Traders’ tough floor routine
The stock market has been placid for most of the day, but Peter Kenny holds his breath as the final hour of trading approaches.
A professional trader at Knight Capital Group Inc. who buys and sells stocks for large investors such as mutual funds, Kenny is betting that prices will drop before trading stops so he can pick up shares at attractive prices.
Although the market already has been slipping for about 30 minutes, that’s little comfort given that the last hour of the day has become enormously volatile during the market turmoil of the last several months.
On many days, prices have swung in one direction in the first 5 1/2 hours only to pivot sharply the other way in the last 60 minutes, more than wiping out what was the dominant trend for most of the day. Even though the market squall has receded in recent weeks, sharp fluctuations in the final hour have continued.
For Kenny, it’s a time to either shine or fall flat.
“It is without a doubt the most important hour of the day,” Kenny said. “It’s my bread and butter time. That’s where I earn my keep.”
The market’s meltdown and last-hour somersaults have made this one of the most adrenaline-filled, nerve-racking stretches ever for the Wall Street traders who are paid to divine the gyrations.
Although the floor of the New York Stock Exchange is far better known, most modern-day stock trading occurs at institutional trading firms such as Knight, where about 90 traders in khakis and golf shirts sit tethered to computer screens on a trading floor across the Hudson River from Wall Street.
The traders at Knight have been like play-by-play announcers chronicling the decimation in the stock market.
“You’re so close and you’re watching stock-price moves, not from quarter to quarter or month to month or day to day for that matter [but from] minute to minute,” said Kenny’s colleague Joe Mazzella.
In executing customer orders, the traders at Knight aren’t putting any of the firm’s own money at risk. But they are under pressure nonetheless to secure better-than-average prices so clients keep giving them business. The losses suffered by Knight’s customers in the last year have amped up that pressure. And that’s not to mention the big bites out of the traders’ own 401(k)s and personal savings. It’s all part of the pall cast across Wall Street by the financial crisis and steep layoffs at major firms.
“Most of us are going home and looking at our bank statements and seeing the real-life damage being inflicted on our own personal wealth, no different than anybody who’s outside this business,” said Joseph Ricciardi, another trader at Knight. “Then we have to come here and see it firsthand.”
Kenny, 50, wakes most days by 4 a.m. and is at his desk by 6 to prepare for the market opening 3 1/2 hours later.
Compared with the messy desks of most traders, Kenny’s work space is fastidiously neat. The few objects in view include a pair of pocket-size books -- one of Buddhist teachings and the other of Catholic novenas with which Kenny starts each day with a prayer.
This day is the fourth he has worked to complete a big order from a California mutual-fund company calling for him to sell 82 stocks and buy 82 others.
The first two days went well. But on the third day, after he had unloaded all the stocks to be sold, the market defied his expectations by rising in the last hour, forcing him to pay higher prices than he wanted for some stocks.
The challenge for Kenny is to prove that he can beat the pack in getting the best prices, or at least most of the pack. It’s similar to a mutual-fund manager who must outperform an index.
As this day’s final hour of trading begins, Kenny needs to “get some runs across the plate,” he says.
Fortunately for him, the market complies by sliding through most of the final hour, and the Dow Jones industrial average closes down almost 200 points.
Kenny looks up as he taps away on his keyboard to execute the order’s final trades.
“It’s a good day,” he says. “Every day is a new day . . . another opportunity to show that you got it.”
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