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August 23, 2005

The Boys of Summer

By Michael Scotti

(Traders Magazine, August 2005) -- This month's cover story on the electronic trading, or algorithmic, group at Credit Suisse First Boston brought to mind a famous book on baseball by Roger Kahn: "The Boys of Summer," the fascinating story of the last years of the Brooklyn Dodgers.

These days, CSFB and its AES product are riding high. One of the top three providers of algorithmic trading, CSFB was among the pioneering firms that aggressively marketed electronic trading. To its credit, CSFB did not fear cannibalizing its traditional business with a no-touch or low-touch product. Clearly, the times may never be better for CSFB's AES product.

Similarly, in "The Boys of Summer," Kahn chronicles the glory years of the Brooklyn Dodgers, roughly a 10-year period ending in the late 1950s with the sad departure of the Dodgers from the county of Kings. Part of the book's allure is its nostalgia. But a subtle theme throughout the book is that those times can never happen again. The Brooklyn Dodgers were atop the baseball world as World Champions with the defeat of the hated Yankees in 1955.

The Dodgers-who through most of their years in Brooklyn had been the Daffiness Boys, famous for three runners on one base-were finally, for all too short a time, number one.

As Executive Editor Peter Chapman points out in his story, one can quibble with who's number one in this algo trading. Still, CSFB holds the "mindshare" lead because of its successful marketing and branding strategy. The story analyzes the firm's road to the top, as well as new products pending release. Nevertheless, competitors are going after CSFB the same way teams went after the champion Brooklyn Dodgers in 1956-as if their futures depended on it. And the future of these would-be algo powers probably will be defined by how well they play against CSFB. Who knows to what extent electronic trading will continue to expand, eating into the world of high-touch trading?

Whether it's Wall Street or baseball, competition always drives the players to do better. It would be difficult to capture this thought better than Alan "Ace" Greenberg, the legendary Bear Stearns executive. In the foreword to Alan Rubenfeld's "The Super Traders," Greenberg sums it up:

"Change is inevitable. It is inbred in the securities industry. If someone finds a better way of doing it-a better way to exploit an information edge or execute a trade, a faster way to contact a customer, or a more efficient way to transmit a confirm back to the client-it will be done. But how long will that edge last? Probably not very long." Still, today CSFB is a top player. It understands Greenberg's point all too well. Its leaders-Manny Santayana and Dan Mathisson-acknowledge the competition and are ready. Whether CSFB's AES era as a leader continues or not remains to be seen.

Will their accomplishments be as short as the revels of Brooklyn fans in 1955? Those loyal fans would see their beloved Boys of Summer gone within two years of their greatest triumph.

But, for now, both Santayana and Mathisson are the Algorithmic Boys of Summer.

Michael Scotti

Editorial Director