What does a trader bring to society?
The role of ‘trader’ has evolved considerably over the years, most notably since the 80s. Since that time computerized trading has taken over. Gone are the days of over-the-counter (OTC) spread arbitrage. We’re now faced with highly efficient electronic markets. The pits are thinning out and floor traders moving to the screen.
In the beginning, trading was a way for farmers to hedge their risk of fluctuating crop and livestock prices. As the trading pits grew arbitrage came into play. A trader’s edge was determined by the speed at which you received the news. Once the electronic futures contracts like the E-mini’s came about in the 90s the game changed once again and arbitrage became a smaller and smaller edge due to much tighter spreads and more efficient markets.
The Results are In: Survey Says…
So what exactly is a trader’s value to society? Nowadays, it seems trading is no longer about making markets, it’s primarily about speculation. About a year ago I conducted a survey to see what some of my readers thought. Here are my findings…
- 80% of readers surveyed said they felt traders added value to society (granted my survey sample was made up of primarily traders and thus biased)
Their reason’s being that:
- Traders provide liquidity
- Reduce spread size leading to more efficient markets and
- Help to determine fair market pricing
Traders provide a transfer of risk from hedgers, farmers, and investors. Without traders, the markets would not exist.
Here’s the original Traders Value Survey.
What do I think?
I believe the answer lies in each of us and what it is that we do with the money we extract from the markets. If you feel trading is an unjust profession, try donating some of your profits (and time) to charity, or helping others in some way. That makes it all worth it.
Doctors and nurses add value to society by helping save lives. Fireman and police men and women protect us from harm. Athletes and musicians bring smiles to our faces and brighten our spirits. So what value is it that traders bring? Leave your thoughts below…
Thanks for reading!