Fidelity Investments stands to reap the benefits as JPMorgan Chase & Co. unwinds its legacy Bear Stearns broker-dealer services clearing and custody unit.
JPMorgan said it had chosen Fidelity's National Financial Services unit as the “preferred clearing provider” for its broker-dealer customers and would be helping with the transition if firms chose to move to Fidelity. Fidelity will also pick up some of the JPMorgan executives associated with its broker-dealer services business, including Joe Triarsi, who heads up the unit.
Terms of the deal, including whether J.P. Morgan received any payment from Fidelity, were not disclosed.
If all firms elected to join, the transition could boost the number of clients at Fidelity's National Financial Services clearing unit by as much as 20%, according to Sanjiv Mirchandani, president of National Financial. He estimates that around 100 clients could be affected as part of the move. National Financial Services, which does not disclose assets, currently has around 500 bank and brokerage clients.
One of the larger firms on the JPMorgan platform is First Allied Securities Inc., which also clears through Pershing, according to regulatory records with the Financial Industry Regulatory Authority and
InvestmentNews' broker-dealer data center. An outside spokesman for First Allied, Matthew Griffes, was not able to comment by press time.
There is not an exact date for the switch to take place, but the Fidelity is looking to have clients moved over within 12 to 18 months, according to spokeswoman Jessica Macdonald.
Mr. Mirchandani said that National Financial's business had been growing “substantially” and that assets under administration were up 54% since 2011.
Consolidation among broker-dealer clearing firms had helped to grow their share of the market, he said.
“This business has consolidated a lot over time,” said Mr. Mirchandani. “Just as recently as eight years ago, there were a dozen firms in this business, and now there's just a handful.”
JPMorgan acquired the unit, formerly known as Bear Stearns Securities Corp., during its 2008 acquisition of Bear Stearns Cos.
The move to get rid of the unit came after JPMorgan conducted a “strategic review” of its businesses, according to a statement from Fidelity.
The firm said that the move would have no material impact on earnings.
JPMorgan will retain some clients from the broker-dealer service business and will continue to self-clear for its broker-dealers, including the firm's Asset Management, Chase and Private Banking clients. It would also continue to clear for current introduced prime and money fund portal broker-dealer clients, according to Fidelity's statement.
