The shakeout in the clearing industry rolls on.
On Thursday, one of the largest and until recently fastest-growing firms, Penson Worldwide Inc., announced it would formally leave the clearing business in the United States, although 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 U.S.
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 certain liabilities to Apex Clearing and net assets valued at $90 million, which will contribute to an expected $130 million in regulatory capital at the end of the transaction.
Penson Financial Services, however, will remain as 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.
Apex Clearing Solutions 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 & Outsourcing Solutions Inc. Two years ago, Penson Worldwide partially acquired Broadridge.
The number of clearing firms has steadily declined over the past fifteen 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.
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“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 2011, company management said Penson was selling certain oversees assets. Over the past year, Penson's stock price has dropped from a high of $4.59 per share to a low of 16 cents per share. In trading Friday morning, Penson Worldwide shares were at 20 cents.
