The major piece of legislation of general interest to securities traders, S. 900, the Financial Services Modernization Act, is in conference committee. Representatives of both houses are trying to reconcile their different approaches to the deregulation measures championed by Sen. Phil Gramm (R-Texas), chairman of the Senate Finance Committee.

Among many other provisions, the bill would subject banks and bank holding companies to some of the same regulations and registration requirements as brokers and dealers. Banks, in exchange for accepting these regulations, would have more freedom to compete in the financial services industry. President Clinton's plans for the bill are unclear, Washington observers said.

More Business

Traders should look forward to S. 900 becoming law, said Alan Bromberg, professor of corporate and securities law at Southern Methodist University in Dallas. "I think [traders are] going to get more business. The bill will let them," said Bromberg, who helped write the Texas Securities Act.

But it is the securities industry, not the federal government, that traders and their colleagues should first look to for signs of change in their business, observers said.

"There's any number of initiatives that the [National Association of Securities Dealers] has out that are going to directly affect the trading community," said John E. Pinto, executive vice president at DOVER International, a securities compliance and financial services consultancy that monitors developments in Congress.

Continued proliferation and growth of electronic communications networks, and their potential mutation into full-fledged self-regulatory exchanges; initial public offerings at Nasdaq and the New York Stock Exchange; the move to decimalization; and resurrection of the central limit order book proposal, are likely to have a more immediate and profound effect on traders than any legislation pending in Congress, Pinto and Bromberg said.

Star Legislation

Traders are advised to keep an eye on state legislatures and regulators as well.

"States tend to be more alert, agitated and activist, and attract more attention in Congress," Bromberg said. He noted that state legislatures haven't been particularly successful at influencing Congress to consider the concerns raised by state regulatory agencies.

Lately, these concerns include day trading activities. But state legislatures have repeatedly persuaded Congress to remove language from federal legislation that could interfere with the prerogatives of state regulators, Bromberg added.

The New York Stock Exchange hasn't made up its mind. The National Association of Securities Dealers is mum.

But there is just one major issue for others on the proposals to spin off the self-regulatory functions of the stock markets.

"We would want to make absolutely sure that the self-regulatory organizations had the revenue stream to continue to do the job that they do to protect investors," said Marc Beauchamp, spokesman for the North American Securities Admini-

strators Association (NASAA) in Washington.

Beauchamp likened the current securities industry regulatory framework to a three-legged household stool: One leg is the state regulators represented by his association; another leg is the Securities and Exchange Commission; and the final balancing leg is made up of self-regulatory organizations such as NASD Regulation (the NASD's regulatory arm). The later polices the industry from within.

"If any of the three legs of the stool' is weakened," he said, "we've got a problem."

Still Exploring

Ray Pellecchia, spokesman at the New York Stock Exchange, said the exchange's board recently authorized the headquarters staff to continue exploring the idea of an initial public offering.

But there is no timetable for an IPO decision, he said, and "a number of options" are being discussed with regard to the NYSE's self-regulatory functions.

NASD chairman Frank Zarb has alternately suggested spinning off the NASD's regulatory functions into a separate entity, or erecting a firewall between the regulators and Nasdaq members and staff.

The alternatives have given rise to heated debates among stock exchange watchers, and some raised eyebrows in Washington.

For Beauchamp and NASAA, though, the issue is simple: "All we care about is whether our investors are going to enjoy the benefits and protections of world-class regulation. If we're assured that they will, we'll probably support the [spin-off] plan."

Separate Body

A separate regulatory body could even improve the investing climate, Beauchamp said: "I think you might have more independence if you didn't have a stock market as part of the regulators' organizational chart."

The long-term health of any spun-off self-regulatory organization will depend primarily on money, Beauchamp said.

"That's got to come from the marketplace somehow," he said. "It's not going to come from the federal government."

Gerard Klauer Mattison & Co. raided the New York Giants for its latest recruits. Phil McConkey, a wide receiver with the football team until 1990 and still running his own investment bank, was hired as a sales trader. Former Giants tight end Mark Bavarro will reportedly start at Gerard Klauer in January.

Other new sales traders include: Carla Chiesa, previously with Oppenheimer for two years; Mark Stachnik, previously with Ladenburg Thalmann for two years; and Joe Haywood in the Boston office, previously a buy-side trader with Boston's Fleet Bank.

