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Tim Quast
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December 1, 2012

The Clearing Industry-What Went Wrong?

By Editorial Staff

Myriad clearing brokerages recently weren't able to remake themselves-they weren't able to expand product offerings and take on new legal responsibilities-so they failed. That's the analysis of a former clearing industry executive, who now acts as a consultant to the industry.

Robert Mumby, a former J.P. Morgan/Bear Stearns veteran with some 30 years in the business, says many clearing brokerages have lost business because they didn't offer enough products and services. The clearing business, says Mumby, who now runs Baltimore-based RM Associates, has dramatically changed from the 1980s.

"Many clearing brokerages have not able to remake themselves," Mumby said. "Today, they are expected to do much more than just clear and settle." And if they don't offer a bevy of new services, he added, correspondents will go-and have been going-to third-party providers.

What happens to clearing firms that can't go though this re-invention process? Mumby warns that they will lose business. Why? Correspondents, he says, who can't get the full range of needed services are going to go third parties, When this process goes far enough, in the case of some clearing brokers, it will mean they can no longer survive, Mumby says.

For more on Mumby's analysis of the clearing business and who the survivors will be, please go to page 46 for our Q&A.


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