In Finance, what is a Squawk Box?

Squawk boxes are intercom speakers that are used by brokers to verbally communicate with the analysts who are also employed by the brokerage, as well as investors who are clients of the firm. The speakers are usually located on the desk of the broker, and provide the option of hands-off communication. Since the squawk box contains a speaker, the broker can continue with other tasks while receiving information or interacting with whomever is on the other end of the conversation.

The fanciful name for the intercom has to do with the sound that the earliest versions of the device emitted when in use. When a connection was initiated, the conversation was preceded with a sound that was not unlike that of a bird squawking as a warning for enemies to stay away from a nest. The squawk would alert the broker to an incoming communication, ensuring that he or she would hear the entire message from start to finish, and be less likely to overlook some important aspect of the data transmitted.

Several vital types of information are traditionally communicated using a squawk box. Analysts and traders use the device to relay data regarding current recommendations. The broker can listen to the information and begin to make use of the data while still communicating via the box. Along with recommendations from the firm’s analysts, brokers routinely received updates on market events as they happen, allowing them to proactively take actions that are in the best interests of their clients.

Information about block trade activity on a given exchange is also conveyed in this manner, allowing the broker to take action without delay. Block trades are situations where a single investor chooses to buy or sell a considerable number of shares of the same security, and may be a strong indicator of something that is about to happen in the marketplace. Knowing about trades of this type immediately via the squawk box can often help a broker identify the impact of those upcoming events on the holdings of his or her clients, and take appropriate action to protect their interests.

While other communication options have come into being in recent decades, the squawk box is still used extensively in many brokerage houses and investment banks. The efficiency of the device is often paired with the use of computers that are connected to the Internet, allowing the brokers to connect with an exchange and execute orders even as the data is being transmitted via the box. In this scenario, the squawk box may actually shave a few seconds off the process of receiving information and acting on that data, and make the difference between sustaining a loss and posting a return.