Penson clearing out of U.S. clearing industry

Jun 3, 2012 @ 12:01 am

By Bruce Kelly

The shakeout in the clearing industry rolls on.

On Thursday, one of the largest and, until recently, fastest-growing firms, Penson Worldwide Inc., said that it will formally leave the clearing business in the United States, though the transaction is structured in such a way that Penson will retain a significant stake in a new venture that serves those firms.

Through its broker-dealer subsidiary, Penson Financial Services Inc., the company provides clearing services for 230 broker-dealers in the United States

In a transaction involving several different businesses, Penson Financial is selling and transferring its customer accounts and clearing contracts to Apex Clearing Solutions LLC. Penson Financial also will transfer to Apex Clearing certain liabilities and net assets valued at $90 million, which will contribute to an expected $130 million in regulatory capital at the end of the transaction.

FIXTURE IN THE BUSINESS

Penson Financial Services, however, will remain a fixture in the clearing business. It will receive a 94% equity interest in a new joint venture, Apex Clearing Holdings LLC, which will be managed by Apex Clearing Solutions.

The latter is a subsidiary of Peak6 Investments LP, a financial services firm that owns a variety of businesses, including an online trading platform, OptionsHouse LLC.

In addition, Broadridge Financial Institutions Inc. will transfer to Apex Clearing Holdings the ownership of its broker-dealer subsidiary, Ridge Clearing and Outsourcing Solutions Inc. Two years ago, Penson Worldwide partially acquired Broadridge.

The number of clearing firms has steadily declined over the past 15 years as margins in the business have dwindled, due to lower-cost technology and greatly reduced charges for trades. The record lows in interest rates also are crimping clearing firms, which generate profits by charging clients interest on margin lending, as well as holding cash.

THIRD-PARTY PROVIDER

“Following the transactions, [Penson Worldwide] will no longer be a U.S. securities correspondent-clearing broker-dealer; thus the transaction will result in a significant refocusing of the company's business,” Penson said in a filing with the Securities and Exchange Commission.

Its primary business in the United States after the transactions will be as a third-party provider of clearing-related services.

Penson Worldwide has struggled of late. At the end of last year, company management said that Penson was selling certain oversees assets.

Over the past year, Penson's stock price has dropped to a low of 16 cents a share, from a high of $4.59.

bkelly@investmentnews.com

0
Comments

What do you think?

View comments

Recommended for you

Featured video

INTV

What is causing the fever for RIA deals?

Deputy editor Bob Hordt and senior columnist Jeff Benjamin discuss factors adding fuel to the M&A fire in the independent advice space.

Latest news & opinion

Merger mania: Why consolidation in the RIA space is about to explode

The pace is expected to pick up as big firms seek to get even bigger and older advisers look to cash out.

Voya Financial Advisors exposes more sensitive adviser information on its website

List of top advisers at the firm comes after Social Security numbers were put at risk.

Securities America hit with lawsuit seeking $18 million in damages

Firm is dealing with the fallout from a rogue broker it fired a year ago.

Brian Block continues his legal fight to stay out of prison

A judge denied Mr. Block's motion for a new trial, but he wants another day in court.

10 social media stars you're not following yet, but should be

Some of the great people using social media to discuss wealth management and financial advice who might not be on your radar.

X

Hi! Glad you're here and we hope you like all the great work we do here at InvestmentNews. But what we do is expensive and is funded in part by our sponsors. So won't you show our sponsors a little love by whitelisting investmentnews.com? It'll help us continue to serve you.

Yes, show me how to whitelist investmentnews.com

Ad blocker detected. Please whitelist us or give premium a try.

X

Subscribe and Save 60%

Premium Access
Print + Digital

Learn more
Subscribe to Print