By Chris Lane
By Jeff Balke
By Aaron Reiss
By Angelica Leicht
By Dianna Wray
By Aaron Reiss
By Camilo Smith
By Craig Malisow
Most of the bandits are guys, but not all of them. One of the best is a woman, Stephanie Clark, and she comes gliding into the offices of Block Trading just a few moments before the bell sounds to mark the opening of the NASDAQ market. Clark hopes to make a noon workout with her personal trainer at a Galleria health club, so she's wearing pink shorts pulled over white spandex shorts and a white stenciled T-shirt that says Beverly Hills, which is where she might be from, a young, freckled Lauren Bacall, with a wide, pretty mouth and well-cut blond hair on top of which rides a pair of sleek designer sunglasses.
She settles into her high-backed office chair like a fighter pilot settling into a cockpit and looks around. A television wired to CNN flickers silently on a back wall, but she doesn't pay much attention to that. By the time financial news makes it to CNN, the people in the know have already heard and reacted to it. More important is the orange monitor that sits between her and another trader; it's here that major stock orders are registered. But most important is the color monitor that stares straight back at her. It's on this tube that the workings of the all-electronic NASDAQ market flit by -- who wants to sell, who wants to buy, what prices are being floated, what offers are being accepted. It's a code, all of it, and to the person who can break that code, a very simple prize is offered: profits.
Clark knows about profits. The day before, she made money from home, calling in her orders through a speaker phone while watching a computer. She made money calling in from her car on the drive home. She made money standing on her patio in her bathing suit, watering her new 12-foot-high bougainvillea. Around the edge of her computer monitor, her obsession is made clear. There, printed like a mantra, is the phrase "Chu-Ching" bracketed by dollar signs. Chu-ching, the sound a cash register makes. Chu-ching, the sound that Clark wants to hear every time she makes a trade. Chu-ching, the sound that likely reverberates, in one form or another, through the dreams of the 50 odd other SOES bandits settling into their own high-backed chairs around Clark. Chu-ching, the tune that could well serve as the anthem of SOES bandits nationwide. Chu-ching, chu-ching, chu-ching. The sound of the big boys of the stock market being SOESed.
SOES stands for Small Order Execution System and, like most phrases connected to the stock market, means nothing to the average person on the street. To most of us, the stock market is a series of numbers that fill unread columns in the back of the daily paper's financial section. Or it may be an investment tool, a hedge against inflation, a way to bolster retirement income by riding the coattails of the capitalist system.
But to the people who are actually in the stock market it's something completely different. It is, as financial writer Adam Smith noted back in the late '60s when the gray men of Wall Street were beginning to acquire a public face, a game, one played daily and with other people's money. It is also a game whose players have historically been tightly restricted. The wealthy were welcomed in; everyone else was invited to stay outside and do their stock buying through the intermediary of those with clout.
That's why the "S" for small in SOES is so galling to big brokerage houses such as Merrill Lynch, Goldman Sachs and Oppenheimer. The "S" means they are being bypassed, and they are not happy about it. It is as though the biggest, oldest and slowest bullies in the playground have had their private game invaded by a group of fast, high-spirited kids.
Traditionally, if a client placed an order for stock, a broker would phone several other brokerages that were dealing in the stock, find the best price and make a deal. It was, by SOES standards, a relatively leisurely process. In 1971, the National Association of Security Dealers, a private, self-regulating agency composed of the nation's nearly half-million stockbrokers and 5,300 brokerage firms, created a computerized stock market, NASDAQ. NASDAQ has grown into the second largest stock exchange in the country after the New York Stock Exchange, doing more than a trillion dollars of business a year in the stocks of more than 5,000 companies. When you buy a stock from the New York Stock Exchange, you are essentially buying from other investors in a daylong auction market conducted by traders competing on the raucous Wall Street trading floor. Regardless of technology, the NYSE is still something of a 19th-century process.