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April 1, 1998

Block Trading... After All These Years

By Michael L. O'Reilly

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  • Block Trading... After All These Years

John C. Gleason began his Wall Street career on the sellside, 36 years ago. He traded for now-defunct Laird Bissell & Meeds in Wilmington, Del., then a part of Dean Witter. One of the firm's first block traders, Gleason shopped orders over the telephone, trying to unload large positions.

"When I was on the sellside, a big block of stock was 10,000 shares," Gleason recalled. "Now, desks don't waste their time with orders that small. Volume has skyrocketed."

"After a while," Gleason added, "smiling and dialing got pretty old for me. I didn't like blindly trying to sell big blocks. I eventually needed to get off of the sellside."

So after 15 years of block trading at Laird Bissell & Meeds, Gleason took a post heading up the buy-side desk at the Wilmington Trust Co. across town. He is still head of the equity desk 21 years later.

"Block trading today is a lot different than it was when I started," Gleason said. "Blocks are all done electronically, and with ECNs [electronic communications networks] and third-market firms, there are so many newer places to bring business."

Trading for 28 portfolio managers with more than $116 billion in trust accounts and assets under management Gleason is still trading big blocks of stock.

A large bank with customers in all 50 states and 13 foreign countries, Wilmington has the 12th largest personal-trust department in the U.S. Of the banks $116 billion under management, $27.4 billion is invested in equities.

His desk, which includes two other traders, handles between 200 and 300 trades each day. While the desk regularly executes small orders, it more often handles trade sizes of more than a hundred thousand shares.

Gleason tries to limit the broker dealers he actively works with to about ten, forging a strong relationship with those firms. "We try to keep our list down rather than shotgunning orders all over the place," he explained. "You get more bang for your buck that way. Every one of those brokers will get a decent clip of our orders."

Of the investment products handled by Wilmington portfolio managers, small-cap funds usually require more effort on the desk.

Gleason said block orders in larger, more liquid stocks are executed in a matter of seconds. But an illiquid small-cap block can sit on the desk for a week.

Gleason added that a block order in a smaller stock tends to impact the market immediately. Figuring out how that stock trades, he can advise his portfolio managers to hold the position long enough for that stock's price to stabilize.

"When I started in this business, over-the-counter trades were unusual," Gleason said. "Now, Nasdaq has become incredibly prominent, and we are trading more small-cap stocks. You have to constantly learn how to trade different products."

Gleason is fascinated by how much learning is still involved in his approach to trading. He regularly attends industry forums and seminars, and subscribes to a number of Wall Street publications. "You can't be caught in the lurch on new developments," he said. "You need training to stay on top of everything."