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In this recent research note, Sandler O'Neill + Partners, L.P. Principal Richard Repetto examines why the public exchange operators hold multiple licenses and that rationale behind this phenomenon.

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September 30, 1999

Preparing for the Worst

By Staff Reports

Bob Brower is in training.

A highly competitive veteran of the trading world, with experience as a floor clerk and sales trader, this head trader at Mark Asset Management in New York, works out with weights and jogs regularly.

Brower, who has close to 18 years in the business, has seen the good, the bad, the ugly and everything else.

With some two billion in assets under management and with a long list of institutional clients, Brower knows the game requires constant training and constant refining of a firm's trading strategies.

The Strategy

Mark Asset Management's strategy is a low volume approach. With three traders and low turnover, the number of trades can range from 50-100 a day.

However, the strategy for their pension funds, endowments and well-heeled customers is always the same, Brower says.

"We use fundamental research to build value for our customers," said Brower, who came to Mark Asset Management's buyside in 1990. He had previous stints with Furman Selz and Keefe Bruyette & Woods. "We consider ourselves long-term investors."

The buy and hold strategy is only going to work if the deal is good at the outset, if the trader has entered into a stock at a reasonable price.

A veteran of the securities business once summed up this buy cheap strategy:

"You don't make money when you sell a stock. You make money when you buy it."

If the cost basis is good, the profits will be there later.

But to obtain value, traders must be driven to seek out bargains for their finicky customers. And they must be nimble. What constitutes a good trader on Brower's desk?

The trader must be "a team player with a strong knowledge of the subject matter," Brower said. He or she must be very "competitive, a quick thinker with the ability to handle pressure and stress," according to Brower. That kind of person must be ready for anything because any kind of situation is what the trader is likely to face.

Military Thinking

So Brower agrees with the axiom of military thinkers through the centuries: Hard training. Easy battle. Easy training. Hard battle.

Bob Brower continues to train for the worst and expects his people to do the same.