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Jared Dillian
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Was it Worth It?

In this piece from 10th Man, author Jared Dillian discusses how the ETF revolution is less about ETFs and more about indexing; about how people have come to view stocks less as stocks and more as blobs of stocks.

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April 16, 2007

Breakfast of Champions

By Gregory Bresiger

Also in this article

  • Breakfast of Champions

Eat and learn before heading out into the trading trenches. Break bread with Knight trading executive Stephen L. Kay. That's what Kay, the new president of the Security Traders Association of New York (STANY), wants more and more of his members to do over the next year.

Along with the traditional annual conference in April, he has scheduled a series of bi-monthly breakfasts so the thinning ranks of traders can learn more about the radical changes in their business. Technology is supplanting the more perfunctory roles within equity trading and has been for some time.

"The general theme of this year is that there are fewer traders today. But they must do more and more," says Kay, director of broker-dealer sales and relationship management with Knight Capital Group and the first Knight employee to head up STANY. And when he says "more and more," he doesn't just mean more work in general for traders-it's the kinds of work the average trader must do.

"They have to understand the impact of algorithms on trading. They have to understand multiple asset classes, which they never had to do before. So our idea is that we need to help them keep up with the changing market structure," Kay says.

The 38-year-old executive formerly traded for Bernard L. Madoff Investment Securities, and before that, he was a specialist trader on the floor of the Big Board.

Traders Under Fire

Traders today, Kay says, must cope with new ways of doing things, including everything from how they route orders to the various fees and the biggest market structure changes in three decades. "It is STANY's responsibility to help them keep up with these things," says Kay, the organization's 71st president.

Therefore, STANY members must also constantly change. Therefore, STANY members must constantly educate themselves. Therefore, they will be able to educate others. Therefore, Kay wants everyone to come to his breakfast sessions. Therefore, please pass the eggs.

STANY, the largest chapter of the Security Traders Association (STA), has some 1,500 members. That's about the same number as last year, STANY officials say, but the kinds of people who are members has changed. There are fewer traders, but more vendors and compliance officials, according to Kay.

"There has been an explosion in the numbers at compliance departments," says Mark Madoff, a longtime STANY activist and Kay's former boss at Madoff Investments. Kay says, "it's no secret" that the number of traders is declining. So someone who wants to stay in the business for the long term must become a Renaissance man of trading.

Traders must learn not only about their subject, but also about subjects that could become suddenly popular, Kay says. This is necessary so that they can find the sweet spots-the parts of what are now predominantly electronic markets in which human intervention remains an important factor.

Humans Needed

Kay, the upbeat STANY chief, believes there "will always be a need for human intervention," but where that human sweet spot is will constantly change as markets do. And where is this trader's sweet spot today? And where will it be in a few years?