Traders Magazine (November 2011)

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September 11, 2001

The Magazine for Securities Industry Professionals

www.tradersmagazine.com

NOVEMBER 2011

>>Real-Time Data Reporting Ignites Debate >>State Street Leverages Transition Business >>Buyside Using Fewer Algorithms STA Affiliate Coverage

Canada • Pittsburgh • Wisconsin

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Steve Stich Execution Consultant

New York 212.449.6090 | London +44.20.799.64521 Asia +852.2161.7550

New York +1.212.449.6090 | Chicago +1.866.202.5908 | Europe +44.20.799.64521 | Japan +813.6 *Standard data rates apply. “Bank of America Merrill Lynch” is the marketing name for the global banking and global markets businesses of Bank of America Corporation. Lending, derivatives, and other commercial banking activities are perfor afiliates of Bank of America Corporation, including Bank of America, N.A., member FDIC. Securities, strategic advisory, and other investment banking activities are performed globally b Corporation (“Investment Banking Afiliates”), including, in the United States, Merrill Lynch, Pierce, Fenner & Smith Incorporated, which is a registered broker-dealer and member of FINRA and SIPC, entities. Investment products offered by Investment Banking Afiliates: Are Not FDIC Insured r May Lose Value r Are Not Bank Guaranteed. Instinct® is a trademark or registered trademark of Bank of countries. ©2011 Bank of America Corporation

w Instinct®Algo recognizes and adapts to more signals and more conditions more quickly than ever. s incredibly easy to use. When you want to

n on relationship.

13.6225.8398 | Asia +852.2161.7550

r

r

and other commercial banking activities are performed globally by banking med globally by investment banking afiliates of Bank of America er-dealer and member of FINRA and SIPC, and, in other jurisdictions, locally registered Instinct® is a trademark or registered trademark of Bank of America Corporation in the U.S. and other

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B]ZSO`\[]`SdWaWbeee]bQ[O`YSbaQ][]`QOZZcaOb  "!!$' State Street leverages its transition business with Pulse purchase > Brokers are listening to buyside demands for fewer algorithms > Odd-lot trading is on the rise, says one academic study > Bloomberg Tradebook doubles its independent research offering

WORD FOR WORD

> FINRA official says broker compliance with the proposed Volcker Rule won’t be easy > he SEC is considering rules that could limit market makers during topsy-turvy markets > Exchanges and FINRA have proposed new parameters for market-wide circuit breakers > NYSE Euronext’s new rule has some buysiders worried about front-running by their brokers. > Regulators continue to hint that real-time data reporting will be part of upcoming CAT proposal

After examining Occupy Wall Street, it looks unlikely that the movement will ever settle on one demand, or for 2 |

NOVEMBER 2011

|

TRADERS MAGAZINE

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Contents NOVEMBER 2011 • VOLUME 24, NUMBER 330

that matter decide much of anything. —Dan Mathisson

STA and Other Industry Events 70 78 81

Canada Pittsburgh Wisconsin

62

OPTIONS > Amex is jumping into the complex order book business > he buyside favors hedging with ETFs instead of single stocks —Peter Chapman

Member of BPA Worldwide

Traders Magazine (ISSN 0894-7295) Vol. 24 No. 330, is published monthly with additional issues in April and July by Source Media, One State Street Plaza, 27th Floor, New York, NY 10004. Subscription price: $120 (US) per year; $170 (US) per year in Canada and Mexico; $170 (US) per year in all other countries. Periodical postage paid at New York, NY and U.S. additional mailing offices. POSTMASTER: Send address changes to Traders Magazine, P.O. Box 530, Congers, NY 10920-1729. For subscriptions, renewals, address changes or delivery service issues, contact Customer Service at (800) 221-1809. Please direct editorial inquiries, manuscripts or correspondence to: Traders Magazine, One State Street Plaza, 26th Floor, New York, NY 10004. Back issues, when available, are $12 each, prepaid. Traders Magazine is a trademark used herein under license. Copying for other than personal use or internal use is prohibited without express written permission of the publisher. © 2011 SourceMedia and Traders Magazine. All rights reserved. www.tradersmagazine.com

4 |

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TRADERS MAGAZINE

67

TECH NOTES

86

BUYSIDE SNAPSHOT Jennifer Setzenfand, a senior equity trader at Federated Investments, is a second-generation trader. And like her father, is set to become the next chairman of the Security Traders Association. —Gregory Bresiger

The opinions expressed by the authors are not necessarily the opinions of the editorial staf. The editors disclaim any intent to make recommendations about securities and security markets. We are not responsible for unsolicited manuscripts. Manuscripts bought/paid for by the corporation are its property.

www.tradersmagazine.com

Liquidity

Anonymity Innovation

Customization

Trade on a Whole New LeveL!

For more information about LeveL ATS and how to connect, visit www.LeveLATS.com or contact us at 617-350-1600. LeveL ATS is a member of FINRA and SIPC

Published by SourceMedia, Inc.

Dictum Meum Pactum 1934 The Official Magazine of the Security Traders Association

VOL. 24, ISSUE 330

We Got the Beat

C

ongratulations are in order for a group of women who have not only succeeded but thrived in the male-dominated industry of trading. Not all of the 15 award-winning women being feted in “Wall Street Women: A Celebration of Excellence” work on trading desks. But at some point, they all have to deal with traders. You can read their stories in this month’s coverage. There is also an event Nov. 10 that will honor these high achievers, too. I’m sure it isn’t easy for them to interact with so many men in such a hyper-competitive business, one that is often rough and tumble. But they’ve all managed to make their mark. I once spoke at an industry conference on the evolution of trading. I reached into my trusty library and pulled out a few anecdotes from “Confessions of a Stock Broker: A Wall Street Diary.” The author wrote under the pen name of “Brutus” and offered some eye-opening—and, at times, hilarious—commentary. The diary covered a seven-month period, ending in January 1971—even before Nasdaq was launched. One character in the book was an order clerk at a regional brokerage office. I can’t recall her name, but her job was to get the retail clients the best price for their orders from OTC traders. Yes, she was young and attractive, and had to fend off the retail brokers seeking dates (not to mention the traders she did business with). But she was also a ferocious negotiator, throwing out lines like “Mind freshing up that quote?” if she thought she wasn’t getting the best price. The book was an eye into how Wall Street worked before orders were centralized. There is no question that the clerk in the order room was actually functioning as a trader—but without the title. You can bet when the Nasdaq stock market took off that she moved quickly up the food chain and worked at a brokerage shop. Maybe she landed at Herzog Heine Geduld, the big Nasdaq market maker that had its share of women working there. Or maybe she found a home at wholesaler Mayer & Schweitzer. Or maybe she went to work at Prescott, Ball & Turben, an Ohio-based broker where Dennis Green ran Nasdaq and OTC trading. Mr. Green spent 38 years in the trading business and is a former chairman of the Security Traders Association. He was chairman in 1990. His daughter Jennifer Setzenfand is incoming STA chairman. Although their tenures as STA chairs are a generation apart, you can read in this month’s Buyside Snapshot what unites them. By the way, Ms. Setzenfand got her start at Mayer & Schweitzer. Enjoy the issue.

