The fall of 109-year-old Van der Moolen is good news for a growing agency brokerage.
When the Netherlands-based Van der Moolen Holding N.V. filed for bankruptcy in September, the VDM U.S. institutional brokerage began to close down operations, as well. Shortly thereafter, the agency broker Direct Access Partners added an eight-man team from the VDM U.S. brokerage group.
As a result, DAP, a 68-person firm, now has about 34 sales traders. Previously focused primarily on hedge fund customers, DAP now expects to bulk up its client base with business from traditional long-only funds, said Ben Chinea, its chief executive.
The VDM group’s corporate access business should help boost DAP’s current offering. The addition does the same for DAP’s options business and its international equity trading effort, Chinea added.
"It’s expanded the breadth of our business," Chinea said. "We were already in much of the [corporate access] space, but this gives us a competitive edge with the diversity of clients and the diversity of the staff’s skills."
Started in 2002, DAP began as a floor brokerage presence on the New York and American Stock exchanges. It later expanded and had to reinvent itself like many firms that at one time strictly earned their keep under the open-outcry, floor-based system. Other firms that started on the floor have developed new business lines, such as electronic, international, research, derivatives or prime brokerage services. They include firms such as WJB Capital Group, JNK Securities, Cuttone & Co., Meridian Equity Partners and Rosenblatt Securities.
Prior to the addition, DAP offered a multi-asset trading platform for fixed income, options, equities and international, plus its floor presence. The firm also sold third-party independent research, Chinea said. In 2010, DAP expects to start offering its own research, though he declined to provide any specifics. DAP also offered multiple algorithms through alliances with several execution management system vendors.
The new team will trade programs, according to Michael Shea, a managing partner at Direct Access Partners. Shea was the chief executive at VDM’s institutional brokerage division.
"We did a lot of portfolio trading at VDM," Shea said. "It was done on a smaller scale here at DAP. We can add that; it was part of the business we brought over."
The VDM group brings a strategic alliance VDM’s sister institutional brokerage in Amsterdam. That group spun out of VDM Holding N.V. also in September and remains on its own, Shea said.
"We have a good relationship with them, and feel it lets us have people on the ground in Holland," Shea said. "We can market each other’s services. You get the relationship with New York and Europe."
"So, in the off-hours, when New York shuts down, clients can trade in that part of the world," he said. "It’s off-hours coverage; it’s our European desk. When our guys come in at 6:30, they take over. And we use the same technology, so it’s easier to pass orders between us."
The new team and services let DAP cross its existing client list. It has about 500 institutions, as a firm, Chinea said.
"We’re trying to re-introduce ourselves to our existing book and offer other services," he added. "That could be a big part of the growth engine in 2010."
All told, the former VDM group includes Shea, a head of operations, a head of marketing, a chief international trader, an equities and derivatives trader and three sales traders.
For its part, Van der Moolen was known in the U.S. mostly for its specialist business. But VDM also had separate prop trading and institutional brokerage businesses in New York.