Gerard Klauer also lost two traders: Dan McMahon went to Oppenheimer as a senior block trader and Tim McCarthy is now running the listed desk at Needham.

Thomas Weisel Partners has seven new hires, bringing its total trading headcount to 36.

Frank Driscoll, most recently an executive vice president in charge of equities at Fidelity Capital Markets, will run the trading desk in Boston. Irene Britt and Chris Pillsbury will work as sales traders in the Boston office. Britt previously headed sales trading at HSBC, in Boston and Pillsbury was an assistant vice-president in OTC trading at Merrill Lynch.

Robert O'Brien and Anita Motwani were hired as position traders in San Francisco. O'Brien was a Nasdaq market maker at Prudential Securities. Motwani was previously a trading assistant at Merrill Lynch.

Tripp Nabors will work as a floor clerk at the New York Stock Exchange. He was previously director of sales at Linkshara.

Mike Hirou, formerly with Goldman Sachs, will work as a sales trader in San Francisco.

BancBoston Robertson Stephens named CIO, Ed Brandman, head of electronic trading. His responsibilities include investigating ways to leverage technology and developing strategic vendor relationships to strengthen the firm's trading business and distribution channels. Brandman joined the firm in 1998 as a vice-president for trading technology after a stint with J.P. Morgan.

Knight Securities hired Paul Sasseville as a vice president for electronic commerce. The position involves marketing Knight Securities business and eKnight, its Internet-based trading system. Sasseville spent six years as the associate publisher of Traders Magazine before moving to Knight Securities.

Lynch, Jones & Ryan hired veteran floor broker Joseph Jaeger as a senior vice president and director of floor operations. The firm also purchased a third seat at the New York Stock Exchange. Jaeger was previously a floor broker with Prudential Securities and a NYSE floor official.

NexTrade, operator of the NextTrade electronic communications network, retained Frank Wilson as a consultant to assist the ECN as it applies to the Securities and Exchange Commission to become a stock exchange. Wilson was a former executive vice president and general counsel to NASD until 1991 when he became a consultant.

Advanced Clearing, the clearing subsidiary of Omaha, Neb.-based Ameritrade Holding Corporation, hired Christopher Nagy as trading manager. Advanced Clearing processes trades on an agency basis for Ameritrade, Accutrade and about 50 other broker dealers. Nagy was formerly a vice president of equity trading at U.S. Bancorp Investments, a unit of Minneapolis' U.S. Bancorp Piper Jaffray.

Prudential Securities hired a new portfolio trading team to service institutional accounts. Michael Birch will head up the three-man team as a first vice president. Nicholas Zerille is a sales trader and Brendan McMahon is an equity derivatives specialist. The three were most recently with ABN Amro Bank.

Damian Riley joined Cowen & Co. as a senior position trader. He was previously a position trader with Furman Selz for three years.

Boston's Adams, Harkness & Hill hired three new sales traders: Barry Bocklet, a sales trader on the west coast for many years, most recently with Seidler & Co.; Tim Vetrano from Credit Lyonnais in Boston; and James Jasinski formerly with Jones & Associates in Boston. All will report to Paul Mazzarella, the head of sales trading. Adams, Harkness & Hill now has eight sales traders and six position traders. Position traders report to Ben Marsh.

M.H. Meyerson of Jersey City hired two position traders: Vanessa Light, most recently with Sharpe Capital for about 18 months, and Tommy Laresca, previously with Baron Chase and other firms. Sal Dacunto heads up the desk at Meyerson, overseeing about 30 traders and 40 support staff.

Archipelago Holdings, the fourth largest electronic communications network as measured by trade volume, said it plans to start trading listed stocks beginning on Nov. 1. A month later, the ECN plans to advertise listed stock prices on the Intermarket Trading System (ITS).

"We need to get representation for our quotes," said Archipelago senior manager MaryLyn Kurish. "This is a building block in our formation of an electronic stock exchange."

The ECN, which primarily matches limit orders for Nasdaq securities, filed with the Securities & Exchange Commission to become a registered exchange in August.

