The Lights go out

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Earlier this week, Lighthouse Financial Group suspended trading and closed their doors.  According to FINalternatives, Lighthouse was unable to make payroll.  There are also rumors that Lighthouse may be sold to a boutique firm looking to become a bigger player.

Whatever the firm specific issues at Lighthouse, the closure casts a shadow over the agency broker business model.  Agency brokers had seen some benefit from the Lehman and Bear Stearns crisis, as clients looked to reduce trading risk by diversifying and extending their broker lists.

However, the crisis may just have bought agency brokers some breathing space.  It now seems that major bulge bracket firms are back on the offensive and with commissions under pressure, clients are having to concentrate commissions on firms providing research, deal flow and low cost execution.  In response, some agency brokers have begun to ramp up their platforms, often through tie-ups with alternative research firms.  Others have added desk research, or are offering corporate access.

Even Lighthouse had made some inroads – through its tie-up with the Investment Research Consortium (IRC) – a marketer for a number of independent research firms.   It is not clear what will happen to the IRC.

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