Once again there is buzz about a consortium of bulge-bracket brokers bringing out a consolidated platform for client commission agreements (CCAs). This week Integrity Research's blog reported that a broker consortium is only weeks away from announcing a consolidated commission platform.The blog cites a newsletter article circulated by Cogent Consulting LLC, a provider of commission management software to the buy and sell-side, which has a portal for administering CCAs among multiple brokers. Cogent's newsletter indicated that the firm is under consideration as the platform provider for the consortium, though other firms are in discussions as well. According to Integrity's blog, The Markets.com, another brokerage consortium that has a research distribution platform and broker vote software, is also a potential contender.
We also learn that Goldman Sachs originally launched the concept in Europe in 2008 and UBS quickly followed with an offering, but these efforts lacked the participation of the other bulge bracket firms. "The movement toward a consortium began in earnest last fall, reportedly driven by Merrill/BofA and Barclays," according to Integrity Research's blog. The real push for a CCA consortium began to build in October following the collapse and bankruptcy filing of Lehman Brothers, which raised concerns about counterparty risk and the need for administrative consolidation of the research dollars into some neutral entity. But according to the blog, other means of addressing counterparty risk, such as custodial arrangement are being pursued.
In February, Advanced Trading reported that a consortium of bulge bracket brokers was working on a standardized front-end for administering CCAs to safeguard the buy-side's balances against counterparty risk. The brokers were learning toward working with an outside vendor well known in the CCA administration area, according to AT's story. However, the story quoted a buy-side relationship manager, who cautioned that a one-size fits all approach, may not fly since some of the larger asset managers are seeking their own solutions.
In the meantime, Integrity Research points out that "the consortium will need to focus carefully on the management of this sensitive client data.If key client data (balances, payments, counterparties, etc.) is to be held centrally, this may create concerns among clients." Cogent is reportedly pushing a Web-based portal that would not require any software installation on the client side. However, if buy-side institutions are currently using multiple broker CCA platforms, that could be a way to diversify the risk of relying on a single platform to manage the data, suggested the blog. It remains to be seen which solution the consortium selects.
Interestingly, Cogent is offering an assurance plan to new broker dealer clients that sign up for its own platform. If Cogent is not selected by the broker consortium to run the CCA technology platform, then it will candel their license without obligation or penalty and trasnfer their data to the software chosen by the consortium.A consortium of brokers is working on consolidating commission platform that will manage sensitive data. Ivy is Editor-at-Large for Advanced Trading and Wall Street & Technology. Ivy is responsible for writing in-depth feature articles, daily blogs and news articles with a focus on automated trading in the capital markets. As an industry expert, Ivy has reported on a myriad ... View Full Bio