Archipelago already receives orders for 10 million to 15 million listed shares per day. At the moment, they all are re-routed to the New York Stock Exchange via the DOT system, a spokesman said.

The Leaders

Archipelago will become the fourth major alternative trading system – Instinet, Island and POSIT got there before it – to trade listed stocks. (Island plans to expand its three-stock pilot program to encompass all listed issues within a month, according to Josh Levine, Island's vice-president of software development.)

Unlike the others, however, Archipelago will plug into the ITS, enabling its prices to compete with prices broadcast on the seven U.S. listed stock exchanges, including the New York Stock Exchange. The ITS is the backbone of the National Market System, electronically linking price quote information and facilitating trading on the listed exchanges.

Archipelago said it has two choices for accessing the ITS. One of them is Nasdaq's Computer Assisted Execution System (CAES), an automatic execution network that connects broker dealers trading listed stocks. Alternatively, the ECN could become a member of a regional exchange.

CAES is used by third market firms, including Bernard L. Madoff Investment Securities and Trimark Securities.

Selway says the benefit of CAES is its familiar technology. The downside is its automatic execution feature. Also, broker dealers using CAES are limited to trading 19c-3 stocks, or those listed after April 26, 1979. They comprise two-thirds of all NYSE stocks, but do not include many of the most active issues.

Regional membership would allow Archipelago's customers to trade all stocks. But, according to Selway, the technology provided is not as strong as the CAES technology.

At Day Trading FirmsTestifying before a Senate panel in Washington, Arthur Levitt the chairman of the Securities and Exchange Commission, said the agency found no evidence of widespread wrongdoing among 30 day trading firms examined by the agency.

Mostly, the agency found evidence of "sloppiness" with ordinary procedures at the firms.

A third of the 30 firms engaged in wrongful activity and were referred to the SEC's enforcement unit. The agency continues to investigate 15 other firms.

Armed with the results of his agency's probe of the industry, Levitt is critical of new legislation on day trading.

Levitt told the Senate Permanent Subcommittee on Investigation that new laws on day trading would not eliminate problems in the industry. The SEC estimates that day trading accounts for less than 5 percent of the market's volume.

Day trading became national news this summer when a crazed day trader opened fire at the offices of Momentum Securities and All-Tech Investment Group in Atlanta, killing nine people. The episode came as state regulators released a report critical of certain marketing tactics used by day-trading firms.

The seven traders at Chase Manhattan Bank's equity management unit in New York could be out of work soon under a reorganization plan for the bank's equity portfolios. Altogether, the reorganization puts 32 employees at risk.

Chase is combining its equity portfolios managed in New York with those run out of its Houston operation. New York oversees $10 billion in stocks while Houston manages $25 billion.

Terry Goodwin, who joined Chase as head of the desk in the spring of 1996, is among the group of seven traders who work on the New York desk. He is a 30-year trading veteran.

At Chase, his mandate was to restructure the desk, following the bank's merger with Chemical Bank. Before he started in his current post, Goodwin was head trader at UBS Asset Management.

Reassignments

A spokeswoman for Chase Global Asset Management and Mutual Funds, the umbrella organization for Chase Asset Management, says the company will make every effort to reassign the employees internally. One possibility is the Houston operation, which employs three traders. Chase said it wants to assign two more traders to the desk in Houston.

At press time, career plans by Goodwin and his colleagues were not available.

Buyside traders generally face a tough job market. Some pros with a stellar record are always in demand, of course. Goodwin's certainly stands out.

Still, Richard Baggott, a consultant at Executive Search Placements in Boulder, Colo. says the job market overall is not good for buy-side traders. "We haven't been getting many job orders for them," he said.

Despite the experience of Goodwin and his team, careers on the buyside are considered stable and attractive. For many traders, "it is always a tough job market because of that stability," said Sam Toy, a buy-side trader with New York's Fortis Advisers.

Jersey City wholesaler Hill, Thompson, Magid & Co. is being acquired by Boston-based Freedom Securities for approximately $45 million in cash and stock.

In an unrelated move, two of Hill, Thompson's most senior managers, Anthony Broy, and Nicholas Ponzio, assume new executive posts at the firm, which will operate as an autonomous affiliate of Freedom Securities. Broy, currently president, has been named chief executive. Ponzio will step into the post of president.

