JPMorgan Chase & Co. is exiting its third-party broker-dealer clearing business, striking a deal with National Financial under which the Fidelity firm will become the preferred clearing provider for the third-party BDs that currently clear through JPM’s Broker Dealer Services (BDS) business.
Fidelity would not release financial details of the agreement, but Sanjiv Mirchandani, president of National Financial, said he would not characterize the agreement as a “classic acquisition or merger.” Instead, he said Fidelity would work with the third-party BDs to ensure a “smooth client transition” to National Financial’s platform, “without a new clearing agreement.”
Joe Triarsi, global head of BDS, will assist in that transition, following which he and several other members of the BDS management team, Mirchandani said, will become employees of National Financial.
Mirchandani said the deal will “add scale and great people” to National Financial while “allowing JPMorgan to achieve their objectives.” Moreover, the transfer of Triarsi and other BDS management will help the more than 100 BDs that currently clear through BDS “to have the maximum amount of confidence” in National Financial’s service platform, providing a “continuity of people and knowledge and service levels.”
JPMorgan said in a statement that it made the decision to transition clients of its BDS unit to another clearing firm after a “strategic review,” but that it will continue to self-clear for its own broker-dealers, including clients of its Asset Management, Chase and Private Banking units. JPMorgan said it “remains fully committed to its agency clearing and prime brokerage businesses.”
Pershing is the largest clearing firm for broker-dealers, while National Financial is the second largest.
See Research magazine’s September 2014 feature, Clearing Firms Join the Robot Race.