Online World Is Sucking Talent
From Traditional Brokerage Desks
By MICHAEL CASEY
Dow Jones Newswires
June 29, 1999
NEW YORK -- As Wall Street executives weigh strategic responses to the challenge of online trading, many of their employees have already decided what they're going to do: jump ship.
It's not yet a mass exodus, but trading and sales desks in established securities firms are losing staff to their online competitors at a steady rate. These people are finding themselves in an entirely different work environment and business culture.
Exact figures for the total number of employees in online trading aren't yet available, but the industry's relentless growth -- now accounting for 25% of all retail equity turnover and for a rapidly expanding portion of fixed income -- is clearly attracting applicants.
All the same, the decision to leave a traditional, off-line desk for an Internet startup is no easy choice. Gone will be the weighty commissions individual brokers draw from the trades they personally execute. Computer-generated matching systems take care of that.
Gone also will be the buzz of the trading floor. The adrenaline rush that risk-hungry traders get from taking positions in a fast-moving market will instead be enjoyed by their buy-side clients. Instead of rows and rows of noisy colleagues, online securities sellers may find themselves working amid a series of personal computers and servers quietly monitored by a small technical team.
Moreover, as a member of a similarly small sales team, the former trader may end up boasting to clients of the intricacies of a software application, say, rather than jawboning about the day's hottest investment story.
Yet industry observers note a growing interest, particularly among younger traders, in switching to the electronic office. What's driving them, these people say, is a new spirit of entrepreneurship -- the desire to participate in a high-growth enterprise. As with many "dot-com" start-ups, the real attraction is stock options, not bonuses.
"People are starting to wake up and look around and realize that this Internet phenomenon is here to stay, and they want to get involved in it," said Eduardo Prado, chief executive officer of Finacorp Securities Inc., Newport, Calif., which last month launched Tradebonds.com, (Tradebonds.com) a new fixed-income trading system for buy-side investors.
Mr. Prado's 15 employees are drawn mostly from traditional bond desks, although his own eight years of trading amount to more than those of his staff members. They tend to be under 35 and have traded for two or three years, he said.
Nonetheless, quite a few Wall Street old hands seem drawn to the online business, despite, or perhaps because of, its contrast to the enormous, noisy and cut-throat trading floors at New York's market-making banks.
Tom Cordisco, sales principal at LimiTrader Securities Inc. (www.LimiTrader.com) of New York, a new online high-yield debt brokerage, spent 17 years as a bond salesman. Five of those were at Salomon Brothers, followed by 10 at Lehman Brothers Inc., and then two in the London offices of the now-defunct Peregrine Securities of Hong Kong.
When the Asian crisis forced Peregrine out of business last year, "I had a hard time thinking of myself going back to a large investment or trading house," Mr. Cordisco said.
At Peregrine he had run a small "boutique" operation that was very different from Wall Street's high-powered fixed income desks. "The entrepreneurial environment of that was an eye-opener in terms of how I saw myself in the business," he said.
But there are good reasons why others may be reluctant to follow in Mr. Cordisco's footsteps.
For one, compensation in the traditional firms remains high, regardless of the growing market share taken by Internet competitors. This year, with financial markets performing well and volumes for some securities at record highs, Wall Street's army of traders, salesmen and analysts look set to again draw hefty bonuses.
In addition, many Wall Street professionals may not be inspired by the prospect of shifting from an intimate relationship with their clients in which they, the dealers, provide sophisticated investment advice, to one in which they're selling a piece of technology.
It's a fundamental shift in focus that Kenneth Austin recognizes. But, after recently leaving his job as managing director of the emerging market desk at Bank Boston Robertson Stephens to head up the Internet-based emerging-market debt operations at Trading Edge Inc. (www.TradingEdge.com) of New York, Mr. Austin isn't bothered by the change in job description.
"I use to sell securities, now I am selling a system," said Mr. Austin. What's consistent is the need for an understanding of the market, he argued.
"You could never sell this service and not know the people involved in the market," Mr. Austin said. "I know who the participants are, and I know how the market works."
Mr. Austin noted that one of the best assets he's brought to Trading Edge is his contact list -- all prospective sales.
This, of course, is what many Wall Street professionals have to offer. And although prospective employees must be Internet literate, online employers say traders' phone books are more important than their technical knowledge.
Fortunately for the online firms, plugged-in job seekers are lining up.
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