Trading Rooms and Private Banking: Definition and Challenges - Expert Views
Trading Rooms and Private Banking: Definition and Challenges - Expert Views
Our "Expert Views" video explaining the role and stakes of the Trading Room for the Private Banking activity. By our SGPB expert Jonathan McKenzie, Head of Prime Market Access Team at SGPB Luxembourg.What is a trading room?
The trading room gathers all the services and staff required by authorised financial institutions to operate on the markets. It is generally arranged into "desks”, or teams that specialise in a particular product or type of client, and is the intermediary between investors and the financial markets.
The trading room provides a host of services, the most important being that it can handle an extensive range of financial products: securities (equities, bonds), currencies, listed derivatives (listed options, futures), as well as customised products (structured products, OTC derivatives)(1). It is the nerve centre of all transactions executed on the market, whether on behalf of large corporations for the investment bank, or smaller entities and private individuals for the private bank.
Making the private bank tick
All private banks require the services of a trading room, not least to execute their clients’ orders. Some private banks choose to delegate the management of their orders to outside trading desks, while others keep their desks in-house. Either way, all the bank’s client transactions transit through the trading room. This makes it all the more important to enhance best execution in terms of the speed of trades and access to competitive prices.
This is not the only challenge trading rooms face: they must develop their network of brokers and counterparties to provide as much liquidity as possible, and therefore the best possible price for each financial product; while also automating and streamlining order execution.
Other than dealing across all asset classes, trading rooms converge numerous key expertise to serve the private bank’s widely diverse clients and meet their specific needs. Certain professional clients, for example family offices(2), require specialist expertise for every asset class. They therefore require direct access to the trading room. These clients also have specific needs for structuring more complex products, such as structured products and derivatives, and accessing leverage(3) via dedicated financing. This calls for careful monitoring in terms of their risk management.
Other clients, such as financial intermediaries (FIMs), have much higher transaction volumes. They will choose to automate the transmission of their trades, which means providing tools that asset managers can use to capture trades directly, or establishing an electronic communications protocol (such as the FIX protocol(4)) between the asset manager’s portfolio management system(5) and the trading room systems. Trade flows are therefore automated, from the capture of the asset manager’s instruction, through to execution on the market and settlement on the account, without any human intervention.
Societe Generale Private Banking's expertise
Societe Generale Private Banking offers two complementary points of direct access to its trading room in Luxembourg:
- Prime Market Access caters to professionals clients(6) who are very active on the markets, such as family offices or investment professionals. It provides direct access to specialists in the trading room from 8 a.m. to 10 p.m., and provides the technical assistance and financial expertise of an investment bank, and the tailor-made support of a private bank.
- Direct Market Access caters to Financial Intermediaries (FIMs). It provides an integrated execution platform with the option of automating trade flows using solutions including the FIX protocol.
For more information on the workings of trading rooms, speak to you private bank, Societe Generale Private Banking.
(1) Derivatives are financial instruments whose price is determined by the value of the underlying financial asset. Investors use derivatives to hedge against negative fluctuations in the underlying value, or to speculate on its value. Listed derivatives are traded on regulated markets (such as stock markets) while “over-the-counter” or OTC derivatives are traded directly between two parties.
(2) A family office is a structure that oversees the financial wealth management of one or many high net-worth families. It usually provides the full spectrum of experts (portfolio managers, legal advisors, tax analysts) to successfully carry out its mission.
(3) Leverage refers to the use of debt in order to increase a structure’s investment capacity.
(4) The Financial Information eXchange (FIX) is a fast and secure electronic messaging standard developed to facilitate the exchange of information on stock market transactions. It is designed to automate communications between trading partners.
(5) A PMS or portfolio managing system is an IT infrastructure that simplifies and centralises client portfolio management.
(6) Professional clients are clients who have the requisite experience, knowledge, and skills for making their own investment decisions and adequately evaluating the risks incurred. The categorisation of a professional client as such is governed by MiFID II in accordance with specific criteria.
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Societe Generale Private Banking is Societe Generale Group’s business operating through its head office at Societe Generale SA, as well as departments, branches and subsidiaries located in the areas referred to below, under the Societe Generale Private Banking brand, and is the distributor of this document.
The information shared on this page is for information purposes only and may be amended without prior notice. Its content is not intended to provide an investment service. In addition, it does not constitute investment advice or a personalised recommendation on a financial product, or advice or a personalised recommendation on insurance, or any form of canvassing, or legal, tax or accounting advice from any Societe Generale Private Banking entity whatsoever.
The offers related to the businesses and to the wealth management and financial information referred to on this page depend on each client’s personal situation, the legislation that applies to them, and their tax residence.
Therefore, these offers may not be suitable or authorised in all Societe Generale Private Banking entities. Furthermore, access to some of these offers is subject to specific eligibility conditions. Certain offers mentioned may incur various risks, involve potential loss of the entire amount invested, or even unlimited potential loss, and consequently may be restricted to a certain category of investor, and/or be suitable only for experienced investors who are eligible for these types of products, services and offers.
Contact private banker to find out whether these offers are suited to your needs and adapted to your investor profile.
DISCLAIMERS BY JURISDICTION
France: Unless indicated otherwise, this document is published and distributed by Societe Generale, a French bank authorised and supervised by the Autorité de Contrôle Prudentiel et de Résolution (French Prudential Supervisory and Resolution Authority), located at 4 place de Budapest, CS 92459, 75436 Paris Cedex 09, under the prudential supervision of the European Central Bank (ECB) and registered with ORIAS as an insurance broker under number 07 022 493, orias.fr. Societe Generale is a public limited company (société anonyme) under French law, with capital stock of €1, 003, 724, 927.50 as of 17 November 2023 with its registered office at 29 boulevard Haussmann, 75009 Paris, France, and registered with the Paris Trade and Companies Register (Paris R.C.S) under the unique identification number 552 120 222. Paris. More details are available on request or online at www.privatebanking.societegenerale.com/.
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