King, who speaks in a twang that is distinctly Southern, added, "I think it helps to be able to understand financial statements and reports. But in the day-to-day transacting of buying and selling stocks, I think certain people are born with the ability to make split-second decisions on their feet."
Eve of Installation
King is answering a reporter's questions during a sultry Southern afternoon in Atlanta. He's soon to take office as the new chairman of the Security Traders Association (STA).
A native of Atlanta, King graduated in 1980 from the University of Georgia with an MBA in finance. But it took him more than a graduate degree to make the grade on the trading desk.
"I interviewed with Robinson-Humphrey, which was a much smaller firm back then, and they had an opening in the trading area," King said. He spent a few days observing the fast-paced trading environment and decided that this was where he wanted to make his mark.
For nearly 20 years King has been at Robinson-Humphrey, a 105-year-old Atlanta-based firm, now a subsidiary of Salomon Smith Barney Robinson-Humphrey has roughly 1,350 employees, including 1,000 retail brokers, and branch offices in New York and Boston.
King worked his way up the trading desk. Today he manages 20 market makers who trade over 300 Nasdaq and OTC stocks. The desk also trades listed stocks and is staffed with 15 sales traders, three retail sales traders, two agency traders, two convertible traders, and two 19c-3 traders. The desk traded 350 million Nasdaq and 167 million listed shares in August, according to AutEx, a Thomson Financial company in Boston. King said his desk handles between 8,000 and 9,000 Nasdaq orders daily. Clients include mutual funds, insurance companies, pension funds, and investment advisors.
The chairman of the STA is supposed to be a strong leader. King is well suited for that responsibility, according to people who know him.
Jim O'Neill, who is head of capital markets at Robinson-Humphrey, said that what makes Robert special is his extraordinary leadership skills.
"He is one of the best traders we have ever had," O'Neill said. "He leads by example. Rob has developed a strong group of traders that work together."
One of those traders, Billy Cahill, a senior vice president at Robinson-Humphrey, credits King with providing "a lot of flexibility and the room to be creative from a trading standpoint."
In recent years, electronic communications networks have radically transformed trading. Voice-mail has replaced the old-fashioned, telephone switchboard operator. Will ECNs soon make market makers obsolete?
That's a question privately nagging some Nasdaq and listed traders. They fear if Nasdaq and the New York Stock Exchange adopt fully-electronic limit order books, the days of their careers are numbered.
According to King, the securities industry will always need the human element.
"Individuals will always be necessary in this business to commit the capital when nobody else is around," King emphasized. "ECNs are great as long as you have two customers. If you don't have two customers and you are looking for liquidity and you are looking for speed of execution, then you are going to need somebody who is willing to commit the capital."
Day trading is another recent, high-speed computerized avenue that is similarly changing the buying and selling transaction process. For a growing number of retail investors it's a cost-saving way to trade more frequently.
But as the evidence shows, it's also an expensive, if not a deadly way to learn how fast large sums can be instantly lost.
Attempting to outsmart the daily ups and downs of the marketplace is not recommended, some experts say.
The shootings over the summer by a disgruntled day trader, Mark O. Barton, at two day trading offices in Atlanta have made this new rapid-fire form of stock trading front-page news. King's office is one block away from where the shocking tragedy took place.
"I can see the building from my window," he said. "Day trading did not cause this guy to go nuts. But it did focus attention on whether day trading is good for the investing public."
SOES
Day trading is relatively new to the general public, but it has been around since the late 1980s. King reminded this reporter that it kicked off after the 1987 crash with the introduction of the Small Order Execution System.
At the start, the intention for SOES seemed a noble one.
"It was implemented by Nasdaq because of complaints by customers that no one was answering their telephone calls," King said. "They created this automated trading system which was for the public customer to get his executions in and not have to worry about his telephone calls being answered."
What went wrong with it? King said that what soon sprang up was a cottage industry of day traders who were able to take advantage of the advanced trade-routing software systems.
"Very few people are actually making money by day trading," he said. "It sounds to me more like it's a casino game where the house is making the money and the customer is just earning only a few thrills."
Making fair money as a Nasdaq market maker is also more difficult. The order handling rules have greatly reduced profit margins at many brokerage firms.
"Although spreads have narrowed," King said, "volume has gone up significantly." He pointed out that a firm's overall profit is primarily dependent upon its business model. The conventional model is facing change. Pressure is building to start charging commissions instead of making money on spreads on institutional trades.
"If the firm is just trying to make a net trading profit, you are probably going to have a tough time doing that," King said. "Our firm is customer-oriented. We are interested in executing customers orders as opposed to trying to make a lot of trading profits executing customer orders."
"As long as we've got our customers, and our customers like our product and our execution capabilities, then we are going to be fine," he added.
King is optimistic that stock volumes will continue to grow while customers will continue to go to those firms that have access to the best information and the best execution and service.
His First Boss
King credits his first boss at Robinson-Humphrey, John Watson, a former president of the Security Traders Association, for encouraging him to join the STA.
Like many active STA members, King started out on the regional level. He spent several years with STA's Atlanta affiliate and then eventually became involved on the national level on various committees.
In 1994 King became a board member of the STA where he successively served as governor, treasurer, secretary and senior vice chairman.
"Once you get on the board," King said, "you can serve two terms as governor and then move up as an officer. By the time you become chairman you are fully acquainted with the organization."
The Future
Looking ahead, King foresees the STA dealing with a full plate of issues in the year 2000.
"There will be a lot going on next year – extended trading hours, the central limit order book, Nasdaq and the New York Stock Exchange going public, the alternative trading systems, ECNs, Y2K and many other issues," King said.
King said it is the STA's role to be on top of the issues and to make sure the regulators, both the National Association of Securities Dealers and the Securities and Exchange Commission, are working together.
Lee Korins, president of the STA, said King brings a wealth of experience and knowledge to the organization.
"I think the STA is fortunate to have people like Rob who have had lots of experience in the marketplace," Korins said. "They are more effective chairpersons because they know what the problems are on a day-to-day basis."
Another colleague of King who gives the new chairman high marks is the outgoing chairman, Art Kearney, executive vice president and director of equity capital markets at John G. Kinnard & Company.
"He is definitely a leader," Kearney said. "Rob is an easy-going individual. His level of intensity and efficiency is extremely well thought out and intelligent when he gets involved in something."
He added, "When you get to be chairman, you are groomed for the job. You are not thrown in there and expected to learn the issues from scratch. You are basically brought up through the process over four or five years."
Hedi Reynolds, managing director of Nasdaq and OTC trading at Morgan Keegan & Company in Memphis, and past chairman of the STA, has worked with King on various industry issues for the past several years.
She said that being from a regional firm, King brings "a great perspective to the STA. He can look at things from the regional firm base as well as from the large New York base."
As the new millennium approaches and the financial marketplace becomes more complex, trade organizations will undoubtedly play an increasingly important role in shaping securities legislation and regulations.
A trade group like the Securities Industry Association is much larger and more widely known than the 7,500 member Security Traders Association. However, King proudly stated that the STA has come a long way in the past several years in building up its exposure and credibility.
"Years ago legislators in Washington did not know who we were," King said. "Today they certainly know who we are and they recognize our grassroots approach," he added. "They know that we have traders all over the country. They recognize our strength and power."
