to buy and sell shares. This explains the term trading floor.

What a stock exchange floor might look like is well reflected in the movie Wolf of Wall Street.

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The stock exchange before the age of the computer: trading on the stock exchange floor

In floor trading traders communicate with each other directly on the trading floor. To do this, the parties call out offers to sell and offers to buy to each other in short form in a special trading language, the stock exchange jargon. In this context, the word money stands for an offer to buy and the word letter for an offer to sell. Likewise, expressive gesticulation by the traders is part of floor trading on the stock exchange floor.

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Floor trading hasa long history

The location of the world’s first stock exchange is disputed: Bruges or Antwerp. Generally, 1409 is considered to be the foundation of the first stock exchange in Bruges. A few years later, the first official building exclusively for the purpose of stock exchange trading was opened in Antwerpand trade was opened in Antwerp. Therefore, the Antwerp people also claim for themselves the origin of the stock exchange. However, the origin of the term is clear. It goes back to the merchant family van der Beurse from Bruges, whose family coat of arms adorned three money boursesrses adorned their coat of arms. Business dinners or other meetings, especially with merchants from Italy, were always held at the family’s home in Bruges. At these meetings there was a lively trade in goods. In the course of time, the niederländische word “beurse” from the Building to the meetings themselves and was subsequently adopted in other European languages. In English, however, the stock exchange is referred to as the “Stock Exchange” or “Commodity Exchange”.

Since the 16th century, Bsince the 16th century, regulated trade in goods and financial products has been conducted on stock exchanges.

At that time, the exchanges of:

Augsburg, Cologne, Lyon (1540)
Hamburg (1558)
London (1571)
Frankfurt (1585)

Among the “old” trading centers also includes the Vienna Stock Exchange, which was founded in 1771. 21 years later, the famous New York Stock Exchange was established (1792). It is currently the world’s largest Stock exchange. Since the floor on which the traders conducted their business was later usually made of parquet, it is also called “Floor trading” is spoken.

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Specialists conduct business on the floor of the stock exchange

The sale by acclamation still filled the stock exchange halls of the world for many hundreds of years. In floor trading the the spoken word counted and the transaction was legally effective. Specialists, stockbrokers and brokers were formed, who determined prices directly on the trading floor through supply and demand.

The advantages of stock exchange trading were quickly recognized. Die stock exchange offers price transparency and liquidity is concentrated. However, the possibilities of manipulation were later recognized, leading to the introduction of stock exchange supervision.

The development from floor trading to electronic trading

The colorful Hustle and bustle on the trading floor with hand signals and loud shouts is largely history today. Most securities transactions take place via electronic trading systems such as XETRA in Germany. When trading by computer, orders are automatically matched with offsetting positions and processed.

The Advantages of electronic trading are primarily speed. In addition, better prices are often achieved. Orders can be split into several orders without much effort, resulting in a more advantageous price in total.

Due to numerous television broadcasts, the Frankfurt Stock Exchange is one of the best-known trading venues in Germanycountry. The same applies to the New York Stock Exchange (NYSE). Floor trading was finally discontinued at the Frankfurt Stock Exchange in 2011. In Austria and Switzerland, the line had already been drawn several years earlier.

Today there are still floor trading still takes place at some regional exchanges in Germany. In Stuttgart, for example, with warrants and in Berlin with some foreign stocks.

Result: History helps to understand – more simply and more favorably it goes today electronically

Anyone who studies the history of the stock exchange, especially the price formation in floor trading, will find it easier to understand what happens on the stock exchange. However, the achievements of technology have made it possible for everyone to deal with the trading of securities without much effort. Likewise the temporal independence may not be underestimated. From placing orders with the bank, commissioning the stockbroker and waiting until the next day have become a few clicks today.

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