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March 1, 2000

Cover Story - Masterminds of the Universe: Greasing the SLK Trading Wheels

By Peter Chapman

Also in this article

Trading technologist Rob Hegarty spent eight years with buy-side trading giant Fidelity Management & Research handling, among other things, the firm's outbound routing. One destination was Nasdaq market maker Troster Singer.

"They just never choked," said Hegarty, now an analyst with the TowerGroup in Needham, Mass. "No matter how high the volume was, those guys could handle it."

Volume is the name of the game for Troster Singer, now called SLK Capital Markets, as it is for the entire Spear, Leeds & Kellogg family of companies. And technology is the grease that keeps the wheels turning.

Technology means EagleTrader, the new trading system for the Nasdaq operation. It means REDIPlus, the electronic brokerage system used by the firm's clearing customers. And now, technology also means TradeFactory, an electronic brokerage system for program traders.

Spearheading the firm's technology mission are three veterans of the Wall Street technology game: Larry Cohen, SLK's chief technology officer; Mike Appleby, head of SLK's Eagle Software Products group; and Tom Williams, CEO of SLK's electronic program trading firm, TLW Securities.

In a candid interview with Traders Magazine, the three were joined by Randy Frankel, an SLK partner, and Neil DeSena, a managing director, at SLK's Jersey City, N.J. site. It was a rare occasion, as one of the last remaining Wall Street partnerships is usually tight-lipped with the press. "Once a millennium," quipped one. "Yea, and we wanted to get it out of the way early," another said.

By several accounts, SLK is a leader among broker dealers in the technology area. Because it processes so much volume it almost has to be. A quick look at the numbers makes it clear.

SLK Capital Markets became the fourth largest Nasdaq market maker last year, trading 14 billion shares, according to AutEx/BlockData figures. That's up from 8.6 billion shares and sixth place the year before.

REDIPlus sent more automated stock trades to the New York Stock Exchange in 1999 than any other broker, according to the exchange's equity sales department. Nearly 27 billion shares were routed to SuperDot last year, or 13 percent of the total shares traded on the Big Board. That makes REDIPlus arguably the largest least-known stockbroker on the Street. REDIPlus customers are SLK's clearing accounts: day traders, hedge funds and other institutions.

TLW is one of the top program traders on the NYSE. For the week ended February 4, TLW placed sixth, trading 59 million shares for programs on the Big Board. Program trading accounts for about 19 percent of the NYSE's volume.

Work Flow

What does it take to process all SLK's stock transactions?

EagleTrader does the work on the Nasdaq side. The order routing and management system was forged from two proprietary and complementary systems by trading systems wunderkind Mike Appleby. Appleby, who built one of the most popular trading applications on the market - the TCAM System - joined SLK in 1998. His mandate was to develop a state-of-the-art trading system for SLK Capital Markets' traders and to then market it to other Nasdaq broker dealers on a standalone or service bureau basis.