---------------------------------------------------------------------------------------------------------------PUBLISHER Kenneth W. Heath [email protected] ---------------------------------------------------------------------------------------------------------------EDITORIAL DIRECTOR Michael Scotti/[email protected] EDITOR Peter Chapman/[email protected] MANAGING EDITOR John D’Antona/john.d’[email protected] SENIOR WRITER James Armstrong/[email protected] CONTRIBUTING EDITOR Gregory Bresiger/[email protected] ---------------------------------------------------------------------------------------------------------------GROUP EDITORIAL DIRECTOR John McCormick/[email protected] ---------------------------------------------------------------------------------------------------------------ADVERTISING SALES MANAGERS Jeff Kohl/[email protected] 917-838-1114 Mike Moran/[email protected] 212-803-8327 ADVERTISING COORDINATOR Jennifer Veras/[email protected] 212-803-8298 ---------------------------------------------------------------------------------------------------------------MARKETING MANAGER Mendee Morgan/[email protected] 917-915-8426 ---------------------------------------------------------------------------------------------------------------FOUNDING PUBLISHERS & EDITOR Michael P. Ceo, Anthony V. Ricotta, Annabelle Krigstein ---------------------------------------------------------------------------------------------------------------EXECUTIVE CREATIVE DIRECTOR Sharon Pollack/[email protected] ART DIRECTOR Nikhil Mali/[email protected] PRODUCTION MANAGER Eugene “Bud” Moccia/[email protected] ---------------------------------------------------------------------------------------------------------------DIRECTOR OF REPRINT SALES/WEB RIGHTS Denise Petratos/[email protected] 212-803-6557/Fax: 212-803-1577 CUSTOMER SERVICE 800-221-1809/[email protected] ---------------------------------------------------------------------------------------------------------------CREDIT MANAGER Keisha Coursey/[email protected] ---------------------------------------------------------------------------------------------------------------SVP & GROUP PUBLISHER Technology Division Rob Whitaker ----------------------------------------------------------------------------------------------------------------

Chief Executive Officer

Douglas J. Manoni

Chief Financial Officer

Richard Antoneck

EVP and Managing Director, Banking and Capital Markets

Karl Elken

EVP and Managing Director, Professional Services and Technology Bruce Morris David Longobardi

EVP, Chief Content Officer

Michael Scotti Editorial Director

Adam Reinebach

EVP, New Business Development

John DelMauro

SVP, Conferences

Jamie Brokowsky

Vice President, Finance SVP, Human Resources and Office Management

6 |

NOVEMBER 2011

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TRADERS MAGAZINE

Ying Wong

www.tradersmagazine.com

>M&A

State Street Buys Pulse Trading

S

tate Street Corp.’s deal to purchase Pulse Trading ofers the Boston-based bank the ability to leverage its huge transition management business through Pulse’s dark pool, BlockCross, according to industry observers. With the addition of BlockCross, they say, State Street Brokerage would be better able to attract more block-size liquidity from money managers looking to trade a n o n y m o u s l y Mark Enriquez and in size, giving the broker both sides of a trade. his would not only bring in additional commissions for State Street, observers say, but would also give it an additional selling point in the transition business—a midpoint cross is attractive to investors. BlockCross uses buyside blotter-scraping technology and integrates both sellside and dark algo liquidity. he deal, announced Sept. 14, is ex-

8 |

NOVEMBER 2011

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pected to close in the fourth quarter of this year. “State Street has a great transition business,” said one brokerage executive familiar with the crossing business. “If you want to cross as much stock as you can with your clients, a dark pool is a great venue to do that. So you populate your dark pool with your transition business and that transition interacts with buyside low. It is a compelling model, theoretically. On paper, if all the math works out, it is a very compelling business.” State Street has long had a robust transition management business. Because it is a custodial bank, it has strong relationships with pension funds. When pension funds ire money managers and hire new ones, State Street is a familiar face ofering its transition management services—the selling and buying of stocks to harmonize the

TRADERS MAGAZINE

portfolio of the old manager with the new one. Once closed, the transaction will represent a homecoming for one Pulse Trading executive. Mark Enriquez, a managing partner and a founder of Pulse Trading, served as director of electronic trading at State Street from 1997 until 2000, according to his LinkedIn bio. Craig Jensen, principal and head trader at New Canaan, Conn.-based Armstrong Shaw, Dennis Fox said the union of the two makes sense in that State Street is a custody bank that is focusing on growing its transition management business by “adding more liquidity.” He added that “anything that helps them keep more business under their roof helps.” Dennis Fox, head trader at Boston-based Munder Capital Management, who trades with both irms, said the BlockCross technology will

make it easier for him to trade with State Street and access its transition business. “I view the acquisition as a net positive for State Street,” Fox said. Execs at Pulse are hopeful that the deal with State Street will bring growth. “We look forward to joining State Street, where we will continue bringing best-in-class trading technology to our institutional clients,” Pulse Trading managing partner Christian Dubois said in a press release. “he combination of our products with State Street’s scale and institutional client base will allow us to expand our reach.” Dubois told Traders Magazine that BlockCross will stay “fully operational” through the transition of ownership. In fact, State Street and Pulse have grand plans for the ATS. “We want to make it [BlockCross] much larger,” he said. “We want to take Continued on page 16

www.tradersmagazine.com

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>SMALL PRINTS

Paper Points to Rise of Odd Lots

O

dd lots—which aren’t reported to the consolidated tape—have grown as a percentage of shares traded and could now make up as much as 20 percent of market volume. That’s according to a recent paper by Cornell University’s Professor Maureen O’Hara, together with Chen Yao and Mao Ye of the University of Illinois. The paper, which looked at odd lots and their impact on transparency, estimated that executed orders of fewer than 100 shares have grown from about 2.25 percent of volume at the beginning 2008 to about 4 percent of volume at the end of 2009. In the past two years, they have grown even more. Experts say it is very dificult to know how much of current trading comes from odd lots, but some estimates run as high as 20 percent. “he interesting thing about odd lots is they used to be sort of a backwater,” O’Hara said in an interview with Traders Magazine. “Odd lots now are actually being 10 |

NOVEMBER 2011

|

used via a very diferent clientele of people.” Titled “What’s Not here: he Odd-Lot Bias in TAQ Data,” the paper examines how a lack of transparency in odd-lot trades has led to a massive amount of missing data that could be skewing perceptions of the market. “Part of what’s happening is algos have now changed how you trade, and so it’s not that uncommon to have an order chopped up into lots of little pieces,” O’Hara said. “hose pieces can all be odd lots, and those things can all fall outside of the consolidated tape.” Since odd lots are not reported to the tape, there is an incentive for well informed traders to use odd lots rather than more visible trade sizes, the paper found. hough the Securities and Exchange Commission recently reairmed its policy that odd-lot trades should not be reported to the tape, the authors questioned that move, noting fragmentation, high-frequency trading and widespread use of algos have changed the markets in some

TRADERS MAGAZINE

fundamental ways. Last year, NYSE Euronext came out in favor of requiring odd-lot transactions to be reported in consolidated trade

Maureen O’Hara

data. he exchange operator noted that a signiicant volume of trading is attributable to odd lots, and reporting those trades would improve the accuracy and reliability of market data provided to the public. hat position represented a turnaround for the exchange, which had previously objected that there were technical hurdles to reporting odd lots to the tape. Now, however,

NYSE says any system capacity constraints that formerly precluded inclusion no longer exist. It was once thought that odd lots were generated primarily by retail investors, but since any trade under 100 shares is considered an odd lot, medium-size trades of expensive stocks often fall in the odd-lots category. For instance, since Google trades at more than $500 per share, a trade of $50,000 of Google stock would still be considered an odd lot. A full 34 percent of all trades in Google are odd lots that don’t report to the tape, the paper found. “here actually are a number of stocks now that have very high prices,” O’Hara said. “Google is a great example, but Apple’s up there now, and so are others.” he most popular size for an odd lot is 50 shares, but the next most popular size is for a single share.he authors of the study said this was likely due to high-frequency traders trying to “ping” the market with one-share orders to ind Continued on page 16

www.tradersmagazine.com

> R E S E A RC H

Bloomberg Ups ‘Indie’ Research Ante

I

ndependent research is taking on a bigger role at Bloomberg Tradebook. The agency brokerage has nearly doubled the number of “indie” research providers it offers to institutional clients. Bloomberg began its research program in May with roughly 11 irms, and with recent additions, it now has 20 separate independent providers. he oferings are wideranging and include research that is fundamental, as well as industry-speciic. Its research covers about two-thirds of the companies in the S&P 500. “Historically, the majority of Bloomberg Tradebook’s client base has been the trading desk,” said Ray Tierney, president and chief executive of Bloomberg Tradebook, “and what we’re trying to do is broaden our depth and reach by moving upstream to serve the portfolio manager and analyst by supporting an independent research ofering.” Tierney, a former Morgan Stanley brokerage exec, described the arrangements as “partnerships,” adding that Bloomberg has not taken equity stakes in any of the pro12 |

