When I was a student, I had the chance to visit a large bank and step onto a trading floor. It felt a bit like an oversized classroom with rows and rows of people, many screens, telephones, and of course the yelling. I thought it a horrible place to work and I pitied the poor souls who had to sit so close to one another and how on earth anyone could concentrate with all of that noise was beyond me.
And so it is rather ironic that I should find reason to be celebrating the utter beauty of these very trading floors. The connection of people from all over the world to a central dealing mechanism, that can deliver pricing in real time is pure poetry in motion. But, in order to appreciate you have to first take away that which one relies upon and so we must also start at the beginning to explain this love affair.
Before there were markets, there was barter, and trade came with a very different set of circumstances. How exactly do you trade a cow for hardware goods or grain against steel? The invention of money was the very first step in making transactions easier, but we were still faced with the original problem: how to value each other’s side of the trade?
Imagine the amount of time everyone spent running around, travelling to faraway places and meeting different counterparties in trying get the best deal. And there are other problems, people change their minds, deliveries don’t take place on time and ultimately, everyone has a different opinion as to what the right price should be anyway.
In came the creation of the first centralised markets, whereby everyone could bring forward their best price for the amount they would like to deal. Thanks to basic supply and demand, there was now a simple way to determine an exact price upon which a trade could be done. It’s transparent, it’s the market price, it’s final and you either take it or you leave it. It is something everyone can agree upon and that’s a beautiful thing.