Being There

I had an interesting conversation with a financial adviser today. He was bemoaning the fact that trading desks are for profit enterprise. What my Chauncey Gardner did not understand is that for profit trading desks make the markets work. Many financial advisers believe that trading desks should serve only to provide bids and offers for their clients. Although many trading desks endeavor to provide the best trading levels with the context of the markets, profit must be generated to pay salaries, technology expenses, research analysts, strategists and to finance positions. Besides, why should a firm leave money on the table?

Finance positions? That's right, traders must pay their own firms to finance their inventory. Without generating a profit from trading activities trading desks would not earn enough revenue from sales credit rebates to function. What about not maintaining an inventory and simply sourcing bonds from the Street? Source bonds from whom? Someone has to make markets, take positions and maintain inventory. Typically, the firm with the largest inventory provides an advantage for its brokers and clients.

Financial advisers often point out the disadvantages of clients who invest with discount brokerage firms to save on commissions. It is pointed out that one gets what one pays for. Financial advisers should remember that the next time they complain about for profit trading desks for doing so is the pot calling the kettle black