Floor Trader (FT)

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Floor Trader (FT)

A floor trader is an exchange member who executes trades from the exchange floor exclusively for their own account. Historically active in open outcry pits, floor traders today increasingly use electronic systems. They act as individual liquidity providers, helping narrow bid-ask spreads while pursuing profits with their own capital; they are sometimes called registered competitive traders.

Key takeaways

  • Floor traders trade on the exchange floor for their own accounts and provide liquidity.
  • The role has declined as electronic trading replaced open outcry and trading floors have closed.
  • Registration and screening vary by exchange; some regulators require specific filings and fees.

What floor traders do

  • Execute transactions using their own capital rather than on behalf of clients.
  • Provide liquidity to markets, which can tighten bid-ask spreads and improve order execution.
  • Compete with market makers and interact with brokers on the trading floor.

How they differ from market makers and brokers

  • Brokers: act on behalf of clients to execute orders.
  • Market makers: primarily provide continuous liquidity, often quoting two-sided prices.
  • Floor traders: provide liquidity like market makers but trade for personal profit. Under some exchange rules, a person may act as both a floor broker and a floor trader.

Registration and requirements

Requirements depend on the exchange and regulator. For example, in futures markets the National Futures Association (NFA) requires prospective floor traders to submit:
* Form 8-R (online)
* Fingerprint cards
* Proof that a contract market granted trading privileges
* A nonrefundable application fee (historically around $85)

Other exchanges may impose different screening steps, background checks, or membership conditions.

Current trends and the future of the role

Electronic trading has reduced the need for physical trading floors, making floor trading increasingly rare. Many exchanges have closed or scaled back open outcry pits, and events like the 2020 pandemic accelerated temporary floor closures and uncertainty about the role’s future. Some exchanges maintain limited floor activity, but the long-term trend favors electronic liquidity provision over traditional floor trading.

Practical implications

  • Traders and students of market microstructure should recognize floor traders’ historical role in liquidity and price discovery.
  • For those considering floor trading, confirm current exchange membership requirements and recognize that most proprietary traders now operate electronically.