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February 22, 2010

Fidelity Ratchets Up the Clearing Competition

By Editorial Staff

Fidelity Investments recently made it official: Its clearing operation is now going international.

Fidelity Clearing Canada affiliate recently signed its first client, the firm said at a news conference.

"We see a growing demand from our U.S.-based broker-dealer customers who have moved into the Canadian marketplace," Richard Hart, senior vice president of Fidelity's clearing arm, National Financial, told CQ&D, which previously reported the move (CQ&D, Summer 2009).

Hart added that the affiliate should be able to capture a large piece of the some 200 independent broker-dealers in Canada.

It expects to have eight to 12 "high-volume, institutional customers" in the next year, added Richard Ness, acting CEO of Fidelity Clearing Canada.

Fidelity officials estimated that its new Canadian operation would give it somewhere between 4 and 8 percent market share within a year.

The Canadian-based operation's first two correspondents for clearing are brokerage Integral Wealth Securities and execution specialist JitneyTrade.

Some believe that Canada is a preliminary to Fidelity adding clearing operations in Europe, but Hart said, "It is too soon to talk about Europe." Fidelity previously tried offering clearing services in Europe and failed there a decade ago, said Matt Bienfang, a clearing industry analyst with TowerGroup.

"Now, it's the right thing to do because there are few opportunities to grow in the domestic market," Bienfang said. He added that Fidelity failed in Europe in the 1990s owing to management issues and the market not being mature.

Bienfang also said it was logical for Fidelity to plan to move to Europe eventually by starting a Canadian operation.

"Going to Canada helps them gain some international expertise without assuming too much risk," he said.

To reach its market-share goals, the new Fidelity business will have to butt heads with some clearing heavyweights. These include Penson Financial, TD Bank and the National Bank of Canada.

Fidelity officials said they will stress that their firm isn't a bank and promote the risk-management capabilities of their clearing services. "We think there is a lot of room up here for non-bank clearing firms," Hart said.

"We are solely focused on clearing, and in this space, we'll bring a very large reputation," Ness added.

 

 

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