NOVEMBER 2011

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viders. he agreements are not exclusive, either. Bloomberg has added a research sales team of six in the United States. Global sales is run by Richard Gould, a former Morgan Stanley veteran

Ray Tierney

with a derivatives background. To date, other than the month of August, Tradebook has reached its “reasonable” sales goals for the research product. Tierney stressed that success will depend upon delivering a “diferentiated product” that clients want because it can generate them additional returns over their benchmarks. “Our goal is to drive growth and be innovative in

TRADERS MAGAZINE

delivering our research product,” Tierney said. “I want to avoid a ‘me too’ product because we want to give clients what they need, not just what we think they need.” Indeed, commissions have been harder to come by for all brokerage irms over the last two years—particularly for agency brokers without research. Bloomberg’s move mirrors an industrywide trend of brokers adding research to ensure trading desks stay busy and maintain commission levels. Commissions fell in 2010 by 12 percent, according to Greenwich Associates, and that comes after a 13 percent slide the year before. hese have also been dificult times for independent research, as well. Integrity Research Associates, which helps money managers choose independent research, reports that spending on independents has been in a downward spiral for the last three years. his year, Integrity reports that spending for independent research is expected to account for $1.47 billion—that’s down from $1.64 billion last year and $1.8 billion in 2009.

On top of that, 2009’s spend was down 18 percent from the previous year. he good news is that decline is expected to “latten” in 2012. hereafter, spending should begin to climb “modestly” beginning in 2013, said Integrity president Sandy Bragg. hings looked much rosier in 2006, when Integrity predicted that independent research would reach $2.5 billion by 2010. At the time, independent research was about a $1.8 billion business. Bragg said that independent research lost traction as a result of the inancial crisis. Also, the recent insider trading investigation placed heavy scrutiny on expert networks, which fall under the category of independent research. As a result, some managers have curtailed their use of this research due to compliance concerns. Combine those reasons with a smaller commission spend, and independent providers were squeezed, particularly when money managers focused on paying their fullservice brokers to stay in their good graces for corporate acContinued on page 17

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WHERE ELECTRONIC TRADING CONNECTS WITH HUMAN INSIGHT.


 


 








 
 


 





 

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> B RO K E RAG E

Algo Consolidation Speeding Up

F

ewer is better. That’s the message brokers have been hearing from clients over the last year, as buyside traders have reduced the number of algorithms on their desktops. “As a trader, you reach an inlection point where it is intellectually impossible to evaluate, understand, and measure the real-time performance of all your diferent strategies, and identify the appropriate scenario to apply them,” said Tim Reilly, head of North America electronic execution sales at Citi. About two years ago, that led to a movement to simplify the front end and the order ticket to create more eiciency in work low and strategy selection, Reilly said. With the increase in volatility, change has become more rapid. In fact, Reilly sees the period of July 25 to the present as a radically diferent execution environment from the beginning of the year. Clients want to streamline for the new situation, but at the same time they are looking for increased customization. Reilly said there’s a much 14 |

NOVEMBER 2011

|

more active engagement from clients around how to best utilize their electronic toolkit. And that doesn’t just mean using algos in isolation. He said buysiders are evaluating all the diferent options they have—capital, sales trader, electronic trading toolkit, crossing network—and inding a suitable map for the best execution for that order. Since July 25, Citi has found its average order size is up by more than a third in participating algos. Meanwhile the average duration of an order has declined by more than 10 percent. Due to the explosion of volume, algos are trading larger orders, faster. Reilly said some clients are trading too rapidly, and they’re creating an impact on the market. He said Citi is working closely with clients to help them to adjust their strategies so they can achieve the best trading outcomes. Bank of America Merrill Lynch has gone so far as to consolidate its algo platform globally. he irm’s Instinct product allows clients to inetune parameters on an orderspeciic basis, choosing a level

TRADERS MAGAZINE

of urgency from one to ive. he irm rolled out Instinct just in time for the massive volatility this August. hat provided for a natural stresstest of the system, and the company says adoption of the new product his been high. According to Michael Lynch, head of Americas electronic trading for BofA Merrill, Instinct simpliies the front end and puts the complexity on the back end. It’s designed to work with all

Jose Marques

levels of capitalization, but because it is signal-based, the beneit is most noticeable in stocks with an inconsistent volume pattern, he said.

Lee Morakis, head of execution services sales at BofA Merrill, said as algo consolidation continues, he could see clients cut back to using only four or ive diferent algos. hat might not happen for another year, though, as traders get their technology in line with where it needs to be, he said. Regardless of how few algos remain standing, most people in the industry believe the time has been ripe for consolidation. “If you’re a trader sitting at a desktop and if you have ive algo providers with eight to 10 strategies each, very quickly you get up to 50 diferent tactics on your pull-down menu,” said Jose Marques, global head of electronic equity trading for Deutsche Bank. Marques said he sees a lot of buyside irms choosing the best of breed algos in diferent categories and then creating a single button for each which hides the broker name from the front-end trader. He said this is done to simplify worklow more than anything else. While consolidation has Continued on page 17

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Special thanks to our Members and partners for helping us become the #1 marketplace for institutional equities.

Paper Points Continued from page 10

hidden liquidity. HFT is now the norm in the equity markets, the paper said, as high-frequency traders are now involved in as much as 73 percent of all trades. With the rise of HFT and eforts by institutions to break up their orders to prevent gaming by high-frequency traders, smaller lots are now vital for price discovery. According to the paper, 30 percent of price discovery is accounted for by trades of 100 shares or less. O’Hara said the fact that odd lots are correlated with price discovery speaks to the

State Street Continued from page 

advantage of State Street’s strengths—its size, client base and assets and global reach.” Rosenblatt Securities, which tracks dark pool volume, doesn’t report igures for Pulse’s BlockCross. So it is unclear what its market share is, and Dubois didn’t comment on the volume crossed within the pool. 16 |

NOVEMBER 2011

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fact that small trades are now being used diferently than in the past. “It’s time to revisit this area, both from the point of view of regulators, and also to just understand the new dynamics of the market,” O’Hara said. “Every trade now is slightly diferent than it used to be.” One veteran broker who asked not to be named said he had been concerned about odd lots for a number of years. In his opinion, the SEC should start requiring that all trades, no matter how small, get reported to the tape. “hey’re not irrelevant today,” the broker said. “You shouldn’t be able to trade 99 shares all day and not have it

represented.” Alison Crosthwait, managing director for global market structure research at Instinet, agreed that regulators should consider having odd lots printed to the tape. She said the large number of odd lots is a concern, especially if traders are intentionally splitting up orders just to avoid the tape. But Jim Toes, president and chief executive officer of the Security Traders Association, said any beneits of reporting to the tape should be weighed against the costs involved with changing the system. “Our organization always encourages cost-beneit analysis be done,” Toes said. “Regarding odd lots, the cost

for having this activity being added to the consolidated tape should be compared to the beneit investors will gain with the increased transparency.” In addition to considering the inancial issue, regulators should look to prioritize oddlot reforms with the many other issues the SEC is currently tackling, according to Toes. Still, he said the academic paper has already had a big impact on his organization’s members. “I think the industry is familiar with the report,” Toes said. “And I haven’t heard anybody dispute the data.” —James Armstrong

Both Dubois and State Street’s Ross McLellan, head of State Street Global Markets’ portfolio solutions division,

dentiality relating to pending regulatory approval. he transaction includes Pulse Trading’s institutional

ton, New York, St. Louis and San Francisco. McLellan declined to comment on the status of the 20 traders currently at Pulse. However, he did say some of the non-Boston-based personnel could expect to move to Boston. “It’s possible some of Pulse’s regional oices will stay open, but decisions haven’t been made just yet,” he said. —By John D’Antona Jr.

