Acquisition Complete, RBC Carlin Unveils Options Pro

Date: Wednesday, January 3, 2007
Author: Jacob Bunge, Financial Correspondent, Hedgeworld.com

NEW YORK (HedgeWorld.com)—RBC Carlin can already check two items off its list of resolutions for 2007, as RBC Capital Markets confirmed that its acquisition of Carlin Financial Group is complete, and the new RBC Carlin division launched the Options Pro trading module for the RBC Accel direct market access trading platform.

As RBC Carlin seeks to become a dominant player in the direct market access segment, the move toward a multi-asset class platform is a necessity, according to RBC Carlin President Jeremy Frommer. Options Pro represents the first in a series of expansion modules for RBC Accel, the portfolio trading system formerly known as Carlin Accel that trades approximately 30 million shares daily. A futures trading module for the RBC Accel system is slated for completion around mid-year.

The purchase of Carlin by RBC, announced in October 2005 Previous HedgeWorld Story, didn't slow Option Pro's arrival, according to Mr. Frommer. Due to the merger process, he normally would have adjusted for a potential delay in the release of the options module, long scheduled to launch in the first quarter of 2007, but Mr. Frommer said the fact that the firm was able to release it in the first week of the year is a testament to the effort of the development group.

In fact, the acquisition served to hasten a number of other initiatives at Carlin, Mr. Frommer said. The timelines for introducing algorithmic trading, trade cost analysis algorithms, and enhancement of existing basket-trading systems are ahead of schedule, and are on pace for release later this quarter.

"RBC has tremendous algorithmic trading capabilities, yet they do not have those trading capabilities embedded in a front-end DMA platform such as [RBC Accel]," said Mr. Frommer. "With this acquisition, they now have the ability to give [direct access to their trading algorithms] to clients who have the platform on their desktop real estate." He added that the firm plans to create customized algorithmic order tickets for RBC Accel very soon, and expects many of them to come out in the next two months.

Carlin's purchase by RBC also meant a significant change in the broker-dealer's plans for international expansion. Last May Carlin announced it had taken a stake in the London-based investment firm Merchant Securities Holdings Ltd. in a bid to lay groundwork for growth in Europe Previous HedgeWorld Story. That plan is now off, according to Mr. Frommer.

"The Merchant investment remains a separate outstanding investment for the principles of the firm, but it is not a part of the RBC strategy for us going forward," he said. "RBC has their own initiative, and that is the initiative that we'll be pursuing."

While the European course has yet to be charted, RBC Carlin does have plans to move into the Canadian market, which Mr. Frommer said is one of the firm's biggest priorities. "Within months our DMA platform will have full access to the Canadian marketplace, and I believe that will ensure its place as one of the top North American DMA providers," he said.

Since the acquisition was announced, Mr. Frommer's own role has evolved. Formerly chief executive of the Carlin Group, he was named president of the new unit, reporting to Greg Mills, head of global equity sales and trading for RBC Capital Markets. Mr. Frommer took over at Carlin in August 2006 as part of a planned succession from Ronald Shear, Carlin's founder Previous HedgeWorld Story. Following the acquisition, Mr. Shear will continue to serve as senior executive consultant to the RBC Carlin division.

Elsewhere in RBC Carlin, Mr. Frommer reported a significant push to aggregate resources between trading desks. As far as client relations, "we've found over the last three months that client reception in general has been very positive, which has lent itself to the mutual building of relationships, creating for us more of a team-type coverage environment from the sell side to the buy side," he said.

With the acquisition complete, RBC Capital Markets now averages a monthly trading volume of 3.5 billion shares, placing it within the top 10 U.S. firms, and as of Oct. 31, RBC is the sixth-largest bank in North America in terms of assets, according to a release. RBC Carlin's mission now, Mr. Frommer said, is to provide the best possible technology to capture the market share implied by those numbers, which means providing a solution as accessible as it is powerful.

"You can create what one would perceive as the greatest DMA platform in the world, but you can make something almost too complex that becomes a hindrance to capturing the marketplace," Mr. Frommer said. "The market isn't just one client, it's a series of segments including hedge funds, large old-world institutions, ‘instividual' traders… with so many different categories, you need to build a platform that's accessible for all of them. That's what the merger has allowed us to do, and that's how you capture volume."

JBunge@HedgeWorld.com