Has Self Clearing Become A Profit Margin Headache?
Traders Magazine, July 2004
Brokerage firms that choose to clear their own trades have long viewed themselves as the industry's mavericks, taking on the often cumbersome back-office responsibilities of collecting and maintaining transaction-related data in order to provide their customers with quick, hands on service. That independent streak, however, has eaten deeply into their pockets in recent years, making the back-office more of a profit margin headache than benefit. The back-office dilemma is making fully disclosed relationships with a clearing firm more attractive, a prospect that has been further sweetened by clearers' efforts to make their correspondents feel more like they're still self-clearing. The last four years have been painful for the brokerage industry as whole. Beyond the seemingly never-ending goal to achieve straight through processing by automating their business systems, brokerage firms have had to bolster their business continuity plans following the Sept. 11 attack, and they've faced a slew of new regulations. Many of the new regulations followed the collapse of Enron and other corporate scandals, but new regs, such as proposals for new mutual fund point-of-sale disclosures and short sale rules keep coming down the pike.
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