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May 31, 2002

From Donuts to Decimals

By John A. Byrne

His timing in business is excellent. And his career is the story of one success after another.

E. E. "Buzzy" Geduld, born and raised in Sheepshead Bay, Brooklyn, began right at the bottom - as a quote boy on a trading floor in 1961. There was his remarkable seven-year experience in the donut business. His successes include a rise to the summit of the OTC trading world, which resulted in his breathtaking sale of Herzog Heine Geduld for a king's ransom.

The enigmatic trader has consistently won and won decisively at his game.

His firm, Herzog Heine Geduld, a dynamo wholesaler on Wall Street through the past several decades, survived substantial challenges and changes: competition from upstart rivals such as Knight Securities, federal regulations like as the order handling rules, penny trading and the rise of ECNs. At each turn, Buzzy - a nickname his mother gave him when he was only a tiny baby in hospital - seemed to rise above all adversity.

When he lost his first job in 1961 as a quote boy, after a mere eighth months, because of market conditions, he went into the donut business with his brother. And he was as passionate about baking donuts, in a succession of "Donut Pubs" he bought and later sold at a profit, as he was buying at the bid and selling at the offer for other dealers when he returned to Wall Street in 1968.

Street Smart Roots

Of his experiences running donut shops, Geduld, who's 59, told Traders Magazine, "It was the basis for learning how to run a good business." Indeed, in interviews over the years, Geduld has emphasized the street-smart roots of the traders he usually hired. Their experience came from the theatre of life and not out of some dusty Harvard manuals.

Geduld's dad was in the bar and restaurant business and he taught his intelligent son some of the rudiments of making money. "In business, my father was my greatest influence," Geduld said. "In my personal life it was both of my parents. My fondest memory was playing ball in the schoolyard."

Some people describe Buzzy as intense. Yet there was no denying his emotional side when Merrill Lynch - which had earlier purchased Herzog - formally announced the planned integration of Herzog into Merrill's own Nasdaq operations. Buzzy Geduld had tears in his eyes, trading pros say.

Some cynics, of course, would swap places with Buzzy, given that Merrill acquired Herzog for $920 million in stock. That, at the time, was less than 25 percent of the market capitalization of Herzog's major rival Knight Trading, though Herzog handled 50 percent more volume than its crosstown competitor. But, likely enough, it is substantially more than Herzog would fetch in the current market, analysts say.

Geduld has a more pragmatic view. "We felt at Herzog that at some point over the next five years or so it would have been increasingly difficult to butt heads with global firms such as Merrill and Goldman," he said. "We felt we had to have a partner at some point in order to leverage what we had and what they had to offer."

End of Buzzy Era

As far as Buzzy Geduld is concerned, the sale, integration and retirement of the Herzog Heine Geduld name spelled the end of an era.

"It was emotional for me because when you help to build a business for 30 odd years, and as much as you want to be part of a larger organization like Merrill, there is that emotional tug," Geduld said. "It's like when one of your children grows up and gets married. Yes, it was emotional but it was still something I wanted to do."

At Merrill Lynch Nasdaq Trading, Buzzy is the chairman, sweeping effortlessly between Merrill's World Financial Center trading floor and the former Herzog floor on Washington Blvd. in Jersey City. Geduld will provide advice and consult with the new owners. But he is unlikely to spend much time on the trading floor.

That's a change for a pro who spent decades on the floor, focused, intense, enigmatic.

But he has another project. He still runs a Donut Pub and is thinking of expanding the business.