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New Report from Aite Group Examines the Correspondent Clearing Workstations of Four Firms

A new report from Aite Group, LLC provides an in-depth look at the correspondent clearing workstations of four major correspondent clearing firms. The report follows Aite Group's March 2008 Impact Report, Closing the Gaps: Correspondent Clearing Customer Segments and Functional Comparisons, and delves into each firm's core functionality, service, technology, and relative usability.

Since the dotcom bubble burst, the brokerage business has faced challenges, including consolidation. This is true of the retail space, too. In addition to consolidation and a drop in commission charges at the discount brokerages, retail brokerages faced an additional burden of costly compliance efforts generated by Financial Industry Regulatory Authority (FINRA) and Anti-Money Laundering initiatives generated by the Patriot Act. The culmination of these activities has caused a steady decline in the pool of available firms for correspondent clearing. However, organic growth has occurred in the number of registered representatives and there has been steady growth in the number of Registered Investment Advisors (RIAs) being licensed to service fee-based business. Leading correspondent clearing firms have found niche capabilities to add value to existing clients and capture new market share where non-traditional competitors once played.

"Given the current volatile markets, correspondent clearing may soon be faced with another wave of changing business models," says Adam Honoré, senior analyst with Aite Group and author of this report. "More sophisticated risk management tools, customized customer interaction capabilities, and multi-channel information delivery have started becoming part of technology discussions. Further, increasingly global markets have opened doors to both potential new opportunities and potential new competitors. Firms will need to continue to target their segments and be ready to add value."

Based on a survey of four correspondent clearing firms - Bear Stearns, National Financial, Pershing and Ridge Clearing - the report performs a deep analysis on unique capabilities offered by each participant and rates each firm according to a five-point ratings system based on four key categories, which allows readers to gauge both comprehensive coverage and identify key strengths and weaknesses.