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May 5, 2009

Pragma and Weeden Expand Ties

By Nina Mehta

Algorithmic provider Pragma Financial Systems is ramping up its ambitions and execution services with the help of longtime partner Weeden & Co., which substantially increased its stake in the firm earlier this year. Doug Rivelli, the new CEO of Pragma Securities, the firm's broker-dealer, will help oversee the expansion of the firm's trading and algorithmic products to both the buyside and sellside.

Rivelli, who ran Weeden's electronic trading desk, and six colleagues joined Pragma in January. Weeden endorsed the move. David Mechner, who co-founded Pragma in 2003, remains president and CEO of Pragma Financial Systems and will run the algorithmic development business.

"I believe Pragma is one of the leading providers of algo products to the Street, and the opportunity to do it right is extraordinarily enticing," Rivelli said. As part of the transition, Weeden, which has had a partnership relationship with Pragma for four years and distributed Pragma's algorithmic platform to buyside firms, became a significant investor in the company. Rivelli and Mechner declined to say how much of Pragma is now owned by Weeden.

Barry Small, CEO of Weeden & Co., will serve as chairman of Pragma's board. "I'm very excited to help blend the talents of Pragma and Weeden to serve institutional clients in the electronic trading space," he said.

Pragma's focus will remain on electronic and algorithmic trading products. About half of its almost 50 employees are in algo development, Mechner said, making Pragma one of the largest algo development groups on Wall Street.

Pragma Securities is currently a non-executing broker-dealer, but that will change this quarter when it begins to function as an executing broker. The company is also gearing up to offer a broader range of execution services.

Doug Rivelli

  

Next month, it will release an upgraded suite of algos to its customers. Pragma Securities will roll out a dark pool in the third quarter. Later this year, the firm will also add a suite of international trading products, according to Mechner.

The firm's OnePipe product, which aggregates dark pools, will continue to be distributed exclusively by Weeden, although Pragma's other products will be available through Pragma to both buyside and sellside clients. These include TradeEngine, the algorithmic software distributed to buyside firms that integrates with the client's front end, as well as PEAK, the algorithmic product for broker-dealers.

Pragma's business has grown rapidly in recent years, and its revenues doubled over the last year, Mechner said. About 70 percent of Pragma's business comes from buyside firms.

David Mechner

  

"Weeden is our main execution partner for buyside clients," Mechner said. "However, we'll now have the option to offer our products to additional buyside clients directly." Rivelli added that some clients may prefer to trade with an electronic-only broker-dealer, "so we'll supply that option."

The company also plans to pursue broker-dealers aggressively. With capital commitment down, the disappearance of IPOs and the value of research being questioned, the door is open for medium-size and smaller broker-dealers to gain some of the business that automatically went to bulge-bracket firms, Rivelli said. Pragma hopes to help those firms build up algorithmic trading businesses without a lot of upfront investment.

 

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