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TOP OPS EXEC: John McCorvey, Gar Wood Securities

May 4, 2011

NAME: John McCorvey

TITLE: Senior vice president, prime brokerage services

COMPANY: Gar Wood Securities

KEY FOCUS: Identify and rectify ‘points of failure’ in hedge fund trading

"Mini” prime brokers not only execute their highly sophisticated clients’ trades but their platforms also act as the bridge to myriad service providers that supply anything from access to markets to clearing of transactions. This results in potential operational risks from front to back office.

Which is why Gar Wood Securities was started up in 2003. Founder Robert Jersey saw a need for high quality prime brokerage services among smaller and midsize hedge funds. He felt he could help supply it, having founded ABN Am- ro’s prime brokerage and serving as the associate director of operations at Mont- gomery Securities, which pioneered the prime brokerage model tailored to smaller funds. Over the past eight years, Gar Wood has built a nearly 500-strong client

base of hedge funds ranging from start- ups to multibillion dollar funds. Its sweet spot: funds with between $1 million and $500 million in assets, according to John McCorvey, senior vice president of Gar Wood’s prime brokerage business.

Gar Wood offers clients as many as 10 direct market access platforms to financial markets ranging from equities to exchange traded derivatives to over- the-counter swaps and currencies. It also provides a choice of clearing and custody through top-rated JPMorgan Chase as well as Penson Worldwide, whose trade aggregation services can lower exchange execution costs.

Client trade data from those service providers passes through Gar Wood’s technology infrastructure, which provides smart order routing and algorithmic trading—all in as close to real-time as possible. “From a management stand- point, we outline all the systems and workflow processes and identify potential points of failure by aggressively testing,” McCorvey says, adding, “In an electronic infrastructure, testing has to occur on an ongoing basis in real-time.”

The firm has emphasized automat- ing its processes to reduce risks associ- ated with keying in data. “Post-trade execution and the clearing, settlement and reconciliation of accounts across multiple custodians is also streamlined through our technology infrastructure,” McCorvey says.

McCorvey says that Gar Wood’s systems sport “dual redundancy” as well as onsite and offsite data back up. Given the access Gar Wood provides custom- ers to OTC and non-U.S. markets, “our team manages and monitors our systems 27-7-365,’’ McCorvey says, adding, “We also maintain a full disaster recovery plan and update the plan as new components, asset classes, and other features are added to the platform.”

Such airtight operations have helped Gar Wood win kudos typically reserved for much larger firms. Last year, trade- cost-analysis specialist Elkins McSherry, owned by State Street, ranked Gar Wood third in its annual survey for best execu- tion of orders under 10,000 shares, above big-time execution brokers including Goldman Sachs and Knight Trading. The survey placed it first in total points, in- cluding areas such as financing securities lending, margin lending and operations.