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September 30, 2003

Andresen Takes Bernstein by Storm

By Peter Chapman

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Matt Andresen has joined the club. As head of global trading at Sanford C. Bernstein & Co. for the past 12 months, Andresen has exchanged his Van Dyke and status as a maverick outsider for the meat-and-potatoes job of running an established trading operation.

The former chief executive of the Island ECN - a trading center that rocketed to fame and glory on the back of the '90s bull market - has removed himself from the limelight of the market structure wars to pitch execution menus to institutional traders.

Andresen is no longer a mover and shaker in the Big Game of jostling with Nasdaq and the New York Stock Exchange, cajoling congressmen and preaching reform to the Wall Street masses. But the 33-year old father of three relishes his new role of steering the trading strategy of the well-regarded research house.

Traditional House

"This is a chance for me to show that I can be successful in a traditional Wall Street house," Andresen told Traders Magazine in an interview at his midtown Manhattan office. "It is a chance for me to build out the trading into the broad and deep offering it is becoming."

Andresen is only the second person to hold his position. Tom Joyce, a Merrill Lynch veteran, came first, spending just five months on the job before being lured away to run the Knight Trading Group.

Bernstein created the slot in December 2001 as part of a plan to broaden its trading capabilities. From an 18-person listed desk, the operation has grown to 42 staffers. It now includes a Nasdaq desk, an electronic desk that offers direct access and algorithmic trading, and a London-based European desk. There are 24 traders and clerks on the floor of the New York Stock Exchange.

The build-out was designed to satisfy client demands.

"The commission pool is being segmented into a lot of different types of businesses," Andresen said. "Bernstein needed to be in those businesses if it was going to continue to grow its franchise. We had to elevate trading to the same level as our research and sales efforts."

Much of that expansion was paid for by the $3.5 billion buyout of Bernstein in 2000 by Alliance Capital Management. The giant institutional money manager bought Bernstein, itself primarily a money management firm, for its expertise in running value-oriented stock portfolios. Alliance specialized in growth stock portfolios.

At the time of the deal, Bernstein's institutional brokerage operation brought in about $225 million on an annualized basis. That was about 26 percent of Bernstein's annual total revenues of approximately $850 million.

That figure has grown steadily to $295 million last year. Still, it accounts for no more than 11 percent of Alliance's total 2002 revenues of $2.7 billion.

Order flow from Alliance accounts for less than five percent of Bernstein's overall order flow, according to Andresen.

When the deal closed, some analysts, believing Alliance only wanted the fund assets, predicted Alliance would dump Bernstein's brokerage arm. That, of course, has not happened and Bernstein remains something of a special case on Wall Street. The firm is one of only a handful of prominent brokerages owned by large money managers. Others are Prudential Securities, Fidelity Brokerage and sister company Fidelity Capital Markets, Legg Mason and Neuberger Berman.