Commentary

Tim Quast
Traders Magazine Online News

We're All HFTs Now

In this guest commentary, author Tim Quast looks back at the history of HFT and how the market has evolved to where many firms now fit the definition of high-frequency trader.

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June 1, 2012

CQ&D Cover Story: Changing Places

Your customer is now less patient. Will you lose him?

By Gregory Bresiger

Also in this article

It's a whole new ball game for the client. 

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Many correspondents, who once dreaded changing clearing brokers, are no longer tied to your platform and products. They can, and often will, go elsewhere.

"I do believe it is getting easier for firms to change," said Doug Dannemiller, a longtime clearing industry analyst with his own research firm, LaRoche Research Partners, in Duxbury, Mass.

A former analyst with Aite Group, Dannemiller says five years ago, about 120 clients changed clearing brokers. In 2010, it was about 135.

"It's up slightly. But it will be up more as the industry improves, because operationally, it is becoming easier to move," he said. He said when trade volume increases, it will lead more brokerages to become more finicky about the quality of their clearing brokers.

Other brokerage officials and clearing industry observers generally agree that the clearing relationship is less sticky.

Why?

Matt Beinfang, BlueMetal

The prevalence of the Web, the wave of broker-dealer mergers and the relentless march of technology make the transfer of data easier. So correspondents are less fearful of change.

"Changing clearing brokers is still something you want to avoid, but yes, it is now much easier for a client to go elsewhere," said Matt Bienfang, head of U.S. client sales for industry consultant BlueMetal Architects. Bienfang is a longtime clearing industry observer.

So sticky business-the kind of business you can count on through the ups and downs, owing to the inconvenience and the costs of switching-is disappearing.

"There's no doubt that it's now become much easier to switch," said Alois Pirker, an industry analyst and research director for Aite Group.

Pirker says the ease with which different systems can be integrated "has improved a lot over the past couple of years." Applications transfers are less daunting, he adds. "So it becomes a far less difficult transition."

Pirker and others listed several examples.

Services on the Web can ensure that data flow won't be interrupted when a brokerage has a new clearing platform, Pirker says.

"The ability to use these services to integrate data flow and information across several platforms has really made a big difference," he said. Before, he noted, a transition could be difficult.

One reason behind not moving was the often difficult process of beginning a completely new data integration system.