Clearing firm

From MarketsWiki

(Redirected from Clearing member)
Jump to: navigation, search
This page needs a sponsor.
Put your logo here!
Email us for information
on how to support MarketsWiki.

Clearing firms are independent intermediaries that specialize in clearing trades for brokers/dealers through the exchange-run clearing house. The clearing-firm sector earlier this year lost its third-largest player, Bear Stearns, in the wake of the subprime mortgage-backed securities wreck.

Members only

Clearing firms are member firms of the exchange's clearing house and so are authorized to clear trades for its broker/dealer customers who are exchange members but not necessarily members of its clearing house. Some brokers that are also clearing members do clearing for other brokerages but most independent clearing is done by specialists like industry leader Pershing LLC.[1]

Although Pershing is currently the colossus of clearing firms with more than twice as many clients as second-ranked National Financial Services (see below), competition is heating up in the sector despite on-going consolidation.[2] New market entrants like Pershing spin-off LPL are battling incumbents for the clearing business of the top 20 independent broker-dealers, although the Bear Stearns collapse has also provided new business opportunities for the leading firms.

Big Five

Investment News magazine's Top-5 U.S. Clearing Firms by number of broker-dealer clients, Dec. 2007[3]

  • 1. Pershing LLC; 870
  • 2. National Financial Services, LLC; 344
  • 3. Bear Stearns Securities Corp.; 275
  • 4. Penson Financial Services, Inc.; 250
  • 5. Southwest Securities, Inc.; 250

Bear Market

Before it was wiped out in April 2008 by the mortgage meltdown, Bear Stearns was ranked the third-largest U.S. clearing firm by Investment News with 275 broker-dealer clients and had been named by financial-technology publication Waters magazine as Best Clearing Firm of 2005.[4] JPMorgan Chase & Co. acquired the thriving clearing business following their fire-sale takeover of Bear Stearns in April 2008 and have pledged to maintain it in-house. But larger rivals like Pershing have been snapping up former Bear Stearns clearing clients since its collapse and some that remained are still uncommitted to the new arrangement and could still switch to rival clearing firms.[5]

Latest News

U.S. securities-industry regulator the SEC recently filed a complaint against North American Clearing, run by prominent small-brokerage advocate Richard L. Goble, alleging it misused clients' funds in a fraudulent attempt to remain in business.[6] Goble has long argued that small firms are being forced out of the brokerage industry by excessive regulation and created the Finance Industry Authority (FIA) to lobby their cause.[7] The SEC placed a temporary restraining order on Gobl;e and his co-defendants and also put North American Clearing into receivership.

References

  1. ↑ Awards. Pershing LLC. Retrieved on July 16, 2008.
  2. ↑ Clearing firms jostle to win and retain indie BDs. Investment News. Retrieved on July 16, 2008.
  3. ↑ U.S. clearing firms ranked by broker-dealer clients. Investment News. Retrieved on July 16, 2008.
  4. ↑ Bear Stearns Named Best Clearing Firm by Waters Magazine. Allbusiness.com. Retrieved on July 16, 2008.
  5. ↑ B-D execs take wait-and-see approach on Bear Stearns clearing unit. Investment News. Retrieved on July 16, 2008.
  6. ↑ SEC Halts Florida Clearing Firm's Fraudulent Use of Customer Funds. SEC. Retrieved on July 16, 2008.
  7. ↑ Clearing Firm Faces SEC Charges, Small Firm Movement Tarnished. Registered Rep. Retrieved on July 16, 2008.
Retrieved from "http://www.marketswiki.com/mwiki/Clearing_firm"
Personal tools