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June 1, 2012

Pipeline Closes; Top Exec Steps Down

By John D'Antona Jr.

Troubled brokerage Pipeline Trading, which recently - rebranded itself as Aritas Group, is selling its key assets and has stopped accepting orders.

Jay Biancamano

As a result, Aritas Group's executive chairman, Jay Biancamano, will be joining software vendor Portware. This coincides with Portware's announcement May 9th that it has acquired key Aritas technology assets.

Biancamano will serve in Portware's business and product development group. He is expected to join the firm, along with 20 other Aritas staff, by the end of the second quarter.

Last year, Biancamano replaced Alfred Berkeley as executive chairman at Pipeline, after Berkeley and the other head of the firm, Pipeline founder Fred Federspiel, left in the wake of a trading scandal.

Berkeley was fined $100,000 for his involvement in last year's scandal, in which it was revealed that Pipeline had sent order flow to an affiliate without proper disclosure to clients. Federspiel was also fined $100,000. Under a settlement agreement with the Securities and Exchange Commission, neither man admitted nor denied wrongdoing.

Pipeline itself received a black eye last October when the SEC hit the electronic broker with a $1 million fine for the shenanigans. The company suffered a crisis of confidence. As part of its recovery plan, Pipeline named Biancamano, former global head of marketplace and corporate strategy at Liquidnet, as its new executive chairman in November 2011. This January, the company officially changed its name to Aritas.

Craig Jensen, principal and head of trading at New Canaan, Conn.-based Armstrong Shaw Associates, a traditional money manager with $3.4 billion in assets under management, said the demise of the firm was no shock.

"In an environment that's based on anonymity, trust is of utmost importance in maintaining a competitive position," he said. "Lacking disclosure and transparency can be the kiss of death, as we've seen here."

The hire of Biancamano comes as Portware has agreed to purchase certain key technology and analytical assets from Aritas. The purchase includes Alpha Pro, which makes short-term trading forecasts, and the Algorithm Switching Engine, which allows customers to use a wide variety of industry algorithms.

"We worked together at Liquidnet, and I look forward to working with Jay again," Portware CEO Alfred Eskandar told Traders Magazine when asked about Biancamano's move.

He declined to provide further details about the transaction, except to tell Traders Magazine his firm has not purchased any of the broker-dealer operations, desk, the dark pool Block Market or the broker-dealer license from Aritas Group.

"As always, we want Portware to stay broker-neutral," Eskandar said.

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