“Last year, a Citigroup Inc. executive who was overseeing the firm’s stock trading took the unusual step of complaining about one of his largest customers: Fidelity Investments,” writes Kate Kelly in today’s Wall Street Journal.

“Meeting with officials of the Nasdaq Stock Market at his office, Robert Moore referred the visitors to numbers scribbled on a whiteboard. Citi could once earn five cents a share in commissions from Fidelity, he said. But the mutual-fund giant’s tough cost-cutting had driven down Citi’s final take to a penny or less. ‘Look where our business is going,’ said Mr. Moore, according to several attendees.”

“Mr. Moore’s gripes can be traced to the labors of one executive: Scott DeSano, Fidelity’s head of stock trading. From what many regard as the most powerful trading desk in money management, Mr. DeSano has made a career of squeezing Wall Street brokers. More than anyone else, Mr. DeSano personifies a major shift of power in the stock-trading business. In a world once dominated by Wall Street stock-trading houses like Citigroup and Goldman Sachs Group Inc., Fidelity and other big money managers now hold most of the cards.”

“Since taking charge of Boston-based Fidelity’s trading eight years ago, Mr. DeSano has cut the mutual-fund firm’s trading costs by hundreds of millions of dollars per year. Those costs, once in line with those of other money managers, now are half the industry average, according Abel/Noser Corp., a firm that tracks such expenses.”

“One of Mr. DeSano’s key tactics is persuading brokers to commit their own capital on many Fidelity trades. Traditionally, if Fidelity wants to sell stock, it takes a risk that the share price might fall while it’s trying to unload its block. That risk is significant, for example, during the few minutes after a company announces poor earnings. When a broker commits capital, it in effect buys the shares from Fidelity, then tries to sell them on the market. That can leave the broker swallowing losses when a stock keeps falling.”

“Mr. DeSano also has installed a sophisticated tracking system to see which brokers can execute trades most efficiently. Those that don’t measure up get the boot.”

” ‘You can’t just give half a million shares to the guy you had a beer with last night,’ Mr. DeSano says. ‘You have to earn our business.’ Blunt and impatient, the six-foot, 195-pound former varsity quarterback has been known to slam down phone receivers so hard he breaks them. ‘You want me to demonstrate?’ he offers, in his corner office overlooking Boston’s skyline.”

“Although Mr. DeSano was among the pioneers, his push for lower trading costs is now common among money managers. Vanguard Group is well-known for keeping down trading costs in its index funds, which try to match market benchmarks rather than pick winning stocks. Vanguard investment chief Gus Sauter uses sophisticated strategies to get as close to the benchmarks as possible without frittering away money on trading.”