Pipeline Trading has brought in a veteran of rival dark pool operator Liquidnet as the company’s former leadership departs following disclosures Pipeline misled users as to how it was supplying liquidity.
Jay Biancamano, the former global head of marketplace and corporate strategy at Liquidnet, has replaced Alfred Berkeley as executive chairman of Pipeline. Berkeley has left Pipeline along with firm founder Fred Federspiel, who officially resigned all his positions on Sunday.
Last month, Pipeline agreed to pay $1 million to settle charges brought by the Securities and Exchange Commission. The SEC claimed Pipeline’s dark pool had marketed itself as a crossing network that matched orders, when in fact its liquidity was mostly supplied by an affiliate of the firm that participated in about 80 percent of all trades.
As part of the SEC settlement, Berkeley and Federspiel each agreed to pay a $100,000 fine for their involvement, though the executives did not admit nor deny any wrongdoing in the matter. The news shocked many people, as both men were highly respected in the industry, and Berkeley was in fact a former president of Nasdaq.
In addition to having worked for Liquidnet for more than seven years, Biancamano spent six years at ITG, where he was a vice president and director. Earlier in his career, he was a compliance manager at Morgan Stanley.
Biancamano said in a statement he was excited to accept the opportunity to lead Pipeline forward. He stressed that the company has great products and many talented, dedicated people.
Pipeline’s block trading activities in the U.S. only amount to about 30 percent of the company’s total business, but the accusations of misconduct have cast a shadow over its other offerings as well, such as the analytic tool Alpha Pro which actually accounts for a larger portion of Pipeline’s revenues.
The company has been reaching out to customers with in-person meetings and attempting to better explain how its dark pool operates. Pipeline maintains customers benefit from its affiliate’s ability to supply liquidity to the dark pool, and the company emphasizes the affiliate penalizes its traders if they make profits at the expense of customers.
With the entire industry abuzz over the Pipeline scandal, however, Biancamano will have his work cut out for himself.
Reid Curley, chief operating officer of Pipeline, expressed confidence in Biancamano, saying the firm was fortunate to have a leader of his caliber coming aboard.
"He is widely admired in the industry for his deep understanding of market structure, his history of successful innovation, and his personal integrity," Curley said in a statement. "Under his leadership, we will offer our customers innovative products that provide excellent execution, and work hard to earn their renewed trust."
