No distancing for trading rooms

Overtrained in risk management by experience and necessity, banks had adapted very quickly to the Covid crisis, organizing remote work, including, for some, concerning trading room operators. And the “ work from home “ was a revolution, as it seemed impossible before setting up this type of organization for these very specific trades of trading.

Today, banks, such as BNP-Paribas or other American banks, are announcing that they want to reinstate all of their face-to-face traders. UBS, which offers a hybrid organization to 2/3 of its employees around the world, excludes it for traders. Others concede hybrid work, but only with one teleworking day per week, revocable each month at the discretion of the manager.

Would market operators be more productive and efficient when they are brought together on a “Floor” ? Are there specific reasons that would justify face-to-face? And what would be the risks of a hybrid organization in these industries?

After teleworking, the threat of “telemigration”

A special environment

You have to see the faces of visitors, often customers, when they browse the trading rooms, to understand how special this world is. On these immense platforms, the limits of which it is sometimes difficult to perceive, a continuous hubbub, apparently meaningless and varying in intensity, saturates the senses of the uninitiated. However, those who operate in these spaces perceive only fluidity and proven organization. All the senses of the speakers are at work to perceive, understand, act and react as quickly as necessary. The flow of information is as crucial as its interpretation. The latter is favored by the interactivity between the protagonists gathered in the same workplace. Technologically linked, they are also physically so and nothing is left to chance. If a move during a reorganization is always a strong moment in companies, it is, in the trading room, quite simply highly strategic. The break-up of the organization and the establishment of “Work from home” – the WFH or work at home – operators, never seen before, could have broken this unstable balance.

Telecommuting has rather worked

Once the crucial security issues have been resolved (including the recording of home conversations, for example), once the technical equipment has been deployed to the operators’ homes (flat screens, “boxes” connected to brokers and remote connection to their physical workstation in room), the organization worked quite well during the crisis. So much so that today the question of the future of back-up, these (expensive) “emergency” trading rooms intended to take over from the official rooms in the event of a breakdown. They may well disappear, since the WFH has now proven its worth.

“With teleworking, it is the managers’ turn to face international competition”

The advantages of working remotely from market operators seem to be much the same as in other organizations. One of the peculiarities of the activity lies in the succession of periods of calm, even boredom, and intense activity. However, on the floors, none of these periods is so favorable to “Deep work”, this more strategic or longer-term groundwork. The requests and interruptions are permanent since everyone, physically present, is supposed to be available to everyone. the “Work from home” seems more favorable to the realization of this fundamental work, which would be carried out more efficiently at home than when it was engaged, in the evening, on the desks after the close of the markets. Managers, integrating this parameter, use resources differently. Rather, they call on those they have “on hand” for the resolution of immediate problems, and entrust the “Deep work” to those who are at a distance. And for certain trades, sales, engineering, this organization is widely possible. The job is done, but differently.

One of the other advantages of working remotely is that it could make it possible to reduce the risks of certain biases appearing (even if it generates others, such as proximity biases). Conformism, for example, risks creeping into any type of meeting ( “Morning meetings”, rendezvous of the mastiff, for example). “Thinking like the majority”, combined with other biases, has arguably also fueled systemic crises. Thus, before the great financial crisis of 2008, the “AAA” rating of subprimes – which is the best and theoretically guarantees the solidity of the financial product – was validated by the operators (and rating agencies), who obviously had fallen. custody in the risk assessment of this new market. They were reinforced in this by observing the competition, ultimately creating a sort of unconscious industry agreement around what would prove to be an illusion. In uncertainty, majority behavior becomes a source of information. Being physically separated could possibly encourage the taking of a step back and the awareness of possible flaws in certain reasoning, in particular by cutting the emotional spiral (the floors are places of high emotional contagiousness).

Today, with a few exceptions, the banks seem to opt for the reinstatement of all their operators on site and the reasons are various.

Restore the flow of information and team alignment

If the distancing worked during the lockdowns, it is difficult to think that it did not lose some opportunities, due to the lack of liquidity in the market due to less risk-taking, or because the operations were not spotted. , or have not even emerged, for lack of sufficient interactivity between operators and their customers, for example. “Nothing replaces physical proximity” indicates a manager. Far from a floor, without micro-signals and informal sources of information, or without the knowledge of information that seems incidental, operators lose part of the “context” which allows them to decipher a complex situation, to take, have their decisions taken and to adjust. . This is especially true in flow activities, but not only. The system 1 of their thought (to use the name of Daniel Kahneman, Nobel Prize winner in economics 2002), experienced, fast and intuitive, is affected by a lesser perception of certain signals and feelings. In hybrid mode, the asynchrony of attendance rhymes with the asynchrony of information. A manager confides that he has gone from one team point per day to two, in order to check that everyone has the same level of information at all times and real-time alignment. Doubling the time invested in this work of cohesion seems more than necessary in hybrid mode to “manage to keep control of the teams” and avoid possible dropouts.

In a hybrid organization, conflict resolution is struggling

If there is one thing that needs to be dealt with quickly on the trading floor, it is conflict. Whether for an operation to be prepared, or already past, an error or a misunderstanding, a reconciliation of operations, the ongoing treatment of friction points and their rapid resolution are essential. Is it possible to do this by videoconference, when the organization is hybrid? Certainly, and sometimes it is even easier to bring the protagonists together. But the outcome of these meetings is more uncertain due to an increased risk of misunderstanding. People at a distance can sometimes ‘overinterpret’ situations, in part because they compensate for a (not always perceived) information deficit. The non-verbal for example would represent more than 50% of communication and is lost at a distance, or is compensated at the cost of (too) important efforts. “Nothing better to slice and solve problems than a face-to-face meeting, that’s where things happen” explains a trader.

Imitation learning

Finally, one of the important points in the trading rooms is the integration and training of newcomers. Man learns by imitating behaviors and codes, by observing, reproducing and experimenting. This is particularly true in these specific professions endowed with specific languages, gestures and postures and characterized by a certain complexity which means that nothing will replace experience, lived experience. Capturing the codes and integrating them contributes to the creation of trust, of a common culture which makes it possible to understand each other half-heartedly and to work effectively. And it takes time. From a distance, all of these learning processes can be affected or delayed, due to a lack of complete immersion, for trainees or juniors for example.

The future will tell if the remote work of market operators, and their support functions, can persist, knowing that it is already rather limited for the former. At present in some banks, it is on a case-by-case basis, depending on the teams, and depending on performance. “The entire distance organization can be called into question at any time and for each operator” indicates a manager. So finally, in the trading rooms as elsewhere, the right balance remains to be found, both for the operators, their organizations but also for the markets in which they operate.