Getting Trades Using a Risky Business Approach
How one execution house sales rep exploited a market inefficiency when soliciting order flow
Sometimes you have a really big stock or commodity trade to get off and you don’t want everybody in the market knowing what’s going on.
That’s when big traders turn to what are known as execution shops. These are not fancy brokerages or banks with legions of advisors. They’re low-profile fill-em and bill-em order houses. The firms offered a commodity service albeit that reaped good profits. Consequently, they had sales teams that competed fiercely for business. Hence, there was little inefficiency in the market. However, here’s a story of one person, who, in the 1990s, recognized an inefficiency and exploited it.
The advent of modern communication, starting with the telegraph, drove growth in the futures markets as traders and hedgers could more easily access markets and prices. The brokerage office is often the first of several steps an order makes on its journey to the trading pit. Typically an order takes the following path: the branch office sends it to the brokerage firm’s main trading desk. From there it’s sent to the appropriate order desk on the trading floor. The order desk chooses a pit broker to handle the customer order. That broker, as he or she yells out the trade in the pit, then decides what local trader will get the order.
Sometimes the order takes a more circuitous path. That’s because the trader doesn’t want to send their deal through obvious channels.
Large traders (speculators, investment banks or funds) develop strategies involving hundreds of millions of dollars. Trades this large have to be handled delicately. If the market senses a big trade is headed its way, everyone tries to jump in ahead of it and prices will move. This phenomena was depicted in the movie “Trading Places” when two floor traders saw the evil Duke brother’s agent buying large quantities of frozen orange juice futures.
Trader 1: “The Dukes are trying to corner the market.”
Trader 2: “They know something.”
Trader 1: “I can feel it.”
Trader 2: “Let’s get in on it.”
This bold move by the Duke’s trader sucked in others and fueled a rally. Few traders are so deliberately blatant. They prefer discretion and patience while working a big position. They may take weeks or even months to set up. Hence the need for subterfuge, subtlety, deception and misdirection.
One of the ways big players set up large positions is by spreading their orders among multiple firms. They may have accounts with five or six firms. In addition to the brand name banks and brokerage firms with large marketing and retail operations, there are other shops that only provide trade execution. As those firms have fewer offerings, they charge lower trading fees. Most of these firms are not widely known.
Here’s how one of those firms got the business using a Risky Business type of strategy. This was recounted to me by a good friend.
The scene is the skyscraper trading room in NYC populated by a cadre of money-hungry late 20-somethings. They may seem to be a picture of success: graduated from a fancy school, hired for a high-paying job with a top Wall Street firm. These are the people handling tens of millions of dollars executing on the whims of senior management. What’s not as evident is that they’re slaves to their jobs. Their work-life balance is tipped to nearly 100 percent work. The hours are long and they’re constantly on call. It’s a lonely existence. Senior management doesn’t dirty its hands in the details of getting the deals done. That’s for the traders, many of whom are math and quant geeks and many of whom may be socially inept. These are the targets of the sales reps for the executing brokers. In those days, Wall Street brokerage and bank trading floors were men’s clubs.
The sales reps are operating with a base assumption that when one of the bank’s big traders need a broker to buy or sell 10s of millions of dollars of stocks or commodities, who are they going to call? Since all the firms are offering essentially the same service at essentially the same price. The decision comes down to the basis of the relationship. Who’s their buddy?
Cultivating the relationship often required shelling out thousands of dollars for fancy dinners lubricated with expensive wines. The heroes of our story took a more modest approach that apparently was equally successful.
Instead of spending money on fancy dinners, the sales rep would call prospective clients and invite them down to a local watering hole for a few drinks and to meet some of his friends. It wasn’t the free booze that was the enticement. Our host, let’s call him Fred, had stunningly gorgeous friends. They were: Mary, a dental hygienist from Jersey City; Sue, a paralegal from Staten Island; Becca a nail stylist from Syosset; etc. Fred played the role of wingman.
The women hung on to the men’s every word – even as they talked about the fine points of leveraged buyouts, interest rate swaps and options trades. As the evening wore on the mutual interest intensified and ended with the girls going home with the guys for an unforgettable night.
Perhaps the reason why the women were so intererested is because they were paid. Fred made sure each trader was guaranteed a companion.
“Fred” did his math. He could spend thousands of dollars over several dinners trying to win over a trader. With his bevy of beauties, his money went a lot further. He paid for a few inexpensive drinks and the women’s time which in the 1990s was on the order of $500 to $600. Fred had figured out the ultimate win-win scenario. The traders had a good time. The girls were well compensated and Fred got the business. A much cheaper and potentially more successful sales strategy.
If you’re a trader, what are you going to remember, the expensive dinner or a night with a stunningly gorgeous woman courtesy of the ultimate wingman, Fred?
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This blog is about more than my experiences. It is intended to be a collective experience of working on the commodity markets physical trading floor. If you or someone you know has a story please let me know I’d like to include it in this ongoing chronicle. I can be reached at linton122(at)gmail.com
© Clifton Linton 2025