Hill, Thompson, which was formed in 1932, makes markets in over 8,000 Nasdaq Small Cap, OTC Bulletin Board, Pink Sheet stocks and OTC ADRs.

Freedom Securities owns a chain of small broker dealers that include two municipal bond houses, Hopper Soliday and Gibraltar Securities. The firm also owns San Francisco broker, Sutro & Co. as well Tucker Anthony Cleary Gull in Boston.

The Attraction

Freedom Securities Chief Executive John Goldsmith said his firm is buying Hill, Thompson in part because of its solid record the last 10 years.

Freedom Securities was also attracted by Hill, Thompson's niche as a dealer in small thinly-traded securities.

"Hill trades the bottom half of the list [of OTC stocks]," Goldsmith said. "These stocks will always need a market maker to provide liquidity. Larger stocks are increasingly traded electronically."

Freedom considered buying an exchange specialist, but decided against it, said Goldsmith. The company is an investor in a small New York Stock Exchange specialist joint account' with Robb Peck McCooey Specialist Corporation and R. Adrian & Co.

Although Hill, Thompson will operate as an autonomous unit of Freedom Securities, some synergies are expected. "We can provide greater institutional depth and market-making capacity that will benefit other Freedom operating companies," Ponzio said. Some of Hill, Thompson's back office functions will be handled by Freedom Securities.

Goldsmith says Freedom Securities' investment bankers might do business with the companies Hill, Thompson trades. Freedom Securities' institutional sales people might market Hill, Thompson securities to their clients, he added.

More Plans

There are also plans to allow Hill, Thomson clients to trade with the dealer over the Internet. Executives at both firms did not provide specific details.

Ponzio will continue to run Hill's trading desk, but will also explore new business ventures, including ways to work with other Freedom Securities units.

Both Broy and Ponzio joined Hill, Thompson in 1990.

For the past two-and-a-half years, the Renaissance Plus IPO Aftermarket Fund (Nasdaq:IPOSX) has been the only U.S. fund to invest most of its assets in new issues. But that is about to change with the recent registration of the Hambrecht & Quist IPO & Emerging Company Fund.

The San Francisco-based newcomer will offer the public shares in a $300 million closed-end fund. The fund will invest 65 percent of its assets in new issues and 35 percent in other instruments.

Here's how it works: IPO shares are bought from a syndicate whenever possible as a company goes public, or else during the first 18 months of a company's public debut. The fund sells the shares it purchased within one year.

Hot Sector

IPO funds allow individual investors to gain entry into a hot sector to which they have little or no access. At the same time, some investors may eye them for the safety usually associated with mutual-fund investing.

Fund watchers caution, however, that historically IPOs have been a volatile investment. They do not think many more IPO funds will enter the market.

"Most studies have shown that IPO [funds] overall don't do very well," said Russ Kinnel, a senior mutual fund analyst at Chicago-based Morningstar.com. "They tend to have huge rallies and huge declines even more than typical small-cap growth funds. That's because the IPO market is so volatile."

Hambrecht & Quist plans to use a quantitative model developed by Symphony Asset Management, the company that will manage the fund. The model will help decide which issues to buy and to sell and when. Because Hambrecht & Quist is also an underwriter, Symphony would have to buy from other investment banks on occasions to avoid a conflict of interest.

Greenwich, Conn.-based Renaissance, by contrast, does not use a mathematical model but bases its selection process on in-depth analysis, says William Smith, the company's president and one of the three fund managers.

"Our mandate is to look at and analyze every single IPO that's out there, go to the road shows, and talk to competitors and suppliers," Smith said.

In addition to scrutinizing every stock, the fund managers research each sector before making a decision.

"Not only are we ranking and comparing the two closest comparable stocks, we ask if we should even be in retail right now," he added.

As of July 31, the fund had a year-to-date return of 31.02 percent. In 1998, the fund's first full year, it reported an 18.4 percent gain despite the August hit that dampened the rest of the market. Some of the fund's holdings include shares in E*Trade, Equant, Amazon.com and School Specialty.

The fund is allowed to hold the stock from an IPO for up to five years after the offering.

