The Unloved Clearing Clients

A source familiar with JPMorgan's clearing business says that the firm is even backing away from clearing for RIAs, or registered investment advisors. At one time, clearing firms were chasing RIAs for the assets under management. But the business is heavy on servicing and the advisors tend to buy and hold -- making them only desirable if they can open new accounts frequently.

All the companies with clearing operations still lust for prime brokerage business, of course, usually hedge fund accounts. Hedge funds make good clients because they trade frequently, borrow stock and use margin accounts -- all big moneymakers. As evidence, JPMorgan recently created a new group specifically focused on expanding services to prime brokerage clients yet it won't devote the same time and attention to broker dealer clearing. Also, on Oct. 15, State Street (STT)announced an expansion of services to its hedge fund clients.

Joe Barra, president of Ridge Clearing, pointed out that the newly combined companies may make changes as they decide which businesses will be their core operations, while dialing down others. As for Ridge, Barra says: "We love adding clients with good track records and sound capital." Ridge has been growing its business every year as opposed to culling clients. "There are still firms that appreciate the value of a small- to medium-sized firm."

-- Written by Debra Borchardt in New York.

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