Ever since Tim Mahoney could remember he knew something about the Street. That's because Mahoney's late father, Joseph, worked for 30 years at Merrill Lynch & Co. His dad was an operations manager on Merrill's block trading desk.
Today, Tim Mahoney, 39, is the director of equity trading for the Americas at Merrill Lynch Investment Managers (MLIM), Merrill Lynch's asset management group in Princeton, N.J.
MLIM has some $555 billion in assets under management. That includes $269 billion in equities. MLIM handles trades primarily for Merrill's mutual funds and a handful of institutional clients.
"I grew up reading The Wall Street Journal," Mahoney recalled. "It was always around the house. My father was involved in the market. I would often go to work with him on holidays. It [the stock market] was a very big part of my life while growing up."
Born and raised in Jersey City, Mahoney spent his summer vacations from college working as a clerk at the American Stock Exchange. Upon graduation in 1983 with a degree in history from Holy Cross College in Worcester, Mass., he joined Merrill's Unit Investment Trust Group as a fund accountant.
Later, he became a fixed income trader. In 1988, after trading municipal bonds for about three years, he transferred to trading equities.
"Having worked on the floor of the American Stock Exchange," Mahoney said, "they [Merrill's UIT equity trading desk] thought that I'd be able to help them."
At that time, he added, he was the only trader who was dedicated to trading equities. In about 12 years, Merrill's UIT's assets under management mushroomed from $1 billion to about $27 billion. The trading desk grew into five equity traders.
Like many young Wall Street pros, Mahoney pursued an advanced business degree on a part-time basis. He earned an MBA degree from New York University's Stern School of Business in 1990. Mahoney is also a Chartered Financial Analyst.
He manages 17 traders who trade both Nasdaq and listed stocks as well as foreign securities. The traders regularly talk with about 30 portfolio managers. Merrill Lynch Investment Managers' trading desk is a 24-hour operation. A few of its 17 traders, for example, trade Asian securities from six in the evening to four in the morning. Then, around the early morning hours, another skeleton shift arrives to handle the European markets.
The biggest challenge facing buy-side traders, Mahoney said, is volatility. "Liquidity is tougher to get at," he said. "It's very hard to keep up with all the activity of any stock that you are in."
According to this veteran trader, experience is the key to knowing how to expertly seek out liquidity. "Each stock has liquidity that is particular to that type of stock," Mahoney said, "and you have to know when it's best to use an ECN and when to use a broker."
Mahoney pointed out that volatility slightly increased when pricing in sixteenths was introduced. "There was less risk for people who were trading for their own account," he said. "With decimalization there will be a little more volatility. There will be less risk for anybody to trade at any given time."
In recent months, the Supermontage proposal has led to complaints from officials at some alternative trading systems, including Archipelago ECN and Instinet. On the buyside, opinions are mixed. "Any option that helps centralize the marketplace is good," Mahoney said. The Supermontage, he said, affords the opportunity to execute an order through several different pathways."
Drawing upon his college history background, Mahoney explained that before the advent of the New York Stock Exchange, U.S. stock trading was quite segmented. "People traded in different taverns around downtown Manhattan," he said. "When 24 brokers came together under the Buttonwood agreement in 1792, they decided to trade under one roof. That brought liquidity back to a central place."
Although Merrill Lynch Investment Managers is affiliated with one of the largest broker dealers, Merrill Lynch & Co., Mahoney said it is one of some 50 broker dealers that are on his speed-dial list. "They [Merrill] are no different than any other broker that we do business with," he said.
