InteliClear Emerges as Trade Processing Alternative
September 22, 2008
Broker-dealer FolioFN, run by former Securities and Exchange Commission member Steven Wallman, has begun processing trades and performing other back-office functions using software from InteliClear, marking that company's emergence in an esoteric but critical segment of the securities industry.
Securities processing, the core back-office function of self-clearing broker-dealers, has been dominated over the last few decades by SunGard Data Systems, Thomson Reuters' Thomson Transaction Services--formerly Beta Systems--and Broadridge Financial Solutions, spun off last year by Automated Data Processing (ADP). A few smaller vendors such as Shadow Financial Systems and Comprehensive Software Systems (CSS) have also arrived on the scene.
FolioFN is the third customer of Goshen, Conn.-based InteliClear's books-and-records system. Two years ago, New York-based Genesis Securities began using the vendor's processing software for its day-trading and black-box customers and, more recently, the retail trades of its SogoTrade discount brokerage service. FolioFN, which provides unlimited trading and the ability to build and manage baskets of securities, or folios, for $29 a month, completed its migration to the platform early this month, according to Robert Victor, managing director of InteliClear. A black-box proprietary trading firm is also in the process of adopting the software, added Victor.
Both Victor and managing director Guy Powell have formidable clearing backgrounds. Powell ran clearing technology at the former Adler Coleman & Co., Datek Online and King Financial. Shortly after founding InteliClear in 2003, Powell licensed an early version of its clearing software to a proprietary trading firm.
Victor in 1995 co-founded Power Securities Systems, a high-volume clearing platform purchased by ADP in 2002. Three years later, he opened Stock Bridge Systems and developed Sparta, a general ledger accounting system for brokerages. Victor licensed that technology to Adirondack Trading Partners, a former broker-dealer that made markets on the International Securities Exchange. Victor joined Powell at InteliClear in late 2005.
A Flexible Platform
Unlike the "big three" trade processors' legacy systems, InteliClear's is built on the SQL programming language and can be supported by Microsoft SQL Server or Sybase ASE, with the user interface running on Microsoft's Internet Information Services, or IIS, Web servers. The design allows for quick systems modifications and program and report development, Victor said. The streamlined platform, he added, places relevant components of trade data--pricing, dividend information, the product master, accounts and Cusips--in a central location, reducing access costs and speeding up processing. "In the older systems, you have to write code to access sometimes numerous other locations and grab the relevant data to put in a single table," said Victor.
The InteliClear system operates in real time, he explained, calculating profit and loss as trades occur. Working with Genesis and Vienna, Va.-based FolioFN has prompted the company to develop real-time tools for margin and corporate actions. The system also incorporates portfolio and tax lot accounting, as well as sub-accounting, which is used to split a master account into the many accounts used by day-traders or the fractional shares that FolioFN customers use to build their folios. Victor said InteliClear has created a module for portfolio margin accounts, which use risk-based models to calculate margin requirements, for its latest client.
FolioFN originally cleared through Herzog Heine Geduld, which was acquired by Merrill Lynch & Co. in 2000, and later built its own back-office system, including books-and-records functionality, using technology from Morristown, N.J.-based Seaman Brokerage Systems. That technology also powers margin systems at JP Morgan Chase & Co., Deutsche Bank and Citigroup, said CEO Edward Seaman, adding that his company continues to license the software to FolioFN, as well as Jackson National Life Insurance's investment arm.
