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March 18, 2010

What Does The Buyside Want?

Traders Speak Out on the Problems of the New Work Environment

By Peter Chapman

It's not easy being a buyside trader these days. Their brokers are less attentive than they used to be. Their portfolio managers are behind the times when it comes to trading. The regulatory environment is becoming more onerous. The marketplace is a mess.


Their World: Day to Day Buyside Concerns


In late January, during the annual conference of the Chicago chapter of the Security Traders Association, a group of four buyside traders from around the Midwest, aired their grievances over a work environment that has changed beyond recognition.

Whereas before they could execute most of their orders in block sizes at a single location, today they must contend with multiple trading spots. Whereas before they could count on their brokers to give them color throughout the day, today the use of instant messaging has eliminated much of that. Whereas before they could count on a plentiful supply of capital, today there is very little.

So just what does the buyside want?

According to the group, their needs are simple: better communication with the sellside, more understanding from their portfolio managers and less fragmentation in the marketplace. Plus half a dozen other things.

The panel vented over such issues as communication, capital, compliance and color. They took their brokers to task, as well as their portfolio managers. They even had words for the vendors in the industry. Traders Magazine was fortunate to be in the audience when the panel held forth on these meat-and-potatoes issues.

The wide-ranging discussion gave the STAC attendee a good picture of life on the buyside trading desk and the pressures and problems faced by the traders.

The outspoken traders included Bob Koci, a 10-year man at Principal Global Investors, who trades micro-caps for the Des Moines, Iowa-based firm.

There was Jeff Nordstrom, who joined Riverbridge Partners in Minneapolis last summer, after spending 11 years across town at Peregrine Capital Management.

Also on the dais was Jeff Pralle of Chicago's RMB Capital Management, which runs a long-only business as well as a hedge fund, focusing on small- and mid-cap stocks

And finally, there was George Metrou at Chicago's Perritt Capital Management, a trader of micro-caps.

George Metrou, Perritt Capital; Jeff Pralle, RMB Capital; Jeff Nordstrom, Riverbridge Partners; Robert Koci, Principal Global Investor

Their comments are below.


The Telephone

Metrou--We're old-school. We don't use Bloomberg or IM. All orders are handled over the phone. You do need to have a hands-on approach with orders. This has been instilled into us by the older guys in our office-the managers and principals of the firm. You talk to your trader over the phone. You have a discussion. We don't get into a lot of the trading systems. We don't use that technology.