What is a Trading Floor?

The trading floor is the place at a stock exchange where the actual trading occurs. This is most often seen during updates on financial news, especially those broadcasted by CNBC and other financial news networks. The trading floor is often a busy and hectic place, though it has become less busy with computer trading applications.

The trading floor is often referred to as the pit of a stock exchange because it is where all the heavy work is done. Further, there are usually elevated positions where people can watch the action, thus the trading floor is located on a lower level than most of its surroundings. From that elevated perch, visitors may look over onto the floor and watch the action, at least at some stock exchanges.

Though the trading floor once dominated nearly all the action at a stock exchange, it is becoming less and less the center of attention as the world turns to computers to do most of the work. In fact, there could come a day when an actual physical trading floor is rendered obsolete. Currently, they play a vital role, but that role has become more tradition than function. As such, a trading floor is one of the last vestiges of the old-school financial markets.

The most famous trading floor is located at the New York Stock Exchange (NYSE), which is the largest stock exchange in the world. Some may be familiar with the traditional ringing of the bell to open and close trading. Much of the time, it is a celebrity who signals the start or the end of the trading day.

As more firms operate and conduct trading outside the traditional trading floor setting, the term is starting to take on different meanings. For example, a trading floor can now refer to the portion of an office building that is responsible for trading stocks and bonds, or any other sort of equity, such as real estate and commodities. Though this is not a true trading floor, it does serve nearly the same function as more traditional trading floors.

Though the trading floor of the NYSE is not as vital to the economy as it once was, its iconic nature means it could be vulnerable to terrorist attacks. Therefore, the trading floor, once a prime spot for tourists visiting the Big Apple, is no longer accessible to the general public. Now, to get a peak at the floor, an individual must be the guest of a credentialed "floor broker," which is a person who is authorized to trade on the floor.