“It’s possible some of Pulse’s regional offices will stay open, but decisions haven’t been made just yet.” Ross McLellan, State Street declined to comment further on BlockCross, citing coni-

TRADERS MAGAZINE

equities business and approximately 40 employees in Bos-

www.tradersmagazine.com

‘Indie’ Research Continued from page 12

cess, IPOs and secondaries. Integrity Research tracks about 1,000 independent research irms, and between 300 and 400 do fundamental research, Bragg said. But there is an equally large segment that offers very specialized research—a group that has historically gotten little of its revenues from the buyside. He singled out John Burns Real Estate Consulting, a irm new to the Bloomberg research platform that has historically done business with home builders and mortgage lenders. “here are a lot of irms like that,” Bragg added. Tierney’s expects Bloom-

Algos

Continued from page 14

been going on for a while, Marques said it has been picking up recently. Another big trend he has been seeing is the uptick in opportunistic algos that aren’t tied to a benchmark like volume-weighted average price. He said a irm can build an algo that gets them VWAP www.tradersmagazine.com

berg’s research ofering to grow to about 25 irms by the end of the year. He doubts the list of independent research providers will go beyond 30 irms. As far as changes to the research list, he said that performance, client demand and what’s hot in the market will be the deciding factors. How a client decides to pay for a “research subscription”—by check, CSA or trading through Bloomberg’s desk or algos—is up to the client, Tierney said. he length of time a client wants to purchase the service is also up to the customer, whether it is three months or longer, he added. “We want to be as lexible as we can,” Tierney said, “because, after all, we’re trying

to build a business.” Part of building that business is keeping the independent research providers and the research salesmen in front of customers. Account executives are also encouraged to get appointments for them. But Bloomberg’s distribution of its more than 300,000 terminals globally might be its biggest asset, and that was a major attraction for the independent irms to sign with the irm, Tierney said. Besides face-to-face meetings with clients, research providers will also be part of video broadcasts Bloomberg plans to host on its terminal. his feature is also undergoing an expansion of bandwidth, which should provide higher

resolution. he video broadcasts potentially could be extended to corporate access, something Bloomberg is planning to ofer clients during the irst quarter of next year. It is in the process of signing up with an independent provider of that service, as well. Corporate access represents about 40 percent of the research commission spend, according to Greenwich Associates. In the end, Bloomberg’s strategy is clear and revolves around research. “No longer am I just relying on an execution-only model,” Tierney said. “he independent research ofering provides a recurring revenue stream.” —Michael Scotti

every time, but from a total-return perspective, there might be a cheaper way of implementing the trade. As the market has gotten volatile, the natural response is to shorten trading horizons, and while there has been some of that, Marques said there has also been increased hand management of trades. Buyside traders are still using electronic tools, but being more

dynamic in deciding when to go ahead with an order and when to pull back for a bit. “When the market gets volatile, it’s harder, because things are moving fast and you’re busier, but it’s also a time when a human trader on the buyside can potentially add more value,” Marques said. It’s impossible to predict how long the volatility

will last, but Marques said it doesn’t look like the macro events driving volatility are going away in a hurry. In such an environment, today’s algos have to be selfadaptive to the changing volatility regimens, according to Marques, and that means building an algo from the ground up to take account for different levels of volatility. —James Armstrong

TRADERS MAGAZINE

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M

att Lavicka is a managing director at

Goldman Sachs. He recently spoke out at the Securities Industry & Financial Markets Association’s annual

>> On the unfairness of the cost burden here has been this faster and faster race of trying to be able to react quickly to quotes and pump more quotes into exchanges. here is no end in sight. here is a certain element in the industry that is producing a lot of messages and not necessarily bearing the costs that result from that production. here is a broader universe of market participants that must consume all these messages. hat has to worry about having their feeds upgraded to support the latest bandwidth. hat has to worry about latency. It’s a big cost to the industry to consume these kinds of messages.

>> On a solution

market structure conference

We need to do something. here has to be a re-aligning of incentives and disincentives. here has to be a better throttle mechanism to deal with the ever-increasing market data message rates.

about the high costs to the

>> On the problem of private exchange feeds

industry of high-frequency traders looding the market with quote data.

he NBBO and the production of market data is supposed to be an industry utility. It is mandated by the SEC. Essentially, it is a monopoly. he industry is obliged to consume it. It has to pay whatever price is necessary to get that data. he problem has to do with the competitive nature of the exchanges. Exchanges used to be non-proits. And they were responsible for production of this data. Now they are for-proit and they have various private market data feeds. And we have this misalignment of the private market data versus the SIP data-feeds, or the NBBO. hese issues will get in the way of us solving this. here needs to be the right incentives set up. It will take the SEC to make that happen.

>> On the threat to a limit up/limit down mechanism Putting in limit up/limit down is crucial, but it can’t happen without recognizing the importance of market data. If limit up/limit down gets behind…It’s the old “garbage in, garbage out” problem because of an overwhelming amount of market data being produced. he NBBO and the last trade are [supposed to be] accurate and a relection of where the market is trading. But in fact that is not always the case. We should put more efort into detecting and making sure the industry has the ability to detect when that is not the case. hat way we won’t have these issues about who withdrew from the market and who can’t get to…Why are the market participants doing things like having to ping consolidators? And checking one versus another? he originators of the trades should be recording time stamps and disseminating them so the consumers can actually see if there is latency in the data. here are a lot of important things we need to do to shore up the infrastructure to make sure the market data is accurate.

18 |

NOVEMBER 2011

|

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>>Cowen Group hires

two longtime partners—Keith Kurzner and Kyle Solomon— to head its options and event-driven strategies group. hey will be responsible for growing the irm’s presence in institutional options and launching its event-driven strategies group, which will include both equity and options sales and trading. hey will be based in New York and will report to Tom O’Mara, Cowen’s head of institutional derivatives. Kurzner and Solomon have been business partners for 17 years. hey recently worked at RBC Capital Markets and, prior to that, at CIBC/Oppenheimer, where they were responsible for establishing and leading similar businesses.

>>CastleOak Securi-

ties has expanded its equity sales and trading division with Patricia Koetzner and Mitchell Ginsberg. Koetzner joins as managing director and head equity trader. She will focus on

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NOVEMBER 2011

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>>Kenneth Heath was elected honorary national vice president for the Muscular Dystrophy Association. Heath, publisher of Traders Magazine, is a longtime supporter of the MDA, will continue to aid its research programs and initiatives in the New York tristate area. He started his involvement with the MDA 10 years ago, when he volunteered for its Wings Over Wall Street campaign after meeting Michael Beier of Credit Suisse. Beier passed away due to ALS in 2003. Heath continued his service with the organization since and has served on the MDA’s Wings Over Wall Street committee since 2006. Heath’s term started this past July and will end in July 2012.

new business generation. She was previously a vice president of Barclays Capital and was responsible for expanding revenue in equity trading. She is a former Nasdaq market maker for Neuberger Berman, Gruntal & Co. and Dominick &

TRADERS MAGAZINE

Dominick. A 20-year veteran, Ginsberg joins as a managing director and equity trader covering institutional accounts. He was previously a vice president of equity research sales and trading at Rodman & Renshaw. Earlier in his career, Ginsberg

was a principal market maker and traded distressed stocks. He worked at Citigroup Global Markets, TD Waterhouse Capital Markets and Neuberger Berman.

>>Jon Fatica joins

execution management systems vendor TradingScreen as co-head of analytics, based out of the irm’s New York oice. Fatica comes from Investment Technology Group, where he had been developing that irm’s transactioncost analysis unit since 2002. He has provided thought leadership and expertise to the buyside marketplace for more than 300 institutions, leading a staf of consultants, analysts, client-support and technology professionals. Prior to joining ITG, Fatica managed consulting engagements in the inancial services practice for KPMG. His career also included stints at J.P. Morgan, First Boston, Bank-

ers Trust and Lazard Asset Management, in positions including risk management, portfolio management and ixed income trading.

