What Is Cash Equities Trading?

The term "cash equities" refers to a type of trading executed primarily by large, institutional investors. These companies trade equities for themselves and on behalf of customers. An individual working as a Wall Street trader may be trading for his company's cash equities desk.

Equities is the stock market. Stock shares represent ownership or equity in the issuing corporation. Stocks can be purchased as long-term investments or traded for short-term profits. Cash equities trading by a Wall Street investment firm will be focused on short-term trading to generate quick and hopefully large profits from changing stock market prices. Traders back the trades with their firms' capital rather than with borrowed money.

A large part of the institutional cash equities trading is computerized trading programs. The Wall Street firms use computers to buy and sell large blocks of stocks in fractions of a second. When news reports discuss electronic or computerized stock trading, the reports are referring to the cash equities trading market. The large volume of stock market trading on the large exchanges and the ability of the financial firms to generate profits from very small share price changes have turned computerized trading into a large portion of the daily stock market volume.

Cash equity trading from Wall Street financial firms also includes making trades for customers. Trades may include large block trades, special off-exchange trades and trading with customer funds. These trading services are for customers with very large amounts of money to put in the hands of professional stock market traders. These stock trading desks have access to trading tools much more advanced than those available to individual traders.

Wall Street financial companies conduct trading activities in several types of securities markets besides equities trading. Credit trading is the trading of bonds, including government bonds, investment grade corporate bonds and high-yield bonds. Futures trading is the counterpoint to cash equity and credit trading. Futures are used for derivative trading of stocks and bonds as well as commodities. Derivatives trading provides a different set of risks and rewards from those of cash equities trading.