Tom George entered the financial world at Merrill Lynch in Toronto when the markets were surging in 1986. Of course, about 12 months later, the markets crashed. "Over the years, I've witnessed some interesting markets," George said. "It was a horrible time to be a trader for a while after 1987. There was simply no business."
Then again, George likes the whiplash. "I guess if I didn't enjoy the pace, I could have gotten a desk job and become an analyst," he said.
For the last five years, George has been a buyside trader for Royal Bank of Canada Global Investment Management in Toronto. It has $37 billion in assets under management. The Royal Bank of Canada (RBC) was founded as a private commercial bank in 1864 and began its business by financing fishing and timber.
Expand Business
However, by 1995, RBC hired a new CEO, John Cleghorn, who set out to aggressively expand the business – especially in North America. The first step was to list the company's shares on the New York Stock Exchange. Then from 1998 to 2000, RBC purchased Internet bank Security First Network Bank, the discount broker Bull & Bear Securities, investment bank Dain Rauscher, and brokerage firm Tucker Anthony Sutro.
As for the buyside department at RBC, it consists of four traders. Two run trades exclusively for Canadian accounts, and the other two focus on the U.S. as well as foreign markets. George is on the U.S. side. "We are not focused on any sector. On a given day, I could be placing trades for biotech companies to oil companies," he said. There is also bond and currency trading, which is critical for dealing with exchange rate fluctuations in the portfolios.
A big part of George's role is dealing with information flow. "The portfolio managers are inundated with information," George said. "Every morning, the traders have brief meetings with all the PMs. At these meetings, we try to get at the most useful information to make the right trades. If oil prices start to rise because of instability in the Middle East, we factor this in. If retail sales are weak, we certainly adjust for that. But it does not stop at the morning meetings. Managing and acting on information is something we do throughout the day."
In terms of strategies, George is very clear about his goals: He finds ways to save and make money on each trade. To this end, he believes that a trader, "must take a stance on a stock." Although this does not mean that a trader must be overly aggressive. "I look for trades that, if the stock moves, I win and can even add more to the position. But I also want room to get out of a trade if it goes against me. It's a delicate balance that takes experience."
Even though George focuses on the U.S. side, he definitely has an understanding of Canadian markets. "They are different from each other," George said. Of course, the big difference is size. "The U.S. market stands still for no one. A 100,000 share trade in Microsoft does not make a difference. But it usually makes a difference with a Canadian stock. Because of this, you must be a position trader on the Canadian exchange."
Another issue is disclosure. Unlike the U.S. market, a trader in Canada can typically see who is buying and selling a particular security. In fact, he thinks this is an advantage. For example, if a trader needs to sell 300,000 shares of a stock, he knows who the real buyers are in the marketplace and can avoid those who are merely fishing.
Actually, George is transitioning to the sellside team at Royal Bank of Canada Capital Markets. "I'm nervous," he admitted. "But I'm also excited. Over the years, I think I have gained some perspective on the good and the bad. I know what a buyside trader wants and perhaps that gives me an advantage." So, what is it? To George, being a successful trader means having respect and trust. "Let's say I place a trade for 100,000 shares of ABC at $21. Some time goes by and the stock is now at $21.50 and my order is not filled. This will no doubt create ill-will on the buyside."
George believes that building relationships is essential. "You need to understand social interaction," he said. "But you also need to do this under a fast pace. Being a trader is like being under constant deadlines. There is no letting up. You cannot be shy or withdrawn."
