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March 1, 2011

New Minority Brokerage Has Native-American Flavor

By John D'Antona Jr.

The commission pool may be flat to slightly up in 2011, prognosticators say, but that hasn't stopped a group of American Indians from forming an institutional brokerage and becoming the New York Stock Exchange's first-ever tribal member.

Dennis Smith and Don Lyons

NativeOne Institutional Trading, a Native American-owned broker-dealer, has opened its trading blotters and is now trading on behalf of institutional clients. The minority-owned firm offers the buyside high- and low-touch trading, direct market access and third-party research.

The game plan, as one might expect, is to court pension funds that have mandates to trade with minority brokerage firms, as well as American Indian tribes that have a need to trade. NativeOne currently has three institutional clients, including CalPERS, the $218 billion California public employee retirement fund. It continues to look for other institutional clients, as well as trading on behalf of Native Americans, such as the Navajo Nation and its $1.3 billion in assets, said NativeOne co-founder Dennis Smith.

NativeOne donates a portion of its commissions back to the Native American community. Money goes toward scholarships, internships, job training and other charitable causes.

"We want to help Native Americans by educating them, providing job training, giving them access to things they've never had before," Smith said. "We want to help them own a piece of this rock."

The firm's New York-based trading desk is run by a trio of seasoned traders. Patrick Forbes works from the NYSE floor. Head trader Leo Decker and former NYSE specialist Jim Maguire Jr. jointly coordinate upstairs trading operations and manage order flow.

Decker said the firm's order flow is about 60 percent high-touch and 40 percent low-touch. NativeOne is using algorithms from several bulge bracket firms and plugs into several dark pools, such as Credit Suisse's Crossfinder and UBS's PIN.

Institutional clients can do business with either the trading desk directly or through Bloomberg Tradebook. By working through Tradebook, NativeOne hopes to expand its visibility and presence right on the buyside's desktops.

NativeOne made its official debut on Wall Street on Dec. 28, 2010. It is in the process of completing an acquisition for the majority ownership interest in an established NYSE member firm, formerly known as Christopher J. Forbes LLC.

Upon regulatory approval of the change of ownership control by the FINRA, which is expected in the next 30 to 45 days, NativeOne will officially become the first Native American-owned member of the NYSE.

NativeOne derives its minority status from Don Lyons, the firm's chief executive and co-founder, who is a member of the Morongo Band of Mission Indians in Banning, Calif. Lyons is the majority owner of the company. Additional ownership is held by a Navajo Nation member, a Mohegan member and several other investors.

Once the change in ownership has been approved by FINRA, the firm will be 51 percent Native American-owned, with the remaining 49 percent owned by private, non-Native American individual investors.

NativeOne joins Westrock Institutional Group, another independentl broker-dealer that is 100 percent owned by the Lower Brule Sioux Tribe, located in Lower Brule, S.D.

 

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