The global financial world is dynamic, volatile, complex and full of developments. Interest rates are frequently updated, exchange rates rise and fall, and indices and commodity prices increase and decrease. More often than not, this happens against the backdrop of geopolitical developments across the globe.
If you snooze, you lose.
At the very heart of the financial market are trading rooms and brokerage services, which serve as the main organs of the financial marketplace. From them, instructions are given to buy, sell or trade. They coach their clients on the financial arena in Israel and abroad, and make available to their clients advanced fintech tools.
The trading rooms and brokerage services at banks allow clients to protect themselves from taking unduly business risks, while empowering them to seize relevant business opportunities in the Israeli and international capital markets.
When we asked Naomi Shpirer-Belfer, manager of the trading rooms and brokerage department at Bank HaPoalim for the past two years, to give us an example of how the bank protects its clients from such risks, she smiled and sent us to the places in which countless Israeli drivers have sat and waited for long hours – the growing lines at the gas stations, with the message from the Finance Ministry about the decrease in gas prices “tonight at midnight.”
“All of us ‘drivers’ follow the global decrease of oil prices, which usually results in lower gas prices,” explained Shpirer-Belfer, who holds a PhD in Finance from the University of Tel Aviv. “All of us have waited until midnight for the new and cheaper prices in order to fill up our fuel tanks to the brim. By waiting, we have saved several tens of shekels.
“At the same time, however, there are companies whose profit is impacted fundamentally by a change in oil prices, even of a few percent,” she continued.
Shpirer-Belfer offered the example of an Israeli plastic company, which is vulnerable to a rise in oil prices.
Not long ago, global oil prices dove by around 35%. At a meeting with the management of this plastics company, Shpirer-Belfer recommended they sign contracts tying them in at the then low oil prices, protecting them from a future price hike and allowing the company to continue to enjoy the low rates.
“The management of the company did as recommended and secured the contracts,” Shpirer-Belfer recalled. “Then, when the oil prices rose again soon thereafter, the company continued to enjoy the low rates afforded to it by the contract.”
What is the difference between trading rooms and brokerage services?
Brokerage is a service that Bank HaPoalim provides a wide-range of clients, from large Israeli investors to hedge funds, institutional investors and corporations.
The idea of brokerage services is to facilitate the buying and selling of financial securities listed on the Israeli and/or global stock exchange. The bank does not serve as the counterparty in these transactions, and therefore, they are not registered with the bank's book either. The bank's brokerage department includes a sell-side research team and two trading rooms, with one being used for Israeli securities and the second one being used for foreign securities.
The department also offers professional operational services for local and international investors along with professional analysis.
Relatedly, but not the same, the trading room for Israeli securities offers its clients financial products for securities, such as shares, bonds, negotiable derivatives traded at the Tel Aviv Stock Exchange, as well as security lending. And the trading room for foreign securities gives clients access to a wide range of financial markets and investment products, such as shares, stock options, future contracts and bonds.
“When talking about trading rooms, in this case, the bank is a counterparty in every transaction,” Shpirer-Belfer explained. “As such, these transactions are registered with the bank.”
Trading room activities are carried out by a dedicated team that provides personalized service to all Bank HaPoalim clients. These transactions are unique in their activity in the areas of foreign currency, interest and commodities.
The trading rooms’ activities include currency exchange and reviewing the interest rates for clients, as well. The goal, according to Shpirer-Belfer, is to minimize client business risk.
“We offer our clients some ‘off the shelf’ products and others are tailor-made to suit the profile and specific needs of each and every client,” Shpirer-Belfer said about Bank HaPoalim. “In the trading room, decisions are made as to what happens with each transaction. This can be done with the client, or as an over-the-counter transaction with another bank. We call this ‘back to back.’”
In today’s world, with the increase in the amount of information coming in from Israel and abroad and its complexity, special technologically advanced tools are required to ensure proper awareness and response time.
“The activity in modern trading rooms is based on modern pricing technologies, revaluation and reporting, as well as tools that allow us to follow and analyze fluctuations and trends in the markets,” said Shpirer-Belfer. “If 20 years ago, notes were used in order to register transactions, and almost a decade ago it was still common to hear the brokers call out and for phones to ring nonstop, today we see mostly web-based electronic platforms. This way, transactions come in automatically.
“Risk-management systems monitor every transaction and market fluctuation in real time, and alert the advanced risk-management systems immediately,” she continued.
Shpirer-Belfer highlighted one of the industry’s latest advances: algorithm-based trade. Here, a command for buying or selling is created automatically, based on sophisticated algorithms and on parameters such as price, volatility, negotiability and more.
At Bank Hapoalim, staff work long hours - starting early and staying up late - to accommodate the working hours of the US stock exchange and others.
“When the New York Stock Exchange opens, for example, as late as 9 a.m. local time, it is already 4 p.m. in Israel,” Shpirer-Belfer said. “This requires us to be available at all hours of the day.
“It is not easy, certainly not for women with children. My own family has learned to live with these usual working hours. However, in my opinion this is the reason why – while in most other areas of banking there are more and more women in key positions – the number of women in the trading rooms and working in brokerage services is declining.
What is the secret when it comes to the correct management of a department that is so complex and so large, employing around 100 professionals around the clock?
Shpirer-Belfer said it is about closely following the developments in the markets, which change rapidly, and using that information to set business goals for clients.
“Over the years, the activities have become more mechanic, and it is important to ensure that your approach remains relevant,” Shpirer-Belfer said. “This means knowing the technological innovations in the field and how to integrate them into our system.
“Moreover, it is important to remember that clients in the area of securities tend to be sophisticated and highly professional people who know the field and follow the developments in it themselves,” she continued. “As such, they expect us to be no different.”
Shpirer-Belfer said that for her, managing the trading rooms and brokerage services department at Bank Hapoalim means managing people at a very high level and constantly remaining professional.
She said that almost all of the bank’s economists or former business managers. The bank also has people with backgrounds in the exact sciences and mathematicians.
“The people here are constantly moving around between Israel and foreign countries,” she said. “This is because they must know the international regulations strengthening this field - and know them well.”
What is the bottom line?
“At the end of the day, we are in the field of risk management,” noted Shpirer-Belfer. “This means that it is crucial that we check that what we do indeed helps and empowers our clients instead of putting them and us at risk.”
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