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Conquering Fear in Trading

In this exclusive to Traders Magazine, therapist Storm Copestand examines how traders can manage expectations and conquer their fear during the entire execution process.

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September 2, 2013

Wrap Powerhouse

By Alan Rubenfeld

However, where the Morgan PPG desk makes the biggest waves on Wall Street is with their ETF trading: "We are one of the largest investors and holders of ETFs in the market today," Kravitz proudly noted. Morgan offers discretionary ETF-only strategies that have more than $10 billion under management. The managers periodically make wholesale changes to their portfolios that create rebalances that can run into over 60 million shares in a day.

When Kravitz's desk trades these rebalances, sellside ETF desks take notice: "We usually do not get a lot of advance notice on rebalance days, but we quickly swing into action, determining how to trade each ETF and the appropriate counterparty." For the most part, the desk attempts to access the liquidity that can be provided by the various market makers-known as Authorized Participants-in each issue. They are able to create and redeem each ETF and generally are willing to provide a lot of liquidity.

For example, if Kravitz has an order to buy 10 million shares of a single ETF, he will call one of his brokers for a two-way market. Simultaneously, Stephens or Viggiano will call another ETF desk and ask for the same market. The key point Kravitz acknowledges to both brokers is that they are in competition and the desk is seeking the best bid or offer. The traders then take the best market and, with just a phone call, trade a $100 million block of stock.

"You win or you lose, and, as they say on the desk," Kravitz said, "no tears."

For those ETFs with less-liquid underlying components, Kravitz will turn to a broker who has been active in the name and has the ability to efficiently trade the underlying securities. The broker will then create the ETF.

"We've enjoyed a great business relationship with the Private Portfolio Group at Morgan Stanley Wealth Management and particularly with Scott Kravitz for several years," said Nick Wood, co-head of equities for Susquehanna Investment Group, a major trading partner of the PPG desk.

"The relationship expanded when PPG began utilizing ETFs in their product offerings, which increased their need for liquidity and market color, two of the areas where we can add value for customers. Scott's willingness to collaborate and to leverage the tools we offer has made for a lasting, successful relationship."


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