Toggling between two computer screens instead of four. Slower wireless connections. Plain old cellphones — missed calls and all — standing in for highly programmed devices that allow instantaneous connections. Instant messaging and videoconferencing replacing quick bursts of conversation across a floor.
Ever since the coronavirus pandemic forced thousands of traders, sales representatives, analysts, bankers and risk managers out of their workplaces and into their homes, the foot soldiers of finance have been making do with technology that’s far more ordinary than many of them are used to.
The individual inconveniences are relatively minor — one trader missed a special Bloomberg keyboard, another struggled with having the chat window to his left instead of right — but together, they have had a noticeable impact on the functioning of markets, according to traders, investors and regulators. Over the last month, as much of the finance industry adjusted to working from home, the rapid-fire, split-second nature of global trading slowed slightly because communicating decisions took longer. And that, in turn, added a layer of unexpected friction to already volatile markets.
“When people are in a new environment and using new systems, combined with market volatility, it slows things down a bit,” said Michael O’Brien, director of global trading at the Boston-based investment management company Eaton Vance.
Of course, much of the recent choppiness in financial markets is tied to fears about the economic fallout of the pandemic as people around the country shelter in place. But the sudden scattering of many of Wall Street’s traders from their hubs in lower and midtown Manhattan and toward a honeycomb of home offices and emergency backup locations introduced an element of discombobulation that few firms had prepared for. Traders around the country faced similar challenges.
Mehmet Kinak, global head of systematic trading at T. Rowe Price, an asset management company, used to sit with a group of about a dozen traders on the seventh floor of his company’s headquarters in Baltimore. Past the sea of screens — traders typically had three or four at their desks — were views of the National Aquarium and Camden Yards, the home of the Orioles.
Now Kinak logs in from his home office — a small room in the basement of his Elk Ridge, Maryland, residence. Instead of engaging in constant chatter, his group connects via live-chat tools such as Webex and Symphony. He’s noticed a slight slowdown in the pace of trading with partners on Wall Street as well, which he attributes to a combination of wild swings in markets and the transition to working from home.
“It just takes a little bit more time,” said Kinak. “But incrementally, it adds up.”
The global financial system is intricate and highly complex, made up of thousands of companies — banks, hedge funds, asset managers, trading specialists — that buy and sell trillions of dollars in assets like stocks, bonds and currencies for themselves or their clients. To do so, companies invest heavily in technology and have elaborate setups meant to simplify communication between trading desks, analysts and clients. Milliseconds make a difference in this environment because prices can change swiftly.
Some of this activity is deemed so important that President Donald Trump last month declared banking employees “essential” to the functioning of the U.S. economy and exempted them from orders to stay at home or stop working. Some Wall Street employees are still going into the office — especially those on trading floors where activity is both highly regulated and customized and difficult to replicate at home.
Troy Rohrbaugh, head of global markets at JPMorgan Chase, recalled how one day in mid-March, when the market was swinging wildly, a large client needed to sell a significant chunk of bonds. Rohrbaugh, who was in his office at the bank’s midtown headquarters, stepped onto the trading floor to confer with a couple of traders and a salesman.
“We were done and dusted and shelling a price to a client in two minutes, three minutes,” he said. “Can you imagine that conversation taking 30 minutes or longer in markets that are moving as rapidly as they are now?” He continues to work from the office despite a recent outbreak of COVID-19 there.
Another company, Citadel Securities, a Chicago “market maker” that matches buyers and sellers, booked a hotel — the luxury Four Seasons resort in Palm Beach, Florida — and set up a makeshift trading floor so it could continue to do business uninterrupted.
But for the most part, financial companies have put in effect strict work-from-home policies. Traders say the impact of the transition has been the greatest in less transparent markets such as corporate bonds. Unlike stock markets, where exchanges provide real-time prices that traders can act upon at any moment, prices in so-called over-the-counter markets for bonds are often negotiated during each trade.
On a typical trading desk, bond traders can gather price information, haggle with brokers and clients or check in with analysts and sales representatives with a few shouts or by pressing a button. By contrast, working from home requires phone calls and instant messages, which take more time, even as markets continue to trade and prices fluctuate before a decision can be made.
“Trading floors are designed the way they are to most effectively and most efficiently socialize information,” said Joshua Younger, a bond market analyst at JPMorgan. Running a trading operation from home is like “a football team running a play by text,” he said. “It wouldn’t work as well. All the information would get conveyed, but not at the speed and the pace that’s required.”
Government officials who monitor the smooth functioning of markets, and traders and investors who depend on it, note that slower connections have created lags leading to uncertainty — say, about whether a buy or sell order is coming through.
Traders typically have three to four screens they use to keep a constant eye on price changes, communications from trading partners and market data sources. But at home, most probably have a laptop and another monitor, so more toggling and clicking is required to nail down the maturity schedule of a bond or call up the daily trading volume on a stock.
The phone is another matter. Traders usually use a specialized telephone known as a “turret” with preprogrammed keys to connect with important clients and trading partners. While there are electronic solutions that would allow traders to replicate their turrets online at home, many seem to have reverted to simply looking up numbers and using their cellphones to connect — another small but significant slowdown in communications.
Jeff Warren, a Goldman Sachs banker who helped oversee the sale of $600 million in bonds March 30 for the restaurant chain Yum Brands, found it much more onerous to deal with hundreds of investors from the attic of his mother-in-law’s home in Long Island than from the office. He said he joked to colleagues that while his downtown Manhattan office has a phone turret that allows 600 calls to come through at once, he is barely able to patch together two lines on a desk phone while working remotely.
The coronavirus outbreak threw a wrench into the continuity planning that many Wall Street companies had put in place since at least the Sept. 11 terrorist attacks. Those plans were largely built around the idea that if trading at a bank headquarters was knocked offline, groups of traders would decamp to satellite trading floors outside the radius of whatever disaster had befallen New York. But those plans quickly became unworkable, given the dangers of infections from the coronavirus for virtually all work that puts people close to one another.
“This is really not the disaster that they had planned for,” said Daniel Beunza, a business professor at the City University of London, who has studied and recently written a book on bank trading-floor culture.
The trading floor at Driehaus Capital Management, a boutique investment manager, occupies the second floor of a 19th century mansion in Chicago. On a typical day, a handful of traders — with four screens apiece — scour the markets for entry and exit points on the stocks and bonds the portfolio managers have earmarked for buying or selling.
Now all of the firm’s traders are working from home, but the disruption has not been significant, said Jason Vedder, director of trading. In recent years, Driehaus had bolstered its ability to allow traders to work from home for a number of reasons — not least the ability to stay home during Chicago’s awful winter weather.
That’s not to say nothing has changed. Instead of hearing nonstop chatter, the firm’s traders have an open Zoom video meeting going throughout the day, allowing them to mimic the ease of in-person communication. They also connect to Bloomberg, where they chat with their counterparts at Wall Street banks and execute trades.
Vedder himself works from a third-floor office next to his son’s room in his home on the city’s North Side. He has hard-wired his desktop to increase its speed, and a 150-foot cable spills out of his office and down the stairwell to the modem in the basement.
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