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

Most watched

INTV

Young advisers envision a radically different business in five years

Fintech and sustainable investing are two factors being watched closely by some of the 2019 class of InvestmentNews' 40 Under 40.

INTV

Schwab's Jeff Kleintop: Prep for volatility given China trade uncertainties

China could be considered a developed market in five to seven years , according to Jeff Kleintop, chief global investment strategist, Charles Schwab.

Latest news & opinion

Funding for Reg BI, other SEC advice reform efforts denied in Waters amendment

House likely to approve measure that effectively kills rule package, but it faces uphill battle in Senate

Wall Street lashes out at Sanders' plan to pay off student debt with a securities trading tax

Financial pros argue that a transaction levy will hurt mom-and-pop investors along with investment houses.

GPB paid B-Ds and reps steep commissions to sell troubled private placements

GPB paid commissions of 9.3%, or $167 million altogether, on the firm's private placements.

Give us a break, active managers say

Seven portfolio managers share their outlooks for the rest of the year, generally agreeing that it's been hard for active managers to stand out.

GPB Capital reports decline in value of two biggest funds

One has dropped by 25.4% and the other by 39%, according to the company.

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