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August 31, 2000

Trading Czar Oversees Salomon Floor Revamp

By Peter Chapman

Nasdaq and listed desks are converging at Salomon Smith Barney under the guidance of the firm's new U.S. trading czar, Ciaran O'Kelly. His mandate is to restructure Salomon's vast trading floor along industry sector lines.

The 32-year-old Irishman was yanked from the listed desk in June to fill a newly-created position overseeing all equity trading in the U.S. His oversight extends to three desks: Nasdaq, listed and international. That means "well in excess of 100 traders," according to O'Kelly. Most are on the Nasdaq desk.

Behind his promotion is the confluence of two trends. First, Salomon's buy-side customers are emphasizing global, rather than domestic sectors. Second, substantial listed trading is expected to move off the floor of the New York Stock Exchange and onto trading desks Street-wide. The upshot is traders now need to specialize in industry sectors regardless of whether the stocks are listed on Nasdaq or the NYSE. Salomon hopes to extend its sector-based model globally in 2001.

"There is a client-driven need for brokerages like Salomon to consolidate all equity trading in the U.S. to harness the synergies across previously distinct [Nasdaq and listed] product areas," said O'Kelly. "The trend towards large cross-border transactions makes the sector model more compelling. Also, the distinction between Nasdaq and NYSE trading is now anachronous as we move inexorably towards a hybrid market that incorporates both models."

The rescission of the NYSE's Rule 390, that prevented member firms from trading off-board, has enabled firms like Salomon to reconsider their trading methods, O'Kelly adds.

"All Wall Street firms are considering whether there are better ways to trade stocks more effectively," he said. "Customers have more choices and that has made competition bet-

ween traditional and non-traditional execution centers ferocious. Margins are razor-thin."

Reporting to O'Kelly will be the heads of the three desks: Bob Basel, his former partner and current co-head of the listed desk; Bruce Turner, in charge of the Nasdaq desk; and Steven Lynch, head of the international desk. O'Kelly will not have authority over derivatives trading although that group is now working closer with the cash desks. His mandate does not include convertible bonds either.

O'Kelly, a dual US-Irish citizen, hails from Dublin. He began his trading career in a Smith Barney training program in 1991 in New York. He eventually focused on building up Salomon's profile in listed technology stocks.