Correspondent clearing from an introducing broker/dealer perspective has stabilized into a largely fixed market, with little room for growth. Correspondent clearing firms focusing on creating tools to foster organic growth with existing client segments and tools for reaching new markets have seen positive growth. Conversely, firms that do not continue to evolve may lose business to competition. Because of this, servicing existing clients through correspondent clearing workstations has become paramount to success in this market. An understanding of customer segments and their technical needs can make a substantial difference in whether or not a customer becomes a target for a competitor. While the core functional differences between firms' offerings appear minor, each gap in functionality can mean a potential customer loss for those prospects that see that function as their particular pain point.
"Aite Group believes there is still work to be done to improve correspondent clearing workstations," says Adam HonorÃ©, senior analyst with Aite Group and author of this report. "This is true across the board, but particularly when it comes to integrating tools. A firm may offer portfolio balancing and trading, for instance, but the two do not yet work together."
For this study, which updates research conducted for Aite Group's November 2005 report, Staying Alert: Correspondent Clearing Workstations Wide Awake To Retail Needs, Aite Group invited 10 correspondent clearing firms to take part. Of those, four - Bear Stearns, National Financial, Pershing and Ridge Clearing - offered to participate in an extensive, 265-word survey and provide a product demonstration. The survey focused on nine categories, including account management, cash processing, compliance and risk management, document management, trading, portfolio and accounting, reporting and analysis, market data and work flow.
"While some people are discussing the real estate and prime brokerage opportunities attached to JPMorgan's acquisition of Bear Stearns, this research indicates that JPMorgan will also be inheriting a fully integrated correspondent clearing platform strong in institutional capabilities and reporting, which is the only correspondent clearing firm supporting futures and commodities," adds HonorÃ©.