>>Annamarie O’Neill joins RBC Capital Markets as a director, in the irm’s U.S. equities sales and trading group. O’Neill was previously the senior sales trader at Execution Noble. Before that, she spent 10 years as an institutional block trader and sales trader at Goldman Sachs. She reports to Michael Marrale, head of U.S. sales trading and desk sector strategy.

>>Stephen Parish

joins privately owned investment bank Dahlman Rose & Co. as managing director for equity capital markets. Parish, a 25-year veteran, previously spent two years at Cantor Fitzgerald, where he was a managing director and global head of equity capital markets. He also spent more than 20 years at

www.tradersmagazine.com

Bear Stearns & Co., holding various senior management positions, including global head of the equity transactions group. He reports to head of equity capital markets Matthew Rovelli.

>>ConvergEx has

names Michael Hutner and A.J. De Rosa as co-heads of global sales for the irm’s Eze Castle order management system. In their respective roles, De Rosa will focus on new client sales, while Hutner’s primary role is business development with existing clients. Based in New York, they report to chief executive Tom Gavin. Hutner, who joined Eze Castle Software in 2000, was responsible for starting Eze’s client service oice in New York and oversaw East Coast operations before being promoted to managing director of global business development in 2006. Before joining Eze, he was a senior associate at PricewaterhouseCoopers. De Rosa, who joined

www.tradersmagazine.com

Eze Castle Software in 2002, has held various positions at the company, including head of new client sales for North America. Prior to joining Eze, De Rosa worked for Financial Models Co. and homson Financial.

>>Peter Cocuzza

joins Stone Toro Asset Management in Princeton, N.J., as a vice president of business development. Cocuzza, a 28-year veteran, was previously an equity trader at Oppenheimer Funds, where he spent nine years. Before that, he traded at Mitchell Hutchins/PaineWebber, where he spent 20 years on both the buyside and sellside. He reports to Jef Russo, Richard Jenkins and Michael Jarzyna, founders and portfolio managers previously with BlackRock.

>>Matt Simsic joins

proprietary trading irm Eladian Partners as a partner and head trader.

Previously, Simsic held senior trading and leadership positions at DRW Trading, Millennium Partners, Bear Stearns and Hull Trading. Simsic has more than 15 years of experience as a trader in a variety of countries and asset classes. he majority of his experience has been in the design, development and implementation of quantitative and technology-driven trading strategies in global equities and futures markets.

>>KeyBanc Capital

Markets has transferred one sales trader to another oice and added another. Aimee Spuller is moving to KeyBanc’s Chicago oice and will continue to cover accounts in the Midwest and Southeast. Spuller, spent the last ive years as a sales trader in Cleveland. Also, Julie Waring has joined KeyBanc’s Cleveland oice as a sales trader. Waring was

previously an account executive at Bloomberg LLP in New York, where she covered accounts in the mid-Atlantic region for the last four years. Both Spuller and Waring report to Kevin Kruszenski, the irm’s national director of equity trading.

>>PMG Capital’s

Daniel Kinsella has joins Emerging Growth Equities as managing director of capital markets. A 20-year trading veteran, Kinsella joined EGE on Aug. 1. Kinsella spent the majority of his career at Pennsylvania Merchant Group. He reports to Gregory Berlacher, EGE’s founder, president and chief executive oicer.

>>Scott Wilson joins

hemis Trading to cover accounts and to work on market structure issues for the Chatham, N.J.based agency broker. Wilson, with more than

20 years’ experience, spent his last 11 years in electronic trading, including stints at Piper Jafray and Vie Technologies, which Piper acquired in 2004. Prior to that, he worked as a Nasdaq market maker at Lehman Brothers, Needham and Morgan Stanley, where he traded technology stocks. He reports to founders Sal Arnuk and Joe Soluzzi.

>>Agency broker

Instinet hires William McKeown as head of North American Sales for its Meet the Street corporate access group. McKeown, a 25-year pro, will focus on helping grow the corporate access business. Prior to Instinet, he served as a director in Knight Capital Group’s corporate access group. He reports to Dan Dykens, president of Meet the Street.

Got a new job? A promotion? Did a colleague? Send your particulars—or a colleague’s—to [email protected]

TRADERS MAGAZINE

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>COMPLIANCE

Volcker Rule a ‘Challenge’: FINRA

M

aking sure brokers are in compliance with the proposed Volcker Rule is not going to be easy, according to an oicial with the Financial Industry Regulatory Authority. Tom Gira, a FINRA executive vice president in charge of market regulation, told attendees at a recent industry conference that “from a surveillance standpoint,” the Volcker Rule is likely to be “challenging.” he problem, Gira said, will be separating those activities that are permissible under the rule from those that ain’t. he executive was speaking at the Securities Industry & Financial Markets Association’s annual market Tom Gira structure conference. Once the Volcker Rule is approved, examiners from both the Securities and Exchange Commission and FINRA will be charged with auditing irms for compliance. Gira suggested brokers may have to provide more details than they already do about their trades for examiners to determine whether or not a particular activity complies with the rule. he Volcker Rule, which was scheduled for release on Oct. 18 but circulated in draft form prior to that, is intended to curb risky trading by banks. he thrust of 22 |

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TRADERS MAGAZINE

the rule is to eliminate proprietary trading, or betting irm capital on securities trades. And while the rule provides exemptions for such activities as market making and hedging, the deinitions of these activities are proving diicult to nail down. Deinitions are the main problem, according to Gira and industry attorneys. “Hopefully, there will be some clear-cut standards,” Gira said, “because there is the potential to impact legitimate activity.” Market making is especially vulnerable under the Volcker Rule. hat’s because distinguishing between it and prop trading is not always straightforward, sources maintain. Often, dealers will replenish their inventories in anticipation of potential demand. hat demand, however, may not materialize for hours or days, creating the suspicion a trader was speculating. he proposal sets out seven standards that need to be met for a trading activity to fall under the deinition of market making. One requires trading positions to have “near-term demand.” “he deinition of market making is going to be the important piece here,” Kevin Campion, a partner with attorneys Sidley Austin, said at the SIFMA conference. “In the context of Regulation SHO,

it is focused on the Exchange Act deinition of a market maker, or holding oneself out by entering quotations.” (he SEC’s Regulation SHO governs short selling and exempts trades done for legitimate market making.) At least one attorney is optimistic the deinition will be all-encompassing. “As for equities market making, I would hope the deinition will be consistent with the Exchange Act and include block positioning,” said Vaishali Javeri, a director and counsel at Credit Suisse. “he indications are that there should be a suiciently broad market-making exemption. But we will see.” Regulators may need more details from brokers to do their surveillance work, Gira said. “If a irm is using the same MPID for multiple types of activity,” he explained, “it will be diicult to ferret out what is market making, what is hedging and what is block positioning.” Gira suggested that irms might have to use special-purpose MPIDs for their market-making desks or new modiiers for each trade. “hat will make it easier from a surveillance standpoint,” Gira said, “but will have consequences.” he Volcker Rule, which was championed by former Federal Reserve chairman Paul Volcker, will apply only to “banking entities.” Some of the biggest stock dealers, including Knight Capital Group and Citadel Securities, will not be afected. —Peter Chapman www.tradersmagazine.com

>ORDER HANDLING

Market Makers Under Fire From SEC

T

he Securities and Exchange Commission is considering rules that could limit trading by market makers during topsy-turvy markets. Speaking at an industry conference last month, David Shillman, an associate director in the SEC’s Division of Trading and Markets, told attendees the regulator was mulling the imposition of “negative obligations” on dealers in certain circumstances. If the stock market were to get overly frothy, as happened during the lash crash of May 2010, these restrictions would bar market makers from conducting trades that might exacerbate the situation.