"We are not flippers," Smith said, adding that sometimes, when a stock falls and momentum players sell, Renaissance may decide to buy. "If you have done your homework and know this is an exceptional company, that's the time to start buying again," Smith said.

Pure Play

While Renaissance is the only IPO pure-play, numerous growth funds invest 10 percent to 40 percent of their portfolios in new issues to help boost their returns. They include the Munder Net and the Oppenheimer Enterprise funds.

But IPOs also add volatility, which can create problems when the fund does not disclose that fact.

Last month, the Securities and Exchange Commission censured and fined the Van Kampen Investment Advisory Group $100,000 for failing to disclose that about 50 percent of the meteoric gains of an "incubator" growth fund came from "hot" IPOs. These are new issues that the SEC defines as those that trade at a premium.

Between 1996 and 1997, when the fund only had $200,000 to $350,000 in assets, IPOs propelled returns to 69.9 percent. The returns were advertised without mentioning the IPO effect. When the fund opened to the public in 1997 and assets grew to $109 million, the impact of IPOs was diluted, and returns took a hit.

The SEC does not have any particular disclosure requirements for IPOs. Rather, its focus is on informing investors of any potential risks, says Amy Gibson, an attorney with the SEC.

"There is no attribution requirement, but what you do have to disclose are things that have a material impact," Gibson said. The Van Kampen Enterprise Fund, for example, has $3 billion under management and also invested in IPOs. "But because of the size, IPOs did not have the same impact," Gibson said.

Using IPOs to boost returns is common practice among mutual funds. The question is to what degree. Usually, a family of funds divides the allocations among fund managers. If one manager wanted all the IPO shares "he'd be barbecued," Smith says, adding that the scarcity of IPO shares is one of the reasons there are so few IPO funds.

Renaissance has only $16 million under management, 1,400 shareholders and a universe of about 30 stocks. It is an open-end fund, which means it is free to increase its size.

Some funds take a hit from IPO exposure. Smith Barney's Special Equities Fund invested heavily from 1994 in Snapple, Boston Chicken and other stocks that initially posted huge gains, which were later wiped out. After temporary gains, the Smith Barney fund suffered heavy losses and was "merged out of existence," Kinnel says.

Currently in registration, another fund, LCM Internet Growth Fund, is planning to invest about 65 percent of its assets in companies that engage in the Internet or Internet-related activities. Led by LaSalle Securities, the company is offering 4 million shares at $10 each in an open-end fund.

As such, it may invest some of its assets in IPOs, as many Internet companies are so new they are still in the first year of existence and qualify as a new issue.

Renaissance has done well, Kinnel acknowledges, but says it's premature to comment on Hambrecht & Quist's prospects, or on Renaissance's future.

"The more volatile the investments, the longer the period you need to assess the fund," Kinnel said. "Come back in five years and see."

Avital Louria Hahn is a senior editor of The IPO Reporter, a sister publication of Traders Magazine.

Is American cowboy capitalism causing unnecessary pain for the U.S. equity markets? Fragmentation of order flow is possibly the worst sign of strain.

A lance corporal of the U.S. equities markets is miffed the U.S. hasn't learned a valuable lesson from European centralized stock market trading. The newest American enemy is electronic communications networks.

"You don't see ECNs in Paris, Frankfurt, or Zurich or even in London, which is moving towards a much more efficient market," said Doug Atkin, the youthful chief executive of Instinet, at a recent press conference.

(Instinet, a subsidiary of Reuters Group, squirms at being labeled an ECN. That's even though it is technically an ECN, and the largest of the eight approved ECNs, as measured by single-counted share volume.)

A coming shoot-out at the OK Corral, therefore, might be a suitable metaphor for what is likely to occur in the years, if not the months ahead. Far-fetched? The suddenness may be as brutal on some participants as recent federal regulations have been for market makers.

"ECNs will be a short-lived pheno-menon," says a report on ECNs by Meridien Research in Newton, MA. "Eventually, fully electronic, order-driven stock exchanges will appear in the U.S. Nasdaq is clearly moving in this direction."

Though the Meridien report is unkind, with cutting cliches, regurgitating Securities and Exchange Commission handouts on how market makers allegedly engaged in price collusion, the picture it paints of the post order handling rules environment is not reassuring for traders.

