Penson Worldwide Inc.

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Penson Worldwide
Founded	1995
Headquarters	Texas

Penson Worldwide, Inc., which filed for bankruptcy on January 11, 2013, was a provider of brokerage, clearing and clearing-related operational and technology services.

The company had struggled since the 2008 financial crisis after benchmark interest rates fell to near zero. The drop in equity market participation in 2010 and 2011 had a direct and negative affect on Penson's commission and interest revenues, the company's COO Bryce Engel said in court papers.

Penson's problems became worse in May 2011 when it disclosed that it held $42.6 million as trading collateral in illiquid bonds issued by a horse-racing track operator with ties to a Penson board member, raising questions about corporate governance and risk management. The company's shares lost about half their value over two days that month, leading to a restructuring of the firm in which it sold off some of its international subsidiaries and combined some of its U.S. businesses.

Prior to its bankruptcy, the firm sold its futures division to Knight Capital Group.

In May 2014, a year after the firm disbanded, the Securities and Exchange Commission brought charges against four former Penson employees. The charges stem from Penson's securities lending practices, and included actions against the company's former president, chief compliance officer and two securities lending officials.

Divisions

• Nexa Technologies, Inc. provides powerful trading platforms, connectivity and market data to more than 100 retail and professional brokerage firms and banks throughout North America, Europe and Asia. In March 2013, the Penson bankruptcy judge approved the sale of Nexa to the Federation des Caisses Desjardins du Quebec, a Canadian financial services cooperative, for $10.5 million.

• Penson Financial Services, the firm's broker-dealer subsidiary, went out of business per its liquidation on August 15, 2013.

• Penson Financial Services Canada Inc. was a leading independent clearing firm in Canada before it wound down its operations in 2013.

• Apex Clearing Solutions LLC is an independent clearing firm in the US that was formed in June 2012 as a joint venture between Penson and Peak6 Investments. The firm was unaffected by the Penson bankruptcy.

History

Penson was founded by Daniel P. Son and Phil Pendergraft (as Penson Financial Services, Inc.) in 1995 and focused its early efforts on serving active trading broker/dealers and investors, using technology, advanced automation and customer service to differentiate itself, eventually expanding to serve all types of investors.

In 2000, Penson Worldwide Inc. was formed as the primary holding company for Penson Financial Services, Inc., and two other Penson-acquited companies as they entered Canadian and European securities clearing. These two companies were Penson Financial Services Canada, Inc. and Penson Financial Services Limited.

In 2001, Penson formed Penson Financial Futures, Inc. to enable National Futures Association (NFA) registered correspondents and their customers access to electronically-traded futures contracts.

In 2002, Penson acquired Integrated Trading Solutions, Inc., and also made an investment in Nexa Technologies, Inc., both software firms that develop and market front-end trade entry software platforms. It 2004, it acquired the remaining ownership interest in Nexa Technologies, and Integrated Trading Solutions was merged into Nexa Technologies. Also in 2004, Penson's technology firm, Nexa Technologies, Inc., acquired the assets of Tick Data, a provider of historical stock price data to facilitate automated traders' ability to back-test their models and algorithms.

On May 17, 2006, following a successful IPO, Penson Worldwide, Inc.'s common stock began trading on NASDAQ under the symbol: PNSN. Later that year, Penson founded Penson Asia, based in Hong Kong, to provide securities-processing technology and other products and services to financial-industry clients in the Asia-Pacific region.

In February of 2007, the Chicago-based company Goldenberg, Hehmeyer & Co. was acquired and joined the Penson Worldwide group of companies as Penson GHCO. That group provided global access to exchange-traded futures and options, including those based on U.S. and foreign equity index products, single-stock futures, foreign exchange, interest rate products, foreign yield curves and agricultural and industrial commodities.

Penson announced in March of 2009 that Penson Financial Services Australia Pty Ltd. (PFSA is an arm of Penson Worldwide, Inc. would launch in the second half of 2009. The venture would provide Australian brokerage firms with independent clearing and settlement of Australian financial products and access to trading on global financial markets.

On Nov. 19, 2008, Penson Worldwide announced the promotions of Dan Weingarten and Sean Malloy to senior vice presidents and co-directors of global sales and marketing. Both Weingarten and Malloy joined Penson Financial Services, Inc. (PFSI), a U.S. subsidiary of Penson Worldwide, in July of 2007 as senior vice presidents of U.S. sales and marketing. In their expanded role, Weingarten and Malloy will continue to direct the U.S. sales team while assuming responsibilities for developing and executing Penson Worldwide’s global sales and marketing strategy.

On April 26, 2010 Penson Worldwide announced that its Australian subsidiary's five-month-old clearing business had secured Australian stock broker D.J. Carmichael as its fifth correspondent broker-dealer. Penson would provide clearing services for D.J. Carmichael's equities and exchange-traded options trading businesses for the next three years. Penson's new Australian clearing services were gaining favor with mid-tier brokers as an alternative to those previously provided by their larger competitors, according to Penson Financial Services Australia CEO Craig Mason.

In May of 2011, a member of Penson's board of directors board resigned after the company's disclosure of his relationship to a large, illiquid bond position, which was used as collateral for $42.6 million in margin loans to a correspondent. The Company’s stock price fell to an all-time low. Penson reported that the bonds were issued by a State of Texas municipal agency to finance construction of Retama Park, a thoroughbred horse-racing track whose operator had ties with director Thomas R. Johnson. The company said in a filing that the bonds could be subject to "material" write-down.

Penson closed on a sale of its Australian unit for $33 million to BNY Mellon on Nov. 30, 2011.

In May of 2012, Penson Financial sold its futures division and related assets and liabilities to Knight Capital Group, Inc. for $5 million. In addition, Penson is entitled to receive earn-out payments over the next three years based on the performance of the futures division.

In June of 2012, Penson Financial transferred its customer accounts and correspondent clearing contracts to Apex Clearing Solutions LLC. Penson Financial also transferred to Apex Clearing certain liabilities and net assets valued at $90 million. In exchange, Penson Financial received a 94% economic interest in Apex.