“he notion of negative obligations is a promising one,” Shillman said at the annual market structure conference of the Securities Industry and Financial Markets Association. “What we saw on May 6 was that some of the high-frequency trading irms were very aggressive. hey were taking liquidity. he question is: Is it appropriate in volatile situations for a market maker to be taking liquidity?” In general, negative obligations bar registered market makers from trading, while positive obligations require them to trade. Shillman’s comments drew mixed reactions from market makers. “I’m OK with a regulator saying that in certain circumstances a irm shouldn’t add to the disrup-

tion of the market,” Chris Concannon, a partner with Virtu Financial, told SIFMA attendees. “hat’s an OK restriction to live by as a market maker.” Adam Nunes, in charge of business development at Hudson River Trading, was more circumspect. “he whole idea of proprietary trading irms exacerbating volatility hasn’t been borne out as true,” he said. “hat’s what we learned from the papers in the Foresight Programme.” he British government’s Foresight Programme, a research organization that studies the impact of science and technology on society, recently tackled the controversial topic of high-frequency trading. —Peter Chapman

> M A R K E T C O N T RO L S

Circuit Breakers Get Refreshed

E

xchanges and the Financial Industry Regulatory Authority, under federal guidance, have proposed updated marketwide circuit-breaker parameters. he existing parameters have been in place since 1988 and were triggered only once in 1997. In light of the May 6, 2010 “lash crash” avoiding a trigger, the current circuit breakers are deemed outdated.

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he marketwide circuit breakers go into efect when the stock market drops by a certain percentage. A trigger requires the exchanges to halt trading. here are ive signiicant changes under the proposal. First, trigger points will be updated daily rather than quarterly. Second, the Standard & Poor’s 500 Index will be substituted for the Dow Jones Industrial Average as a market measure.

hird, the trigger percentages have been lowered. Fourth, the proposal shortens the length of any halt to no longer than 15 minutes. Finally, under the proposal, trading can be halted at any time between 9:30 a.m. and 3:25 p.m. Currently, the last opportunity to halt trading is 2:30 p.m., unless the market drops severely. —Peter Chapman TRADERS MAGAZINE

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NOVEMBER 2011

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> E XC H A N G E P O L I C y

New Front-Running Rule Change

R

ecent rule changes by the exchanges operated by NYSE Euronext have some on the buyside worried about frontrunning by their brokers. In September, the New York Stock Exchange, NYSE Amex, and NYSE Arca all changed their rules that prohibit trading ahead, or front-running, to mirror those of the Financial Industry Regulatory Authority. In so doing, it watered down a key protection for large institutional customers. he crux of the change is a reversal of the assumptions that underpin the understanding between the sellside and the buyside regarding trading alongside, or ahead. Rule 92, as both the NYSE and Amex rules were called, barred trading ahead except in the case of block orders. he exception allowed brokers to trade alongside or ahead of their customers, but only if the buyside gave them permission to do so. he exchanges’ new Rule 5320, by contrast, allows brokers to trade alongside their customers without asking for permission. Brokers only need to send out “negative consent” letters to their customers once a year, informing them that they intend to trade alongside, unless instructed otherwise. In other words, the buyside trader must “opt in” to the protections provided by Rule 5320 by raising the issue 24 |

NOVEMBER 2011

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TRADERS MAGAZINE

with their brokers each time they trade. hey no longer have the luxury of “opting out” of the protections of Rule 92 when prompted by the broker. he change shifts the compliance bur-

den from the sellside to the buyside. “his is very signiicant,” one buyside trader, who requested anonymity, said. “he broker-dealers are claiming this is just a minor rule change, but it certainly is not. his rule says they can trade beside me or ahead of me anytime they want to.” he concern arises when a buyside trader asks his broker to commit capital for part of an order. If the broker does so, he takes on a position and puts himself in competition with the customer. He must trade stock on behalf of the customer as well as his own account as he seeks to latten his position. he fear is that the broker will trade for his own account at prices better than

those he obtains for his customer. hat’s a form of front-running, or trading ahead. Both FINRA and the NYSE have had similar rules prohibiting this for years. In a bid to ease the compliance burden of the sellside, the two organizations have been “harmonizing” their rulebooks in recent years. FINRA won Securities and Exchange Commission approval for an updated version of its two “Manning” rules earlier this year. It created Rule 5320. NYSE Euronext won SEC approval for its lookalike Rule 5320s in August. he exchange operator received no pushback from money managers or their Washington-based advocate, the Investment Company Institute, at the time. he rules went into efect in September. NYSE iled the rule with the SEC for “immediate efectiveness,” meaning there was no comment period. his is common for non-controversial rule changes. Buysiders who spoke with Traders Magazine were adamant that a comment period should have been part of the process. hey also contend they did not receive proper notiication of the proposed change. Whether or not some party will petition the SEC to remand the rule remains to be seen, one source said. Despite the purported surprise by the buyside at the sudden change, NYSE EuContinued on page 27

www.tradersmagazine.com

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> C O N S O L I DAT E D AU D I T T RA I L

Real-Time Reporting Ignites Debate

M

uch of the industry is irmly opposed to real-time reporting of a new consolidated audit trail, but regulators continue to hint that a real-time component might still be included when the Securities and Exchange Commission rolls out its CAT proposal in the next few months. At a conference hosted by the Securities Industry and Financial Markets Association, David Shillman, associate director of the SEC’s Division of Trading and Markets, called CAT the agency’s “number one” David Shillman priority. While a real-time reporting requirement would mean extensive technology upgrades, he said it could still be feasible. “If a real-time audit trail were approved by the Commission, monitoring technologies could be developed,” Shillman said. At the same conference, Gregg Berman, senior adviser to the director of the Division of Trading and Markets, was even more enthusiastic. He said the SEC had sought information regarding the availability of real-time tools and found the necessary technology for monitoring 26 |

NOVEMBER 2011

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TRADERS MAGAZINE

is available. at Nasdaq OMX. “In order to recognize “We were quite pleased to ind that it manipulation, you have to look at patis possible for us to procure systems, daterns of activity over time.” tabases and applications that will enable Elizabeth King, counsel at Getco and us to read, monitor and analyze the same former associate director of the SEC’s low-latency trade-and-quote feeds that Division of Trading and Markets, echoed many of the most sophisticated market Concannon, noting that an investigation participants use today,” is usually necessary Berman said. once possible abuse is Such systems would detected. “We don’t allow the SEC to obunderstand the added serve every trade, every beneit of a real-time quote and every cancel, audit trail,” King said. at just about the same “T+1 seems perfectly time and in the same sufficient.” way that other market Many in the inparticipants do, accorddustry want the SEC ing to Berman. He said to use the Financial that while markets are Industry Regulatory complex, they are not Authority’s Order Gregg Berman inscrutable. Audit Trail System, Others are not so sure or OATS, as the basis real-time reporting would be a good idea. for CAT. Some argue that OATS—which Many in the industry feel it would be extracks an order from start to inish—is alcessively expensive and would add little ready 80 percent of the way there. value for regulators, since illegal market But in spite of industry concerns, a activity probably could not be identiied number of vendors have been lining up until after the fact anyway. to provide the technology necessary for Some in the industry feel it would be real-time reporting. Michael Belanger, impossible to spot in real time any activity president of Jarg Corp., said real-time renot so egregious that it would be caught porting would be relatively inefective the today anyway. way it’s currently proposed, but the agen“Real time is the worst time,” said cy could implement a monitoring system Chris Concannon, a partner with electhat works well and costs little. tronic trading irm Virtu Financial and Instead of building new databases, former head of U.S. transaction services Continued on page 27 www.tradersmagazine.com

Rule Change Continued from page 24

ronext’s August rule iling was not its irst public pronouncement on the subject. In March 2009, the exchange operator sent a memo to its members asking for comment on the possibility of swapping Rule 92 for Manning. In response, the Securities Industry & Financial Markets Association sent a letter to NYSE declaring its approval for any rule change, noting that compliance with the existing rule was a burden on traders and caused “unnecessary delays in the trading process.” Also, at the time, one senior NYSE Regulation oicial said publicly that it might not be a bad idea for the buyside to do its own policing. NYSE Euronext declined to comment for this article.

