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September 10, 2007

No Do-Overs

By Michael Scotti

It's not a stretch to say equity traders earned their pay last month-markets whipsawed after the subprime mortgage mess spread to the equity markets. Volumes went through the roof, with equities seeing days of greater than 10 billion shares trading hands and others in the 9-billion-share range. That's certainly good for the trading business. It will be interesting to see how it affects agency firms this quarter.

You can read in "Inside Trading" a roundup story that outlines what traders saw during those days of extreme volatility and high volume. One theme is that the markets were so volatile a trader could complete a trade, and less than 10 minutes later, that same trade that had looked like a great one suddenly didn't look quite so good.

That reminded me of something famed investor Leon Levy (1926-2003) wrote in his book, "The Mind of Wall Street" Levy, founder of Oppenheimer & Co. and Odyssey Partners, wrote: "There is a genius on one side of every trade and a dolt on the other, but which is which does not become clear until much later."

I have yet to meet a trader who doesn't love that quote. It's a great book.

Levy, who ran the first mutual fund to gain approval to short stock nearly 50 years ago, discusses the psychology of markets. He'd have plenty to say, I'm sure, about the current credit quality of bonds backed by iffy mortgages.

You'll also find in this issue two separate stories on the recent brouhaha surrounding soft dollars. Both stories revolve around testimony given by SEC Chairman Christopher Cox to the Senate Banking Committee. Sen. Charles Schumer, (D-N.Y.), questioned Cox's call for the abolition of soft dollars. This issue also contains a transcript of the controversial dialogue between the two. It makes for interesting reading.

I'd also like to mention that this issue marks the first one in Traders Magazine's history in which its staff has five full-time writers. It was inevitable. The industry keeps getting more complex. Real reporting and analysis take skilled professionals who can put in the time and get to the bottom of a story.

Our recent hire of James Ramage brings a reporter who has both financial writing and newspaper experience. And it showed on his first news assignment, jumping on the phone to report the volatility roundup story. James was freelancing at ESPN the Magazine before coming aboard. And he's acutely aware that in trading-like sports-there are no do-overs. He'll do fine here.

Michael Scotti

Editorial Director