Location, Location, Relocation: Covid Prompts Firms to Re-Tool vs Reopen

Are you sitting comfortably? Good, because you might be there a lot longer.

Despite many businesses—including financial firms and exchanges—reopening for business, coronavirus cases continue to rise, and precautionary measures are likely to be in place for the foreseeable future.

The result is that many individuals who can work from home are opting to continue doing so, and for the most part, their employers are supporting this choice and implementing longer-term work-from-home strategies. At the same time, their suppliers are re-engineering their products to support compliance from the kitchen table and best execution from the bathroom.

Until now, most changes to working practices have been undertaken with the assumption of a speedy return to “normal.” But in the absence of a Covid-19 vaccine, a full-on return to traditional work environments is by no means certain anytime soon. Aside from professionals’ understandable concerns for their own health—and the health of others they come into contact with—there are practical matters that would make returning to office spaces problematic, to say the least. Socially distanced desk space will make it more expensive to accommodate all employees, while limiting the number of people who can ride in an elevator at once could dramatically increase the time it takes staff to get in and out of their offices.

In some cases, these measures make returning to work at best inconvenient, or at worst, impractical. In others, it’s simply impossible to resume in the same manner, so financial markets are recreating familiar scenarios using technology—and we’re not just talking about holding meetings via Zoom.

It’s the (Virtual) Pits

For example, Cboe Global Markets, which closed its open-outcry trading floor in March to slow the spread of the Covid-19 virus, before reopening it in June, is still evaluating other options to maintain its operations, given that the exchange may decide to close its floor temporarily again for this or other reasons. In a June 12 filing with the Securities and Exchange Commission, Cboe proposed a rule change that would allow it to address some of the shortfalls of purely electronic trading for instruments that typically trade on a hybrid model.

The filing proposes an “audio and video communication program” that, along with a chat capability, would create a “virtual trading floor” comprised of “virtual trading pits” for specific options asset classes. Participants in each pit would be able to see who is present, and communicate with other participants to allow “the same communication capabilities TPHs [Trading Permit Holders] generally have on the physical trading floor so that they may conduct open outcry trading on the virtual floor in the same manner as they do on the physical trading floor.”

Meanwhile, in its physical pits, the exchange will modify the space available to maintain distancing between participants. This would mean fewer trading spots, which should encourage participation in the virtual pits.

The result is that where a financial professional is physically located is less important than ever before, while technology makes it easier than ever for firms and employees to operate effectively when working remotely.

Just a decade ago, it became less important where a firm’s internal IT was located so long as its trading servers were co-located in the same datacenter as their main trading markets. Similarly, employees and their functions could now be spread throughout a city, state, country, or the world.

During the Covid pandemic, for example, Northern Trust has been using technology from Boston-based Enlighten Software to identify capacity within its workforce around the world and shift tasks between staff in different locations, depending on their workload and availability.

And while firms will still need physical locations, it’s increasingly evident that participating in—or serving—the global financial markets no longer requires companies to cluster around traditional market centers. And if markets do become even more decentralized, then one lasting impact of the coronavirus may be how it literally re-draws the map of financial markets.