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Joanna Fields
Traders Magazine Online News

Navigating Cybersecurity on a Stretch of "Regulatory Rapids"

In this shared commentary, Aplomb Strategies writes that when considering a firm’s governance structure, a holistic approach makes the most sense.

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June 30, 1998

OptiMark Could Heat Up Competition in Clearing

By John A. Byrne

Savvy institutional clearing firms have a new sales pitch: anonymity brokerage services.

The latest clearing broker to join the marketing bandwagon is New York-based Citicorp subsidiary Citicorp Securities Services (CSS), which has provided institutional agency-only brokerage and clearing services since 1984.

Citicorp's foray into clearing has been somewhat overshadowed by larger clearing outfits that capitalize on an image of size and service.

Now the planned implementation of the OptiMark Trading System initially for listed business may burnish CSS's image and help it snare more business, clearing experts suggest.

Driving this view is concern among some investment managers about OptiMark's basic design as a supercomputer that aggregates, executes and does not disclose the customer behind an institutional order.

At issue is fear that an investment manager runs the risk of leakage, or revealing valuable information behind a block trade if the manager clears through a firm that has proprietary equity positions. By the same token, agency-only clearing brokers do not take positions, providing investment managers more protection, experts say.

"Agency-only clearing brokers believe they can attract business from OptiMark users nervous about information being revealed," said one person familiar with the institutional clearing business.

Citicorp has signed an agreement with OptiMark and The AutEx Group, a division of Thomson Financial Services. The agreement will allow institutions to route orders to OptiMark via AutEx's TradeRoute, and to designate CSS as its clearing broker. (Thomson Financial Services is the parent of Securities Data Publishing, publisher of Traders Magazine.)

Earlier this year, New York-based Bank of New York's BNY ESI & Co., an agency-only broker and clearing unit for institutional clients, signed a similar agreement with OptiMark.