For nearly 30 years Kevin Connellan was on the sellside. Last year he made the biggest trade of his life. The veteran sellside trader switched over to the buyside.
Connellan joined Northern Trust Investments, the asset management arm of Chicago-based Northern Trust Corp. in August, as director of equity trading. He manages a desk that comprises four traders.
Northern Trust has some $330 billion in assets and equally trades both listed and Nasdaq stocks for its parent firm's trust accounts, as well as for its group of growth mutual funds.
Born and raised in Dublin, Ireland, Connellan originally had aspirations of becoming a rock 'n' roll star. Soon after completing his education he packed his bags in the early 1960s and headed to the U.S. with an Irish rock group, K.C. and the Spenders, hoping to make the New York club scene. He played the drums. While he followed his musical dream, he also landed a job as a booth clerk for a specialist firm at the New York Stock Exchange.
"I always had an interest in the stock market," Connellan said. "Growing up in Ireland, I was familiar with the London Stock Exchange."
After a few years working at the Big Board during the day and at night playing renditions of top 20 hit songs in smoke-filled nightclubs, Connellan decided to trade in his drum sticks for order slips. He joined Blythe Eastman Dillon & Co. as a sales trader. A few years later, Connellan moved to Chicago, launched a trading desk for Drexel Burnham Lambert and managed the firm's Midwest trading operations. He joined Schroder & Co. in 1990 and, once again, he set up a trading desk.
For Connellan, a veteran sellside trader, the buyside today offers many opportunities. "A lot of buyside firms are recognizing the value of upgrading their desks and having more efficient traders," he said.
One of the main attractions for Connellan at Northern Trust was the firm's tremendous growth. "I felt that I would be able to contribute my talents not only in the trading arena, but also in technical things like setting up order management systems," he said. "One of my objectives here [at Northern Trust] is to upgrade our order management."
Connellan contended that, increasingly, more sellside traders are jumping the fence to the buyside. "I think the talents between the two are starting to merge," he said. "It is absolutely essential that buyside traders have good trading skills. You can't bring someone on board anymore and have them work just as an order taker."
The former sellside trader also foresees the compensation structure for the buyside adapting to the changing marketplace. Connellan believes the days of compensating many buyside traders with a fixed salary will give way to a pay scale that is based more on performance. "If the trading desk can help performance, then the traders will be compensated accordingly," he said.
The recent switch-over to decimals has disturbed some on the buyside. One of the big complaints among buyside traders is that they are 'pennied' by specialists at the NYSE.
Due to decimalization, Connellan suggested, many more buyside firms will be motivated to become members of Liquidnet, which now has about 45 members. The newest alternative trading system, Liquidnet, he contended, has the wherewithal to become a threat to the Big Board.
"Unlike OptiMark," Connellan said, "Liquidnet is much more user-friendly. It has the capability to deliver – if it gets the critical mass."
To Connellan, market fragmention is something that a lot of pros talk about remedying, but nothing substantial is ever accomplished. He has little confidence in SuperMontage bringing about fundamental change. "You will see a depth of three different prices," he said, "but with decimalization the prices will only be in increments of a few pennies."
Like many traders on both the buyside and the sellside, Connellan enjoys playing a few rounds of golf. He also takes delight in supporting his wife Mary Ellen's efforts for charities in the Chicago area. She is executive director of the University of Chicago Cancer Research Foundation. She also serves on the board of many other charitable organizations. "We go to a lot of fundraising events. Every dinner is a $250 a plate. You can't go to McDonalds with her," he quipped.
