Secondary "PiggyBack" Clearing
When we started Bedford and Main in 2012, we never envisioned that we would be boasting how much expertise we developed with “piggyback” clearing firms. Any way you cut it, it just doesn’t sound cool. But here we are a few years later, and due to high demand, it has become an area of expertise.
The community of secondary clearing, or “piggyback”, clearing firms has seen surprising growth over the past few years. Piggyback clearing has become a viable option for certain introducing brokers.
Traditionally, these were smaller broker-dealers in the early start-up stages, or on the cusp of becoming an introducing broker, looking for more capability and reduced costs in order to meet the needs of their distinct business models. But operational costs, FINRA compliance, and regulatory pressures have challenged even well-established smaller firms. Many now look to this option in order to maintain their independent broker-dealer registrations. They seek to maintain the systems and services offered by established clearing firms, but with fewer expenses. This can be accomplished with an introducing broker acting as an intermediary.
However, the majority of introducing brokers simply do not offer a business model that supports these tri-party agreements. For those that wish to service piggyback firms, their clearing firms ultimately must give their approval. Some of the correspondent clearing brokers have difficulty rationalizing the risk/reward equations with any piggyback clearing arrangements.
Fortunately, Bedford and Main has an in-depth knowledge of the firms that do offer piggyback clearing services and their respective correspondent clearing firms.
We can help match your business model with a high-quality firm that provides these services, or help you to pursue other options available to grow your firm.