What Is a Runner?
A runner is short-hand for a junior broker-dealer employee who delivers a trade order to the broker's floor trader for execution. Runners are often entry-level positions which lead to clerks and ultimately traders or brokers.
In the days of open outcry floor trading, orders for buying and selling securities were written down on paper tickets, which needed to be processed by the exchange and each counterparty's clearing firm. Runners were junior employees who worked on the floor of the exchange, running from trader to trader (or broker) in order to collect and disseminate trade ticket information to the correct location. Runners were an important task for floor trading. While automated technical communication takes a larger part in the execution of trades throughout the trading day, floor trading is still a component of some exchanges.
The New York Stock Exchange (NYSE) and most trading exchanges in Chicago still utilize floor traders, many which also employee runners. Floor traders work for broker-dealers and execute large trades by physically working at exchanges where they may employ runners to support their trading activities.
- A runner is a junior employee on the floor of a securities exchange that transmits order information about trades to the appropriate destinations.
- While floor trading is giving way to electronic markets, runners still play a crucial role on the remaining trading pits.
- Runners are entry-level positions, where an individual can work their way up to trader or broker.
Exchange Floor Trading
Floor trading continues to remain popular on some exchanges despite the growing use of technical trade automation. Many market participants and exchanges believe it is an important component for marketing and branding exchange trading across the financial industry.
Broker-dealers who choose to participate in floor trading must pay a fee which can be approximately $20,000 a year. Depending on the operational procedures for each broker-dealer, they may or may not use a runner to execute trade orders.
Some broker-dealers manage their own communication between clients by personally taking orders, writing orders and executing orders in an exchange’s pit. Broker-dealers who do utilize brokers will have them available to take customer orders from a trade clerk who manages and writes out incoming orders to be executed. If a runner is used, the runner will usually be responsible for delivering the trade order to the company’s broker located in the exchange’s trading pit. The runner communicates all terms associated with a market order as it was placed by the customer to the clerk. Runners are generally low paid employees receiving less than minimum wage. However, it is essential that they communicate orders correctly to ensure error free executions. Runners are usually also responsible for returning executed orders to the broker-dealer’s clerk for final entry.
Floor brokers are market makers who will work from the exchange’s trading pit to match an order with a corresponding counterpart. Just like electronic market makers, floor brokers use a bid-ask quoting system. This system requires them to buy at the bid price from a seller and sell at the ask price to a buyer. Floor brokers can be responsible for either buying or selling securities on the trading floor. On the trading floor they do this by shouting orders, using hand signals or following the exchange’s pit trading system. Once a corresponding position has been identified for their order, the broker will receive a payment for the spread. In all trading scenarios the ask must always be higher than the bid for a trade to execute. Floor brokers are also subject to certain rules and regulations of exchanges and regulators.