`Instinct' guides busy floor trader
New York — THE worn wooden floor at Mark Soltz's feet is already littered with crumpled order cards, chewing gum foil, and an Oreo cookie six-pack wrapper. Trading on the New York Stock Exchange started just half an hour ago and the market is down 22 points.
For the next six hours, Mr. Soltz will stand amid the debris, shouting, getting jostled, and gazing at a cathode-ray tube slung overhead while making a thousand tension-packed, split-second decisions - trying to outguess a notoriously fickle market. Yet between trades, Soltz is enthusiastic.
``This is a great place to work,'' he says.
At 29, he's one of the youngest of 400 specialists on the floor of the NYSE. Charged with keeping an orderly market, Soltz performs as part auctioneer, part umpire, and part poker player.
To land the job, he didn't attend an Ivy League college or earn an MBA. Soltz started in 1981 as a lowly page (a messenger) and, like most on the floor here, worked his way up.
Nor does Soltz have a Park Avenue penthouse. He lives in Yonkers with his parents. He commutes via the same graffiti-covered subway as millions of other New Yorkers, not in a limousine. An immediate goal: to sock away enough for a down payment on a one-bedroom condominium in Manhattan.
Yes, there is big money to be made here. But in a bull market era often distinguished by white-collar excesses - insider trading, money laundering, cocaine dealing - the exchange floor remains largely a blue-collar kind of institution.
``The floor is a different community from what goes on upstairs,'' shouts Sam Cosimano, a specialist at a post not far from Soltz's. ``Business is the same today as always, except for the volume.''
Soltz agrees that the scandals ``haven't had much effect on us. People here already have a major commitment to integrity.'' Then, he uses a phrase that may as well be carved on the surrounding marble walls, it's repeated so often: ``Down here, your word is your bond.''
Indeed, 185 million shares are traded in an average day. And every trader makes hundreds of oral contracts in a 6-hour day. Sometimes, a trader realizes he's made a tactical error that could cost $10,000 or more in just minutes. But the trade must be honored.
``You would rather let them come for the couch and TV set than go back on your word,'' says a trader.
``The system makes for a high level of integrity and civility,'' points out Robert L. Newberger, a ``two-dollar'' broker who started here in 1940. A two-dollar broker handles excess orders when, say, Merrill Lynch's floor broker is too busy.
``If you want to buy or sell IBM, you've got to go to the center panel at Post 5,'' Mr. Newberger says. ``And you've got to get along very well with those traders because they're going to be there every day. You can't say, `I'll never do business with him anymore.' There's no place else to trade IBM on the floor.''
Since trading acumen has little to do with formal education, the floor is more likely to be populated by graduates of Brooklyn Technical High than Harvard or Princeton.
``There's no real school that prepares you for this,'' says Mr. Cosimano, who did not finish college. ``It's a matter of OJT, on-the-job trading.''
One trader actually shunned college graduates because ``they think too much.'' Arthur Cashin Jr., a PaineWebber floor broker decked out in a red tie dotted with money bags, explains, ``At any given time, you can have $30 million in verbal contracts at risk. If you dwell on that, you make errors. Errors here can be very expensive.''
Many of the better traders also excel at cards and backgammon, using their ability to analyze probabilities quickly. Others say it takes instinct, stamina, and a cultivated ``feel'' for the market.
How much money is made on the floor?
``In a good market,'' says Perrin Long Jr., a brokerage industry veteran, ``a specialist in an active stock, one of the Dow 30, can pull down $250,000 to $500,000 a year without any trouble.'' And this is a good market. Last month a seat on the stock exchange sold for a record $1.1 million, nearly double the price of four months ago.
A specialist earns money in increments. He makes about 40 percent of his profits by charging a commission of about 1 cents a share on most transactions made at his post. The rest of his income, in an up market, typically comes from constantly trading a handful of stocks. With no broker to pay, the specialist can trade in and out of a stock every few minutes.
``I pick up a quarter point here, an eighth there,'' says a specialist. ``The object is to turn the inventory.''
On any given day, a specialist or an independent broker can take positions netting as much as $50,000 to $100,000. Or that much can be lost.
Many working on the exchange floor start out at relatively modest salaries. Exchange wages begin at $15,288 for a page and top out at $36,504 for a floor reporter after seven years. Salaries paid by exchange members are higher. Clerks, brokers, and specialists can start at $20,000 to $100,000.
Mr. Soltz, for instance, does not own a seat on the exchange but is a salaried employee of Stern Brothers Inc., a specialist firm.
Despite assertions that the exchange floor's community is untouched by the world at large, there are some small changes in the culture. For instance, occasionally a woman can be seen on the male-dominated floor. Of the 1,366 exchange members, 54 are women but only 24 are active on the floor.
The exchange first started hiring women back in 1970. It was a crucial policy change since most member firms choose their new hires from the ranks of the exchange floor pages, clerks, and reporters. Gail Pankey, a two-dollar broker, was among the first women hired.
She started as a page, a job that requires walking upwards of 15 miles a day around the exchange floor. Her current job still puts a lot of wear on her Reeboks.
``It was difficult breaking into a man's exclusive club,'' she says. ``You have to work a little harder. But the market is the equalizer. Fact is, male or female, if you can't do the job you're not going to be here very long.''
Exchange members say the floor is getting more professional. ``There's a lot less nepotism now,'' says Newberger. Even business school graduates appear on the floor, usually as part of a major brokerage firm's training program.
There was a time when, on a slow day, traders would play cards, slip out to a backgammon room just off the floor, or pull practical jokes on their colleagues. But that was before the great bull market that began in August of 1982.
On this day, the Dow is up more than 66 points at the closing bell. Some 191 million shares have end up changing owners.
``I remember when 60 million shares was the record,'' says Soltz, sounding like an old hand already. ``In January, we topped 300 million. We don't have time for pranks now.''