Opportunities abound in a transformed landscape
As buy- and
sell-side firms seek to transform their respective businesses to survive in the
post-crisis market, some firms, including post-trade specialist Pershing, are
taking advantage to expand their offerings and grow their global presence.
has been a whole new dialogue on a global basis with major financial
institutions on how they could re-engineer their businesses to be more
efficient, productive and economical," says Frank La Salla, managing director,
global customers and chairman and acting CEO at Pershing Limited (UK).
La Salla sees
most of these conversations stemming from the credit crisis of 2008. “At first,
the industry was in denial and thought that that business would return to
normal in six to 18 months. It was not until the end of 2009 and into 2010 the
industry realised that this was not a cyclical phase. There were structural
changes happening in the industry and firms need to think how they are going to
transform their businesses in order to survive in the future.”
industry has known Pershing for its clearing, settlement and custody services
since its inception in 1939, the company has expanded its offering to include
technology, product delivery and ancillary services, such as equities, foreign exchange
and fixed income trade executions. Says La Salla, "We view ourselves as a
holistic provider of services that partners with clients to grow their
La Salla, of the hundreds of millions of dollars that Pershing invests in
technology annually, US$200 million goes to developing front-end capabilities,
such as its browser-based Nexus Complete platform that provides UK financial
advisors with portfolio management capabilities and access to client accounts.
US and UK, we are delivering a sophisticated technology platform providing a
compelling alternative to self-clearing for investment banks and institutional
brokers," says La Salla.
Scott Coey, head of institutional relationship management at Pershing, greater
regulatory overheads may in some cases demand a reappraisal of business models
for brokers both in Europe and in the US. "The increase in compliance
costs for high-frequency trading firms being regulated under MiFID II for the
first time could be so high as to prompt a period of consolidation,” he says.
In Europe, new
regulations under MiFID II will include annual disclosures of information on
trading strategies and algorithms used. New risk controls will also be imposed
and extra of surveillance costs introduced as regulators attempt to deter
market abuse. MiFID II increases the scope of instruments that would require
trade and transaction reporting; it also proposes reporting indications of
interest, executed or otherwise.
of existing and upcoming regulation is a seminal event for ourselves and the
industry," says La Salla. "Clients need to decide whether they want
to continue in-house or use products and services to which they did not have
On the institutional
side, Pershing's offerings go beyond just being the end-point of the sell-side's
trade lifecycle. Clients can store their books and records in the company's
Nexus platform, but they can also connect to the various markets using
Pershing's direct market access offering.
from the order management system onward can be handled with Pershing pipes,
technology, experience and support," says La Salla. "They can do away
with clearing of their own books and outsource their middle office.
beyond providing just technology to its clients, such as offering financing and
securities lending services so that clients can leverage their existing assets.
take advantage of the variety of instruments that can be traded on the Pershing
platform, such as money market funds, says La Salla. This allows advisors to
offer new products to clients who maybe sitting on their cash rather than
having those clients transfer their assets and losing access to those assets,
has been busy growing its offerings, it also has been busy moving into new
launching presences in a number of new markets over the past few years,
Pershing now services over 1,500 financial institutions globally, 800 of whom are
based in the US and the rest in 40 other nations.
provide clearing, custody and execution in 60 markets globally," says La
most recent acquisition was Penson's Australian clearing business, which
Pershing purchased in November 2011. The new business has become the firm's
third global processing center, behind the existing US-based Pershing LLC and
UK-based subsidiary Pershing Ltd. processing centers.
Prior to the
Australian deal, Pershing also launched a registered broker-dealer business in
Canada in 2011 and one in Singapore a year earlier.
La Salla is
optimistic for 2012 saying that Pershing does not plan to stop looking of other
opportunities in the near term. "Over the past several months, Pershing is
reinvigorating its international expansion strategy," he adds.