(Yes, the academic evidence of ill-gotten gains on Nasdaq is overwhelming. A libertarian economist, however, might consider the subsequent federal order handling rules, installed to clean up Nasdaq, a form of insidious price control straight out of a socialist monetary textbook.)

The order handling rules, the report underscores, unleashed the whole sorry mess of ECNs that are fragmenting the marketplace today. The irony, of course, is that these rules, designed to speed up the centralization of the U.S. equity markets – and to prevent market makers from "shelving" unprofitable limit orders – are encouraging the opposite.

ECN Growth

Together, ECNs will attract and match an increasing proportion of Nasdaq order flow in the years ahead, according to Meridien. By 2001, the research outfit projects that ECNs will account for about 50 percent of Nasdaq trade volume. But the unification of disparate market centers may be looming.

"The number of ECNs will not remain at the current level," Meridien notes. "We expect to see significant consolidation because stock exchanges tend to be something economists refer to as "natural monopolies."

"Investors will naturally gravitate to the largest exchange, because that is where the greatest liquidity is, and where they are most likely to find a counter-party willing to trade at the best possible price. The same logic applies to ECNs – users will gravitate to the largest ECN."

The rationale is clear: a consolidating ECN industry will tussle with the New York Stock Exchange and Nasdaq and some marriages of convenience will occur. Instinet and other ECNs have all recently danced jigs with the Big Board and Nasdaq. The most publicized partnership talks centered on Instinet and the Big Board.

In the meantime, Nasdaq will tussle with its own members to finally implement a Nasdaq-operated central limit order book while the Big Board is likely to move in a similar direction. "Creating a central order book where orders are matched automatically based on price-time priority would mean that Nasdaq itself would operate like an ECN," Meridien states.

The loser is not Nasdaq but the Nasdaq market maker.

"A common misconception is that ECNs are taking liquidity away from Nasdaq," says Octavio Marenzi, senior analyst and author of the Meridien report. "In fact, ECNs are adding efficiency to the market."

"The pressure that ECNs bring to bear is squarely on the market makers, who can no longer control pricing. With some ECNs already filing for exchange status, it appears that the electronic network will take an increasingly greater role in the future of equity trading."

There is no certainty that the changes envisaged by Meridien will take place. But many trading experts, like Meridien, agree that the current patchquilt of ECNs and other market centers, could fail to survive in the next round of dynamic change on Wall Street.

That ECNs are clamoring to become full-fledged stock exchange brings the debate on the current state of the U.S. equity markets back to fragmentation.

Does allowing ECNs to register as stock exchanges make sense. Is there room for more "stock exchanges?" The American Stock Exchange, for example, has barely enough order flow to cover its embarrassingly dismal performance.

Will more exchanges just make it more difficult to accomplish the regulators' goal of best execution, never mind a national market system envisaged by Congress in 1975?

Virtual stock exchanges may be different. But as Meridien hints, the current crop of wannabe stock exchanges can promise but do not necessarily guarantee a best execution. The granddaddy Instinet has liquidity. The network handles 150 million shares daily and accounts for 20 percent of the volume in Nasdaq's 100 largest stocks. To be fair, it is a "super ECN" operating in 40 markets worldwide. Besides matching stock trades, it provides research and analytics, and has a strong edge in upstairs block trading. Instinet spends $100 million annually for technology.

But that does not mean the best prevailing prices on a stock are always available on Instinet. Bloomberg's Tradebook thinks it has the solution for traders having scruples about best execution. Its "bang" feature allows subscribers to access the markets broadcast by Nasdaq trading desks and ECNs via SelectNet.

Search Machine

Archipelago contends it is the first to implement a "best execution" system. If an order is not matched within Archipelago's internal book, the ECN will sweep Nasdaq market makers and rival ECNs for possible best execution. Another ECN, STRIKE, launched a web-based network that searches the best bid and offers outside its own limit order book

What this all suggests, of course, is that American cowboy capitalism came into its own soon after the order handling rules were unleashed. An astute investor should consider a search of most ECNs and market centers for the best possible prices.

With consolidation looming, many ECNs are likely to go down in battle. "Once Nasdaq and the NYSE move to fully electronic trading systems," Meridien states, "the niche that ECNs occupy will disappear."

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."