The business and regulatory environment following the financial crisis has seriously eroded profitability in the clearing business, particularly in listed derivatives. This is resulting in a substantial retrenchment among the sell-side, especially the Futures Commissions Merchant (FCM) segment, with clearing brokers reducing services, focusing on specific markets, or exiting the business completely.
With sell-side firms generally retrenching and simultaneously focusing on a narrower range of potential clients, many buy-side firms are struggling to find clearing relationships that meet their business needs. Buy sides can no longer access all the markets and services they need through a single full-service broker.
This “Great Reshuffling” of relationships is forcing significant business changes on both the buy-side and the sell-side. Both need the flexibility to deal with a new normal. In response, Object Trading established the Conformed Broker Programme. It offers market participants the opportunity for better control over their business models by bringing complete flexibility to aid both the buy-side and the clearers.
Conformed Broker Programme
The programme gives brokers the opportunity to reach a community of buy-sides who are generating order flow globally on the Object Trading Direct Market Access Platform.
Brokers who join the programme own the clearing relationship with clients as they normally do, in order to execute and clear trades on clients’ behalf. But instead of having to deploy and maintain infrastructure to support new client order flow, brokers simply conform to the Direct Market Access Platform’s Pre-Trade Risk Controls. Once pre-trade risk limits are established and approved for individual customers, brokers are able to provide immediately-available access to the world’s trading venues with minimal startup costs.
This gives brokers the flexibility to reconfigure their prime brokerage and clearing businesses, and focus on growth and a broader choice of potential clients.
Buy-sides gain the flexibility to choose from a community of brokers already conformed to the Direct Market Access Platform. As the platform is fully broker-neutral, buy-sides can choose single- and multi-broker relationships. Further they can request Object Trading to add new brokers to the programme. Buy-sides choose their specialist clearing provider relationships depending on their account size and leverage requirements, as well as their geographical and asset class needs.
|Benefits to Clearing Brokers/FCMs||Benefits to Buy-Side|
|Access a new sales channel and a pool of order flow where you can offer your services with no added costs.||Choose from a selection of brokers and clearers, including bank and non-bank FCMs, based on your unique needs.|
|Onboard clients for Direct Market Access without having to support their technology or infrastructure.||Use as many brokers as you want without having to conform to their trading infrastructure.|
|Write once to our Risk API and provide risk managed DMA to any markets/clients you choose to support.||Write once to our normalised interface (API or FIX) and connect to any broker or trading venue on our system.|
|Allow buy-side clients to use any trading screen they want without having to absorb any support or infrastructure costs.||Choose trading screens and other systems based on your unique business needs rather than the systems brokers provide to all their clients.|
|Reduce or eliminate the cost of maintaining DMA infrastructure for your clients.||Stop paying broker technology mark-ups for direct market access.|
|Eliminate the headaches of keeping up with exchange upgrades.||Eliminate the headaches of keeping up with exchange upgrades.|
|Reduce the complexity of supporting multiple trading systems and paths to market.||Reduce the complexity of supporting trading screens and multiple broker infrastructures.|
|Use a single, globally compliant pre-trade risk control interface to manage all clients and destinations.||Establish and manage more granular risk constraints within the limits set by the broker.|
|Get a comprehensive view of a client’s risk, including positions and exposures across markets and trading systems, allowing you to do more efficient risk allocation.||Simplify the process of porting strategies to new markets because risk constraints are applied consistently regardless of broker or venue.|
Learn more about the Direct Market Access Platform
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Select your deployment model
Email us or contact one of our local offices to get more information, get a list of brokers, or learn how to join the Conformed Broker Programme.
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