SmartPool, the dark multilateral trading facility (MTF) operated by NYSE Euronext, has teamed up with Penson Financial Services, the London-based clearing unit of Penson Worldwide, to offer mid-tier brokers a cost effective method of trading in the dark.
By connecting to Penson, brokers will be offered a single solution for execution, clearing and settlement on SmartPool. Penson, which will be a designated general clearing member on SmartPool, will also offer brokers the option to outsource delivery of the settlement process.
According to Lee Hodgkinson, CEO, SmartPool and head of European sales and relationship management at NYSE Euronext, the solution will particularly appeal to clients of mid-tier brokers that are keen to explore alternative sources of liquidity.
“There is an increasing demand from the clients of mid-tier and boutique brokerage houses for the provision of alternative execution services,” Hodgkinson told theTRADEnews.com. “Penson's membership of SmartPool means we can offer those firms an additional access through an alternative entry point which will enable them to meet their clients' needs. We see it as the next stage of evolution in European markets.”
Mid-tier brokers that do not trade enough to warrant their own connection to MTFs like SmartPool would typically partner with a prime broker that would offer them the trading services normally used by hedge funds.
“Using a prime broker, mid-tier brokers will pay a premium price for some services that they historically have not always needed, such as leveraged trading,” said Clive Triance, CEO of Penson Financial Services. “We have created a service that is specifically targeted to brokers looking to reduce the costs associated with trading on an MTF.”
Connecting to SmartPool is also possible for mid-tier firms through NYSE Euronext's Universal Trading Platform, a single point of access for all of the exchange group's markets. However, the costs of connecting to EuroCCP, the central counterparty used by SmartPool, can make the costs prohibitive for smaller brokers.