ConvergEx Shines its Light on Expanding Dark Pools
February 8, 2010
For ConvergEx Group, long a supplier of investment and execution technology to institutional clients, the past several months have been quite eventful.
It's become a full-fledged operator of dark pools, for starters.
In little more than six weeks late in 2009, the firm made three acquisitions, concluding with the purchase of NYFIX's U.S. Transaction Services business, completed in December. With that move, ConvergEx became owner and operator of the Millennium Alternative Trading System, the first pool of unseen or "dark" liquidity in North America. Millennium, which aggregates more than 2 billion shares of available liquidity in more than 6,000 symbols every day, became ConvergEx's third in-house dark pool, after the VortEx, which pulls together indications of interest from about a dozen venues, and ConvergEx Cross, a dark pool devoted to trading of large blocks of stock. ConvergEx also picked up software from NYFIX which supports trading via direct market access and algorithmic strategies.
In November, the firm also purchased boutique prime broker NorthPoint Trading Partners and software developer Cogent Consulting, whose product help institutional money managers and broker-dealers manage commissions. At about the same time, ConvergEx was selected by Mahogany Partners LLC, a consortium of independent NYSE broker-dealers, to build a full line of advanced electronic block trading technologies.
"I think one of the things people sometimes don't realize about ConvergEx is that technology is at the core of everything we do. The way we distinguish ourselves is through our technology and our clients can either use our technology directly or we [will] use technology ourselves to service our clients," said ConvergEx chairman and CEO Joe Velli, who has led the firm since its founding in 2006. Prior to the formation of ConvergEx Group, Velli served as senior executive and vice president of The Bank of New York and chief executive officer of BNY Securities Group.
In an interview with Securities Industry News, Velli discussed his firm's recent acquisitions and how it expects to cross-sell trading firms on the different merits of its three dark pools.
How do your recent acquisitions fit into your overall corporate strategy?
ConvergEx's businesses have performed remarkably well throughout all the recent turmoil in the markets and we've found ourselves really well positioned to be able to seize on opportunities as they arise. Each of these acquisitions is a continuation of our strategy of building out our proprietary technologies and client base through internal growth and investment, as well as through acquisitions.
The NorthPoint acquisition puts us in a familiar, but also new, space, servicing small and medium-sized hedge funds. That space is pretty important to us because in our technology offering we have long-standing relationships with many of the world's largest hedge funds, and we think the small and medium-sized hedge funds that are NorthPoint's clients will also benefit by having access to ConvergEx's product offering. There are a lot of cross-selling synergies and we are well ahead of plan as far as NorthPoint is concerned. NorthPoint is an introducing prime, so we do not carry positions on our balance sheet, we don't make markets, we introduce clients to another clearing firm. NorthPoint has clearing relationships with Goldman Sachs, JP Morgan and Jefferies.
