Jared Dillian
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The Liquidity Problem

Maudlin Economics Jared Dillian examines stock market liquidity.

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November 1, 2000

Non-Stop World of Sales Trading: Liaison to the Buyside Must Know His Customer

By John A. Byrne & Sanford Wexler

What's more, the expert added, a sales trader should keep his customer informed each time he puts up a print in a stock the customer is holding but did not turn over. "I have the responsibility to ask the buy-side trader did you see the print: do you want to get involved?"

"Most of our job is service," said Whipple at Unterberg Towbin. "The sales trader is the liaison between the buyside and the sellside."

Holway agreed. "That's a major part of what a sales trader does," he said. "He knows his customer's account; knows his holdings; what he's interested in; what his trading styles are."

Even so, critics on the buyside charge that there is an unofficial pecking order operated by some sell-side firms. "The [buy-side] shops that generate the most commissions get the first call' from the sell-side," said one trading pro. "The best accounts get a call before a print goes up and those at the bottom get the call after the print."

Whatever the pecking order, sales traders hit the phones after the morning meeting, contacting their clients on the buyside with the skinny on what's happening in the market. The sales trader is attuned to developments that may affect their clients, such as trading activity, market sector information and research, and IPOs.

The role of the sales trader is changing in the electronic world. The advent of electronic trading, and its competitive commission rates, has forced desks to justify their own charges. Some see the future in a world that melds the natural talents of sales traders with electronic trading systems.

Holway at Jefferies has been overseeing a revamp of the firm's web-based block indication matching system, dubbed @Haborside. The system, as originally conceived, allowed Jefferies' sales traders on either side of a trade to negotiate for customers after they found potential "matches" for their "indications of interest."

The system was originally offered to the buyside as a new tool to anonymously and confidentially locate liquidity.

Sales traders must work harder than ever before. But they are unlikely to disappear anytime soon. In numerical terms, they often outnumber the other pros on a trading desk. "The role of the sales trader is becoming stronger and more important," said Mahler at Weeden & Co. Four pros tell their story to Sanford Wexler.

Jim Whipple,

Head of institutional sales and trading,

C.E. Unterberg Towbin

The Typical Day

Our research meeting starts at eight in the morning. We go through the markets around the world and the research areas that we cover. That's over about 8:30. Then we go out and make our calls to our accounts. We try to get our accounts to be aware of what we are talking about and find out what they need. That's how the whole day starts.

Most of our day is spent calling accounts and making them aware of what merchandise we have to buy and sell and what we know and feel about stocks.