ITG now has its trades in Canada cleared by Fidelity Investments’ clearing arm. ITG, which self-clears in the United States, says it plans to remain self-clearing in the U.S.
In Canada, ITG had been using a Canadian bank for its trade settlements. But it decided to move to Fidelity Clearing Canada because it offered a better service, according to ITG.
“We took Fidelity because its technology platform fits our business very well,” said Greg Davies, the chief financial officer of ITG Canada. Fidelity uses Broadridge’s Dataphile system, a real-time data system. “Many other systems are batch-oriented or somewhat overnight-process-oriented. But this is a system that was recently developed, not a legacy system,” Davies said.
In the United States, ITG went self-clearing about five years ago. It had used Jefferies & Co.’s clearing services, which Jefferies recently sold to Pershing. (ITG was originally a division of Jefferies, which spun out ITG in April of 1999.).
“[Self-clearing] has worked out very well for us, although there are places in the world where it makes sense for us not to self-clear,” said James Farley, an ITG spokesman.
In 2009, ITG Canada had revenues of $70.8 million, representing 11.2 percent of ITG’s $633 million in revenues. Through three quarters of 2010, ITG Canada has generated $57.3 million, representing 13.2 percent of its parent’s $432.4 million in revenues.
ITG officials also said the decision about self-clearing versus having someone else clear is based on economies of scale, compatibility of systems and the unique needs of clients in each country.
In Canada, for example, Davies said Fidelity’s clearing model is the best choice. He also says the ability to change systems easily was a factor in going with Fidelity Clearing Canada. He notes that ITG isn’t a full-service broker-dealer. Davies emphasized that Fidelity Clearing Canada’s system would be better for its record-keeping.
It lets ITG Canada keep all of its business in one place, Davies said. Record-keeping is an important issue for ITG, which has clients in the U.S., Asia and Europe. Most clients are institutional money managers.
Match rates on trades in Canada are now about 95 percent, Davies added. He noted that the minimum rate should be 90 percent. “And we want to be comfortably above that number,” he added.
That’s because, he said, the average client’s biggest need is “executions without any surprises. And the client also wants a trade settled the next day.”
In Hong Kong and Australia, ITG self-clears, Farley says. However, he added, “in Europe we have a consolidated arrangement with BNP Paribas, but we have our settlement books and records in house.”
