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December 1, 2002

Trading Twenty-Four/Seven

By Tom Taulli

Some might call it "The Wide World of Trading."

Madison Gulley's trading responsibilities span the globe. They go from the Bahamas to the Far East and to many other points. Gulley, known to friends as Mat, is senior vice president and director of global equity trading for Franklin Templeton Investments, which has about a quarter of a trillion dollars in assets under management.

But the magnitude of his awesome responsibility comes from more just the huge amount of money he oversees. His desks are almost everywhere, functioning at almost every hour of the day and night. To borrow a line from Kipling, the sun never sets on the Franklin Templeton trading empire. It has desks in San Mateo, California, New York, New Jersey, Florida, Hong Kong and the Bahamas. The latter is the home of the firm's founder, Sir John Templeton. Templeton sold to Franklin about a decade ago.

At any given moment some 500 issues could be traded. But how does the firm ensure that the right hand doesn't interfere with the left hand? That Franklin Templeton traders in the Far East aren't fouling up things for their colleagues in the Garden State or in Florida? And how does a firm operate across so many different boundaries, cultures and, most importantly, regulatory schemes without running into legal problems?

To cope with this complexity, Gulley relies on a group of investment advisors. He says they are "very research driven." The firm also uses a centralized trading system. Depending on the particular advisor, a team of sector analysts will identify the best values in a certain market. At that point, other analysts will examine the supposed bargain. If everyone agrees that a stock makes sense, then the portfolio managers will order it.

"It does not matter what office you're in. All trades are initiated in the main system," according to Gulley. The centralized trading system is also designed to keep the firm from regulatory woes. In the system, there is a compliance test and then the order is routed to a specific trader's blotter in one of the many offices. The desks can share capacity, information and knowledge."

The system also gives the trader much leeway. It is up to him or her to pick and choose from a huge menu of execution dishes. The trader will select the venue for execution. The trader might also decide to call up a broker or use an ECN.

Trading a global fund means that Gulley must always take macro economic issues into consideration. And the rapid pace of technological change also affects almost everything that Gulley must do to manage this empire.

"I spend a great deal of time on technology and management," he said. These sensitive issues are seemingly always front and center.

These issues, more than ever, relate to efficient trading, which means retaining control of the business and finding more profits through lower costs, Gulley said. "ECNs, FIX connectivity, direct access to liquidity, anonymity, and the potential for positive alpha from trading and other economic approaches allow and require the buyside to have more control over order flow and provide for true decision making," he said.

There's a lot that can go wrong in the Wide World of Trading. But Gulley, a trading veteran who began with Bridge back in the early 1980s, understands that. Gulley knows that trading desks - like empires - are fragile institutions and are constantly under pressure. Can Franklin Templeton withstand the pressure? Can it be one of the survivors of the trading wars that have swallowed so many other firms that billed themselves as nimble?

Gulley's leadership will be one of the key elements in answering those questions.