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RBC acquires Carlin to increase hedge fund clientele

Date: Thursday, October 26, 2006
Author: Heidi Moore, Financial News Online US

RBC Capital Markets will acquire trading-system provider Carlin Financial Group in order to grow the investment bank’s reach with hedge funds.

Greg Mills, global head of equity sales and trading for RBC, said the primary motivation behind the acquisition was to court hedge funds, with the aim of selling them other services such as investment banking advice.

“It will give us an opportunity to cover a client segment that we don’t presently cover in a meaningful way,” Mills said.

Carlin provides trading software for professional traders and hedge fund managers. Mills defined “professional traders” as those managing between $5m (€4.0m) and $25m, and emerging hedge fund managers as those with $25m to $500m under their belts.

RBC has a large prime brokerage in Canada – where it is also the country’s biggest broker-dealer – but its US prime brokerage numbers only around 10 people, according to RBC’s Mills.

RBC’s goal is to combine Carlin with the bank’s electronic trading capability in Canada. If the bank’s plan is successful, Mills said RBC “will effectively create the leading north American electronic execution platform".

The founder of Carlin, Jerry Frommer, formerly had a 17-year career at RBC.

The terms of the deal were undisclosed. RBC represented itself in the acquisition and Carlin turned to boutique Freeman & Co.

RBC has historically depended on acquisitions to grow in the US. The firm first established a significant presence in the USA by acquiring investment-banking boutique Dain Rauscher Wessels – now renamed RBC Capital Markets – and also added retail investors through the acquisition of boutique Tucker Anthony Sutro.

RBC has 900 staff in New York and between 1500 and 1600 in the rest of the US.

Several of RBC’s larger rivals have been taking stakes in electronic trading platforms. Morgan Stanley, Lehman Brothers and Credit Suisse have all taken stakes in the Bats trading system, while last month, six Wall Street banks said they will launch an electronic trading service for big block trades. Citigroup, Goldman Sachs, Lehman Brothers, Merrill Lynch, Morgan Stanley and UBS are forming a new platform called Block Interest Discovery Service, or BIDS.