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May 31, 2000

The Trading Patterns

By Sanford Wexler

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There are always revealing patterns in the financial markets, Dave Briggs says. There is constant change. Flux.Volatility.

Briggs, 45, head trader in the equity and high-yield bond trading desk at Federated Investors in Pittsburgh became a trader after a career steeped in calculations, a mathematical ability - and patterns. He was a computer systems analyst at Mellon Bank, the Securities Group, and Touche Ross. In 1982, he joined Federated, the mutual fund management company based in Pittsburgh which manages $125 billion in assets. Three years later, he moved to the trading desk, which executes trades primarily for the Federated family of funds.

Today, he oversees a trading desk that manages about $25 billion in assets, including 80 percent equities and 20 percent high-yield bonds. Equity trading comprises 60 percent listed and about 40 percent Nasdaq. The desk is staffed with six equity traders, two high-yield bond traders. Federated has 12 portfolio managers. The shares traded daily are valued at about $150 million.

According to Briggs, the job of the institutional trader is similar to controlling a valve on a water pipe. "If the water is trickling out, you need to kind of loosen things up a bit so that the water is coming out at a better rate," he explained. "If it's gushing out, you need to cut back."

Briggs has an undergraduate degree in mathematics and a graduate degree in computer science from the University of Pittsburgh. That helps explain why he notices the similarities between past and present stock price movements and indexes. "The same things that worked well in computer science like pattern recognition," Briggs said, "work very well in trading."

The market environment over the past two months, Briggs observed, is somewhat similar to the market environment in October 1987. "Then it was the S&P [that was unstable]. This year it's the Nasdaq," he said. "What pattern recognition tells you is how people reacted in a similar but non-identical situation."

Briggs has witnessed many of the phenomenal changes that have transformed the industry. "Time has been compressed. Things that used to take months to happen, now happen in days. The speed of information has accelerated," Briggs said.

Traders with experience, Briggs said, are able to take advantage of the changes. "If you are able to make decisions quicker or act in confidence," he said, "you can sometimes beat the lesser experienced people to the punch."

Although his desk regularly uses Instinet, Bridge, Bloomberg, and AutEx, Briggs still uses the telephone as much as possible. "I'm probably a bit old-fashioned," he said.

"I still like to talk to people. I try to talk to my partners at Lehman, Goldman, and Smith Barney on a daily basis."

This one-on-one communication keeps him in touch with what's happening on the Street. "A lot of times firms don't broadcast everything they do," Briggs said.