Real-Time

Continued from page 26

Belanger suggested the SEC use existing databases and use routing search engine technologies known as intelligent agents to look for speciic patterns in real-time. “We certainly have the technology,” Belanger said. “here could be thousands or millions of agents, depending on how sophisticated the SEC’s thought process was.” Belanger said a irm like his could create the platform and regulators could design agents to look for whatever patterns www.tradersmagazine.com

he new NYSE rule does allow the buyside to opt into the protections afforded by the rule. But, in practice, the value of that opt-in may depend on the brokerage. And at least one broker is taking a hard line. Citi sent a letter to its customers telling them it would only ofer share-byshare protection for held orders. “Citi will consider such requests on a case-by-case basis,” the letter said. “It will inform the customer whether it is willing to accept such a protected order.” Traders Magazine received excerpts of the letter by a recipient. Citi told its customers it would not offer share-by-share protection for not-held orders. “Because not-held orders require that the irm exercises discretion as to time and price of execution, Citi does not believe it is feasible for these orders to be

eligible for share-by-share protection,” the letter said. Citi declined to comment. Not-held orders are those in which the broker has discretion in the handling of the order. Held orders require the broker to follow its customers’ instructions to the letter. Most institutional trading is done on a not-held basis. Many buyside traders do not use held orders because they involve the display of limit orders on the exchanges. hat may signal the trader’s intentions. A number of brokers have sent out letters to their clients and/or posted their policies on their Web sites. Not all policies are as restrictive as Citi’s. UBS and Goldman Sachs, according to one source, appear more willing to accommodate the buyside. —Peter Chapman

they considered problematic. he agents would then alert the SEC if it looked like a trader were going of the rails. his, he argued, would be far superior to waiting until a market disaster actually happens. “It would be like a chess game,” Belanger said. “he agents would be essentially telling you what moves are being made, and they would speculate on when there was going to be a checkmate, and how many moves ahead.” Installing such a platform for real-time surveillance would cost between $40 million and $60 million, according to Belanger. After that, the system could be

maintained at modest costs allowing for continual upgrades, he added. hat price tag is a far cry from the $1 billion to $4 billion projected when CAT was irst proposed by the SEC. Shillman believes modern technology will make an updated system feasible and that OATS is too creaky. “Technology has advanced since the late 1990s, when OATS was developed,” Shillman told SIFMA attendees. He also took issue with the characterization of OATS as 80 percent ready. —James Armstrong and Peter Chapman TRADERS MAGAZINE

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Celeb

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ebrating

Women Trailblazers, Entrepreneurs, Mentors, Rising Stars and Others Honored for Their Achievements

Excellence

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Trading is and always has been a man’s world. But there are exceptions to every rule. Women in trading have made their imprint on an industry that has not always been femalefriendly. Welcome to “Wall Street Women: A Celebration of Excellence.” This issue features 15 award-winning women who have placed their mark of success upon the Street—and as a result, are being honored for their accomplishments. While a small number of women have survived the tumult

By JOHN D’ANTONA JR. AND GREGORy BRESIGER

www.tradersmagazine.com

of Wall Street, the great ones have thrived. The winners’ TRADERS MAGAZINE

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stories of leadership, perseverance, assertiveness and charity are inspiring to both women and men. Take Jeanne Murtaugh, for example, a Wall Street pioneer. A 38-year veteran, she founded Wachovia’s retail brokerage division. Murtaugh will deliver the keynote address at the inaugural event feting

learn from her, as well as a respected colleague to everyone. Indeed, perseverance is the name of the game for others, too. Kathy Cheevers, chief executive oicer at Chicago–based Cheevers & Co., has seen much in her career. But nothing compares to Sept. 11, 2001 and the aftermath, according

While a small number of women have survived the tumult of Wall Street, the great ones have thrived. the winners on Nov. 10 in New York. Her success formula? A vision; being able to see where markets were headed. “It was very important,” she said, “to be strategic in my orientation. I clearly was not only committed to working hard, but identifying a trend line in a market.” A love of the business has been a primary driver that has propelled these high achievers to success. Just ask senior sales trader Sylvia Rocco, a 40-year veteran at Bank of America Merrill Lynch, who started on the trading desk in the 1970s. She recalls being the only woman in a men’s locker-room atmosphere, given no formal training yet being asked to handle institutional clients’ orders while her male counterparts were traveling. “I worked for four brokers as their sole assistant,” she said. “he three hired before me quit within a few days. I guess they didn’t like the hectic atmosphere.” But she remained and persevered. She has long been an anchor on the desk—a mentor to the junior traders who look to 30 |

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to Cheevers. It was a time that tested her commitment to the business. “I remember when I was on the phone with a broker and then it just went silent,” said Cheevers, who opened her irm in 1982. “But we kept going.” Other women have similar stories, ones that demonstrate their determination and patience, as well as their desire to succeed. RBC Capital Market’s chief operating oicer Deborah Freer said she had to establish that she was “not going to be walked on.” At the same time, Freer had to determine “the right level of assertiveness.” Freer won a Traders Magazine Mentor Award, along with BofA’s Rocco. Each woman developed her own strategy to compete at the highest echelon. Stacy Bash-Polley, partner, co-head of ixed income sales in the Americas at Goldman Sachs, was the sole winner of the Excellence in Leadershp Award. She devised a rule that she has applied to both her professional and personal life. It’s the

24-hour rule, which introduces a cooling-of period before responding in certain situations. It helped her innumerable times in her career. And Melissa Hinmon, now a senior equity trader at Turner Investments, recalls being excluded from meetings by her male counterparts at the outset of her career in the 1980s. But she didn’t let that bother her, and today her skills are recognized. Today she works on a desk in which ive of seven traders are women. “Without a doubt, things are much better for women than when I started in the business,” Hinmon said. And that has been the mantra of Deutsche Bank—making things better for women. he broker-dealer was selected for its proactive stance towards women and its prowess in recruiting, cultivating and supporting females in all roles. When searching for talent, especially with more experienced candidates, the irm works closely with several executive search irms and requests diverse candidate slates for those positions. Deutsche Bank has also expanded its search for U.S.-based talent across the globe. “Hiring at the MBA level is truly global, with U.S. MBAs often taking roles in our overseas locations and foreign national MBAs often taking roles here in the U.S. oice,” said Mark Chamberlain, head of diversity for the Americas. he winners in eight categories were nominated by the industry and selected by an independent advisory committee comprised of women in the inancial community. Here are this year’s winners of the inaugural “Wall Street Women: A Celebration of Excellence.” TM www.tradersmagazine.com

Diversity Achievement Award

Entrepreneur of the year

This award is presented to the irm that demonstrates focused eforts and quantitative and qualitative results in the area of achieving gender diversity in the executive ranks.

Given to women who have pursued, and succeeded on, an entrepreneurial path in the inancial markets.

Deutsche Bank —————————————

Excellence in Leadership Award Presented to a woman who demonstrates exemplary leadership and exceptional performance throughout her career. This individual, selected by the advisory committee, is such an outstanding professional that she qualiies for multiple award categories and is considered to be the standard-bearer for women in the inancial community.

Stacy Bash-Polley, Partner, Co-Head of Fixed Income Sales in the Americas, Goldman Sachs

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Industry Trailblazers This award is presented to high-performing Wall Street women who broke the gender barrier when it came to trading and advancing up the career ladder on the buyside and sellside. These trailblazers forged the opportunity for other women to become traders, managers and successful inancial professionals.

Nanette Buziak, Senior Vice President, Head of Equities Trading, ING Investment Management Kelly Mathieson, Managing Director, Global Custody and Clearance Business, J.P. Morgan Worldwide Securities Services

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Lifetime Achievement Given to women with more than two decades of senior management experience on Wall Street, who have achieved the pinnacles of success and acted as role models to younger generations of women and men.

Annette Nazareth, Partner, Financial Institutions Group, Davis Polk & Wardwell

Kathleen T. Cheevers, CEO, Cheevers & Co.

