The floor of the stock exchange was once the main location for market transactions. It was home to the traders and brokers who did the actual buying, selling, and negotiating on the physical exchange floor. Of course, this was before the evolution of electronic trading platforms.
Those same brokers and traders are now surrounded by computers that manage the majority of the buying and selling of stocks for their various accounts. Floor trading still exists, but it is responsible for a rapidly diminishing share of market activity: just 10% in 2017, according to a CNBC report.
Will Floor Traders Become Completely Obsolete?
The open-outcry system of trading can appear chaotic and disorganized, but it is actually quite orderly. Traders on the floor use signals to quickly negotiate buys and sells. These signals may represent different types of orders, a price, or the number of shares intended to be part of the trade. Specialists maintain a book of all open orders for a stock (or group of stocks).
While trading on the floor of the exchange is being quickly eroded by electronic trading platforms, this method of trading doesn't appear to be completely going away any time soon, at least for traders at the New York Stock Exchange. Companies that list on the exchange occasionally list the showmanship, human touch, and assurance of human traders during crises as reasons for their selection, according to Quartz.
So, traders are trading on the floor of exchanges because, for now, standing on the trading floor is still a necessary way of trading on the stock exchange.