SAC Capital's head trader testified that hedge fund founder Steven Cohen had instructed him in July 2008 to start selling Elan stock in accounts that had "less visibility."
The trades in July 2008 are the heart of the government's insider trading case against Mathew Martoma. Prosecutors allege the former SAC Capital portfolio manager used nonpublic information about the results of an Alzheimer's disease drug trial that he obtained from Dr. Sidney Gilman to his benefit.
Martoma allegedly alerted Cohen about the information he had received and then began unwinding his position in Elan stock. By the end of July 2008, SAC Capital had no position in Elan.
(Read more: Martoma trial witness: FBI targeted SAC's Cohen)
Phillip Villhauer, SAC's global head of execution, described in detail the accounts used within SAC Capital that are designed to sell large blocks of stock without being detected internally, or externally, in order to avoid "slippage." Such a move ensures that other firms didn't learn that SAC was selling large blocks of stock and then begin selling their own positions, thus driving down the price.
Of the 900 employees who worked at SAC Capital in 2008, these "limited visibility" accounts were only accessible to 10 to 15 people, whom Cohen had ultimate discretion over.
Testifying at Martoma's trial on Tuesday, Villhauer said that on the instructions of his boss, he began selling SAC's position in Elan on July 21, 2008. Over a four-day period, Villhauer was able to execute the sale of more than 10.5 million shares of Elan within four SAC accounts. In his weekly trading report to Cohen and SAC President Tom Conheeney, Villhauer said the transactions had been "executed quietly and efficiently."
(Read more: Witness: I helped Martoma with insider information)
On cross examination, Villhauer told the jury how volatile markets were in 2008 and that the type of accounts used to execute the Elan trades were used to prevent slippage. He also noted that there is nothing improper with these types of accounts and that it was not unusual for SAC to unwind or sell large positions in a short period of time.
The government rested its case against Martoma after Villhauer's testimony.
Martoma, 39, is charged with two counts securities fraud and one count of conspiracy to commit securities fraud. He faces up to 45 years in prison if convicted on all counts—20 years for each securities fraud count and five years for the conspiracy charge.
—By CNBC's Dawn Giel.