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August 31, 2001

Advice for the Sellside:Buyside Comments and Complaints

By Gregory Bresiger & Sanford Wexler

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  • Advice for the Sellside:Buyside Comments and Complaints

The sellside is dreadful. It doesn't provide best execution. Dealers are swapping the details of executions without a thought of how it hurts the buyside. The sellside doesn't understand its customers. It doesn't understand fragmentation. It doesn't understand the changing nature of markets and how they can hurt their customers.

The comments of a critical regulatory agency that has just released a scalding report on sellside practices? Not at all. These are some of a series of complaints from buyside traders given to Traders Magazine in a series of interviews.

Buyside traders are fed up with their opposite numbers. A frequent charge is that the sellside should know its customers better.

"By that, I mean don't call me with your morning run-down regurgitating what you heard on a call. Know what we hold and know what types of things we hold," complained Jennifer Setzenfand, assistant vice president and senior trader at Federated Investors in Pittsburgh.

The sellside too often fails to provide any value added services, another concerned customer told Traders Magazine.

Some Privacy

"The sellside should not just be passing on information. It should be looking at different angles. When companies in the U.S. report earnings, it's affecting European companies more and more," according to Sean Dulea, international trader at Ivy Management in Boca Raton, Fla.

Another area in which the sellside is failing, according to buyside professionals, is when customers need cash to make a trade work.

"It's harder to get capital commitment," added Anthony Iuliano, vice president and head equity trader at the Glenmeade Trust Company in Philadelphia. "I'd like the sellside to provide more capital. I believe that's a result of the sellside being hurt a little bit more by decimalization. Also, I'd like to know what brokers will be doing as far as over-the-counter trades - keeping it as a spread or changing it over to commissions. I'd like to have them clarify that."

Another hot button for the buyside is the ethics of the business.

Specifically, one professional wants the sellside to clarify for him how it operates.

"The thing we are collectively looking for the most is more openness. By that I mean more disclosure. How did you [the sellside] arrive at the price and where is it on the tape?" said Brian Pears, head of equity trading, Victory Capital Management in Cleveland.

"As you are working something, whether it's on the New York or the Nasdaq, it's become very difficult for buyside traders to figure out exactly where our prints are on the tape," he added.

Protect Customers

John Wheeler, a longtime trading executive with American Century, Kansas City, Mo., says sellside professionals could and should be doing much more to protect their customers. He notes that there are too many bad calls made by sellside brokers. The problem is that too many sellside professionals don't know any better, Wheeler notes.

"There are a lot of longstanding conventions in the business that are detrimental to the institutions," he said.