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December 1, 2001

Renewal and Reform at the STA: The new STA president tries to chart a course through troubled seas.

By Gregory Bresiger

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  • Renewal and Reform at the STA: The new STA president tries to chart a course through troubled seas.
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It's battle stations for John C. Giesea, who should be a very busy man over the next four years.

"The situation today is probably as bad as we have faced in the last ten years and maybe significantly longer than that," Giesea said on his first day in his new post as president of the Security Traders Association, an organization for securities traders that goes back seven decades. Right now, he noted, many of his members are hurting.

"Profitability is our number one concern," he said. But certainly it is not his only concern. Giesea has many tasks in front of him.

Giesea, a past chairman of the STA, will also take the chief executive officer title in February. The group has some 7,000 members and 29 affiliates, the biggest of which is the 2,300 member New York affiliate. The STA is at one of the most difficult times in its history. It lost members in the Sept. 11 tragedy. It is wrestling with industry consolidation that has hurt regional affiliates.

Born to Trouble

There are numerous problems facing the leadership of this organization, an organization that was born to trouble. It traces its roots back to the most difficult time in American economic history, the Great Depression. It is a potential depression that many of his members face as Giesea begins his duties, and many look to him for answers. Giesea's potential list of issues is imposing.

"Regulation, market structure, market conditions and the economics within the country have already proven to be negative, plus layoffs that we haven't seen in many, many years," according to Giesea. A bear market is squeezing the markets, his members and their customers, many of whom were conditioned in the 1980s and 90s to believe that 20 percent annual returns were their birthright. Decimalization has narrowed trading profits, Giesea noted, which has meant that many firms are now trying to find a new operational model. For an increasing number, that means a switch to full-blown agency trading in Nasdaq issues. Many of Giesea's biggest market making members are complaining of a regulatory environment in which their electronic competitors are favored.

Giesea enters the job facing a bevy of tasks. A much awaited and ballyhooed tax relief - the reduction of the Section 31(a) transaction fee - is still stuck in Congress, despite a so far unsuccessful campaign to reform the pesky tax, a campaign the STA began in the 1990s.

"The indications are that it will pass," Giesea said, echoing the words of several STA officials who have invested years of efforts in trying to reform it.

Asked what the next leadership should do, a longtime STA activist says that, the STA must "stay focused" on Section 31(a) reform. "We need something done about this onerous tax," said Andy Brooks, vice president and head of equity trader for T. Rowe Price. Many members agree that the STA must also be more effective in its lobbying efforts.

"The STA should be more of a political than a social organization," said Stephen Bookbinder, an STA governor and the director of sales for Bloomberg Tradebook. "It needs to be directed from a political standpoint."