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September 2, 2013

Speeding Things Up

Clearing and settlement should be much faster, says InteliClear's Robert Victor. 'Why can't we have a T+0 standard?'

By Gregory Bresiger

Clearing and processing a trade typically takes too long. More trade processing should be real-time. Margining, profit and loss, and other vital information not only need to be collected on the day of the trade, but in one comprehensive step.

Such are some of the sentiments of Robert Victor, the managing member of clearing processor InteliClear. It is a relatively small trade processor with fewer than a dozen big clients. But it wants to take on the big boys of the business, such as Broadridge and SunGard.

Victor said correspondents need real trade processing that will tell them, before the trade is completed, how profitable it is or isn't. A 30-year veteran of the business who came into the securities industry with an accounting education, he joined what would become InteliClear LLC.

The firm's leadership believed the financial services industry was investing billions of dollars in trading-related software solutions while essentially taking no action to improve the post-trade processing systems that still relied on batch-processed legacy solutions. These legacy platforms often required multiple systems, daisy-chained together to provide the full offerings clients required.

The manpower needed to reconcile disparate systems, as well as the inflexibility and other overhead associated with such a topography, meant the trading community was saddled with high costs to clear, settle and custody business. To accommodate the demands of the "new" Wall St., where trade volumes were higher, profit margins slimmer and regulatory and risk obligations constantly changing, InteliClear was formed. Victor recently discussed these trade processing issues in an interview with CQ&D.


CQ&D: How many clients do you have?

Robert Victor: Nine.


CQ&D: And how do they break out?

Robert Victor: We started out with high-volume trading firms, added some correspondent clearing firms and several financial firms that are using certain modules of our system.


CQ&D: Please describe the typical InteliClear client.

Robert Victor: Well, we have two types of clients. They are customers that are self-clearing or clearing for others, and customers who are using components of our system.


CQ&D: How will the latter use your system?

Robert Victor: Maybe they'll use the margin system or they are using our system for their books and records; they may be omnibus with their clearing firm and using us for their sub-accounting. So we have a split between the two. Four of the firms clear for other firms and use our system as a competitive advantage because we're charging a fixed cost, not on a per-trade basis. Costs are lot easier to manage and control.


CQ&D: Let's go back to the self-clearing clients. What do these clients use your system for?

Robert Victor: It could be everything from purchase and sales to cash settlements, corporate actions-a whole of gamut of services.


CQ&D: But self-clearing isn't a growing part of your business.

Robert Victor: Well, the road a broker-dealer must travel to go self-clearing has become more difficult, so we're not finding a lot of new firms out there looking for new systems.


CQ&D: Why is that?