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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

The social part of this business enhances relationships. When you are getting an order over the phone it's difficult to know all of your customers' needs in this changing environment. So you go out with your customer and touch base. I get to find out what more I can do to better serve their execution needs.

Twice a week I go out with customers. On the weekends I sometimes host dinners or go to conventions. You have to work at this business at 120 percent. Your family has to be very supportive. You really have to have one person who is willing to mind the kids and take care of the household things.

A good sales trader will have very loyal customers. You build trusting relationships with your customers.

Dennis Leddy,

Managing director for equities,


Banging the Phone

The single most important contact to our customers, on the institutional equity side, is through sales trading. That has become more noticeable over the past three or four years. We are on the phone taking the orders for syndicate, getting the retention, and getting the information through. We have become the main line to the customer. The sales trading contact to the trading desk has become the live connect between the customer and the sellside.

We've seen a significant amount of consolidation on the Street. Clearly, issues of liquidity arise. The bulge bracket is now down to seven or eight firms. Not in U.S. terms, but in global terms. There's a less competitive climate for people worrying about whether [the Street] is getting the other side of a trade. [Dealers] aren't as aggressive in offering their firms' capital as they had been in the past.

The customer is changing dramatically as he looks for liquidity. The trading desk has a fiduciary responsibility to go where they can to find liquidity. The changes that have occurred with soft dollars and directed business have resulted in trading desks becoming much freer. Traders now have a greater sense of control over order flow.

They not only have a fiduciary responsibility to find best execution, but the portfolio manager has been taken out of the decision where orders should go.

We've seen it first in the hedge funds. The hedge funds didn't care where the research came from. The hedge funds care about execution. When the trading desk is unshackled from research, they do significantly better.

Customers don't need our research to determine their flow of trading throughout the day. I think more and more, the role of institutional sales trading is getting bigger and bigger.

Sales trading is a mainline into our customers. The hedge funds were the first ones to grab hold of the fact that their trading desk was focused on getting best execution. They don't want to handicap their trading desks by directing them to their research houses. They don't want to handcuff their traders. They want their traders to go where the flow and the liquidity are.

The human element will always be a very integral part of this business.