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Dana Telsey, CEO and Chief Research Officer, Telsey Advisory Group

Mellody Hobson, President, Ariel Investments

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Mentor of the year Given to women who have shown dedication to the cause of mentoring other women in inancial services.

Sylvia Rocco, Managing Director, Senior Sales Trader, Bank of America Merrill Lynch

Deborah Freer, Chief Operating Officer, RBC Capital Markets

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Charitable Works Award For women who devote considerable resources and energy to philanthropic causes.

Lisa Utasi, Director, Senior Equity Trader, ClearBridge Advisors Stacey Lee, Director, Institutional Equity Sales, Liquidnet

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Crystal Ladder For women who began in an entry-level job in a inancial irm and climbed steadily through the ranks to reach senior management.

Savyona Abel, Managing Director, Global Client Support Services, Investment Technology Group

Christina Kelerchian, Managing Director, Head of U.S. Equity Fundamental Trading, Goldman Sachs Asset Management

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Rising Stars Recognizing today’s and tomorrow’s leaders. The Rising Star Award is intended for high-impact professionals who will continue to lead the industry in the next generation.

Melissa Hinmon, Senior Equity Trader, Turner Investment Partners Joanna Fields, Head of Market Structure for the Americas, Deutsche Bank

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WOMEN ON WALL STREET

TM Diversity of the year Award

Deutsche Bank

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ith great power comes great responsibility. And at Deutsche Bank, global hiring responsibility lies in three core beliefs: maintaining gender diversity, staffing across generations, and accountability and leadership. That philosophy sets the bar. “And then there are priorities that are unique to each geographic region,” said Mark Chamberlain, head of diversity for the Americas. “In the U.S., it is ethnicity.” He told TRADERS MAGAZINE that Deutsche Bank has made an active effort to hire women and minorities at the bachelor’s and the MBA levels, and that the bank has several programs dedicated to this end. So far, the bank has been able to hire more of both. However, that doesn’t limit the bank in its hiring, he added. Deutsche Bank sources talent from all communities, regardless of race, creed or sexual orientation. And that is important. Chamberlain recalled a recent survey that reported that of women attending U.S. colleges, only 8 to 9 percent

indicated finance was a field they were interested in. So, as in trading, the bank competes for talent and has to adjust its strategy. Chamberlain said that to attract more experienced talent, the firm works more closely with several executive search firms and requests diverse candidate slates for those positions. Deutsche Bank has also expanded its search for U.S.-based talent across the globe, as well as looking for U.S.-based candidates to work overseas in Europe or Asia. “Hiring at the MBA level is truly global, with U.S. MBAs often taking roles in our overseas locations and foreign national MBAs often taking roles here in the U.S. office,” he said. The company also sponsors quarterly conferences across the globe targeted toward women. These “Women on Wall Street” meetings serve to let bank personnel, clients and others get together and exchange ideas and network.

TM Excellence in Leadership Award

Stacy Bash-Polley Firm: Goldman Sachs Years in Industry: 17 Previous Firm: Ernst & Young Status: Partner, Co-Head, Fixed Income Sales in the Americas

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oldman Sachs’ Stacy Bash-Polley is a prime example of a women success story in the trading industry. She began as an associate at Goldman Sachs in 1994, after a stint as an information specialist with Ernst & Young. Bash-Polley has undergraduate and graduate degrees in business, but she also obtained a master’s in information science. Bash-Polley won TRADERS MAGAZINE’s Excellence in Leadership Award for a number of reasons: two are she had a thorough education, and she expected to succeed. Now co-head of Goldman Sachs’ fixed income in the Americas, Bash-Polley emphasizes that success comes to those who actively pursue it and have the tools to achieve it. “The DNA of someone who is successful is someone who doesn’t wait to be asked,” she said. “It’s someone who goes for it.” She added that such a person is not someone who needs to be reassured, but knows her job and can achieve goals independently. Take, for instance, the conferences so many professionals must

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attend. “I never go to these things without coming back and having an action plan. When I go, there is an intention. When I come back, there’s an action,” she said. Yet Bash-Polley also believes professionals who get to the top should sometimes be deliberative. One must know when to stop and think, a practice she employs. “I call it the 24-hour rule. It’s very important, when faced with a conflict, never to respond right away, whether it is an email or any other situation,” she said. “Waiting ensures that you will be much more thoughtful and actually get the results that you want.” Learning the importance of this rule, she notes, and a thorough education, are both vital to any person’s success. She also believes that mentoring is important for newer traders. Therefore, Bash-Polley has developed a women’s network for Wall Streeters. The goal? A bigger mentoring network for the next generation of women traders.

www.tradersmagazine.com

WOMEN ON WALL STREET

TM Mentor of the year Award

Deborah Freer Firm: RBC Capital Markets Years in Industry: 30 Previous Firms: Citigroup, Merrill Lynch Status: COO, RBC Capital Markets, CEO, US Broker Dealer, RBCCM, LLC

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fter about three decades in the securities industry, Deborah Freer understands the contradictions of a woman achieving success in a competitive, male-dominated trading culture. Succeeding in the trading industry requires considerable learning and tenaciousness, Freer believes. “I would tell women that this industry is a big commitment,” she said. And that also means not letting people take advantage of what some perceive as a weakness, owing to a lack of experience or because women supposedly lack strength—challenges she faced. To succeed, one can’t “be a wallflower,” Freer said. Indeed, early in Freer’s career she established that she was ready to compete. Yet that tenaciousness, so vital to surviving in a competitive culture, must be tempered, she noted. “One of the biggest challenges women have is figuring out the right level of assertiveness and acting on it,” Freer said. While she said that early in her career, she faced confrontational situations,

she emphasized that one must be careful how and when to fight these battles. In making difficult decisions, Freer said, women face another contradictory situation. Upcoming female professionals can be helped, as Freer was, by women mentors. But women mentors are in short supply, she noted. Yet a mentor was important in her success. Freer credits Diane Schueneman, Merrill Lynch’s global head of operations systems and technology, with helping her. Schueneman, Freer noted, never favored any group, but always dispassionately selected the right person for the right job. “She chose the right person for the job, which reflected on a much broader and much more diverse pool of people,” Freer said. “She did not tell you what you wanted to hear, but rather the cold hard facts and the realistic alternatives to a problem.”

TM Mentor of the year Award

Sylvia Rocco Firm: Bank of America Merrill Lynch Years in Industry: 40 Previous Firms: Merrill Lynch Status: Managing Director, Senior Sales Trader

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urturing relationships—with her clients, her position traders and her other colleagues—is the best part of Sylvia Rocco’s job. And that is what makes her a successful mentor at Bank of America Merrill Lynch. Rocco, a sales trader who has been covering accounts for 40 years at the irm, credits her mentors for her longevity and success. “To make a successful trader, it really takes a village,” she said. “I feel like I had a whole bunch of mentors who helped me.” The year was 1970. Trading desks resembled men’s locker rooms, and very few, if any, women were on them, let alone working on Wall Street. Rocco found herself sitting on the institutional sales desk next to her irst mentor, salesman Peter Broms. Though Rocco, as a newbie, made some mistakes on the desk, Broms was there to push her to carry on and excel. “What Peter did was push me to get my Series 7,” she recalled. After passing the exam, Rocco was encouraged by Broms to interact with clients and hone her skills. He also helped her ind her current

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home. “When he found out a position opened on the trading desk, he recommended me.” And now, it is Rocco who is mentoring the irm’s younger traders. Many of them are seated right next to her. Like Broms before her, she guides them and helps them acclimate to their new surroundings. “I don’t think you go to class and learn how to be a good sales trader,” she said. “You can learn the mechanics of trading, but being a sales trader means developing relationships, and learning these methods is essential. They can’t be taught in a classroom.” Her position as a sales trader has been a constant learning experience during her career, as the job has changed dramatically. “You have to sit next to someone to get it,” she said. “I tell the younger traders to reach out and learn from as many people as you can. That’s the secret to a successful career.”

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INVESTMENT S LIFE INSUR ANCE RETIREMENT     Industry Trailblazer Award


 
  

 
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