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May 26, 2005

More Power to The Buyside!

By Peter Chapman

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The growing sophistication of the buyside was on display at a recent trading and technology conference. At Worldwide Business Research's (WBR) TradeTech USA conference in New York City last month, buyside traders spoke out on order management systems, FIX, algorithms, portfolio trading, ECNs and other tech topics.

Peter Driscoll of Northern Trust, Floyd Coleman of AXA Rosenberg, Richard Tsai of Barclays Global, Curt Engler of BlackRock, Gary Chropuvka of Goldman Sachs Asset Management and many others, held their own with the sellside at TradeTech's inaugural U.S. conference. For the past five years, the international WBR has hosted a

TradeTech conference in Europe. However, the three-day New York talkfest last month, sponsored by Wall Street's major brokers, was the first conference in the U.S. Brokers came to give algorithmic trading the hard sell. But the buysiders attending were not all lambs for the slaughter.

Strong voices from fund management firms spoke of a new era: Trading power is shifting from the sellside to the buyside because of technology and commission compression. And the buyside trader who doesn't cotton to technology will be hurt.

Below are edited excerpts from three presentations at the conference by a trio of the Street's largest money management shops. These buysiders outline their use of technology, offer advice and make forecasts.

Peter Driscoll, senior equity trader at Northern Trust, a $570 billion index player. He is also a former Chicago Stock Exchange floor trader.

Technology will continue to develop. It will continue to make us more efficient. Order managements systems, the Liquidnets, Harborsides, Pipeplines, PBTs. These are all trading tools. They are all things that a trader on the buyside is going to need. He's going to have to know how and when to use them.

As the evolution continues, demands will be placed on the traders to keep up. The days of pulling a body off the reception desk to fill in on the trading desk are gone. Buyside trading desks are going to have to begin to pay for talented people who are up to date on the use of these tools of automation.

Pre-trade and post-trade analysis. These services are going to become user friendly. Pre-trade analytics is going to become less hypothetical and much more understandable. They are going to be used as tools to develop traders and to get what is expected out of the trader.

Block trading, program trading, algorithmic trading. It's all about the money. Block trading costs four cents to five cents. Program trading is three cents. DMA, one cent.

'The days of pulling a body off the reception desk are gone.'

Peter Driscoll, Northern Trust