Clearing Broker

Self-clearing

This model eliminates the need for a clearing member,  giving the brokers greater control over the products and services provided to their clients. 

The bulk of self-clearing is outsourced to technology providers such as ADP or Thomson Financial and National Financial Services (Fidelity). The advantages are:

• The self clearing makes greater sense now, in the aftermath of the market meltdown of 2008, when fears of counterparty risk were heightened. This of course applies to OTC markets, notably financial and energy derivatives.
• post-trade functions can be kept within its shop.

• full control over their policies, branding, client experience and revenue-generating activities.

Only about 5% of over 5,000 (equity) brokerage firms are self-clearing, that is, only 5% are capable of clearing trades for themselves. Other brokers, known as correspondent firms, forward their orders to a clearing firm, a firm that is authorized by a clearinghouse to manage trade comparisons and other back office operations. Knight investment brokerage firm , recently becoming self-clearing, estimates its savings at about $20 million annually.