Dealing desk

A function inside a broker rather than a room, in most firms now a set of rules running automatically. Where it operates, the firm is the counterparty in fact as well as in contract: an order is filled from the firm's own book, and the exposure it creates stays with the firm until the firm does something about it. The alternative model passes each order to an external liquidity provider and takes a fee for doing so.

What the desk does with the exposure is the substance of the model. Client positions in the same instrument point in both directions, so most of the exposure cancels internally, and only the residual leaves the firm to be hedged externally. Netting is why the model can operate at all. It is also why the firm's remaining position is the mirror of its clients' remaining position, which is a structural conflict rather than a hidden one: it is disclosed, it is supervised, and it does not disappear by being disclosed.

The labels attached to this are the least reliable words in the industry. Dealing desk, no dealing desk, straight through processing and electronic communication network are marketing terms with no agreed technical definitions and no regulatory ones, and firms use them inconsistently, so the label on a website establishes very little. What is checkable is documented: the order execution policy, whether a quote can be rejected on the way through, and whether requoting happens and under what conditions.