Penson Completes Consolidation

Terry Flanagan

The firm announced that it has successfully combined two of its units in a move to reduce costs.

Some three and a half weeks after announcing that it would be merging its futures and securities subsidiaries, Penson Worldwide has received all the requisite regulatory approvals and has completed the transition.

“The combined Penson Financial Services, which now houses the operations of Penson Financial Services, based in Dallas, and Penson Futures, based in Chicago, facilitates more efficient use of capital and increased operating efficiencies,” the company said in a release. “No other changes in management, marketing, resources or offices are contemplated.”

A Penson spokesperson declined to comment on the matter any further than what was stated in the release.

“The move, which follows a path taken by other firms that own both a broker-dealer and futures commission merchant, completes the first of the series of strategic initiatives Penson announced in an August 4 news release to reduce costs and debt, increase profitability and capital, and better position the company for growth, in order to enhance shareholder value,” it said in the release.

Penson on Aug. 4 had announced a series of initiatives aimed at reducing costs and debt amid lower trading volumes and declining revenue. Among those initiatives was the consolidation of its Chicago futures commission merchant, Penson Futures, and its Dallas broker-dealer unit, Penson Financial Services, which it estimated would free up to $30 million in regulatory capital and reduce costs by as much as $2 million annually.

In addition, Penson is also actively seeking a sale of its U.K. subsidiary, which was $6 million in the red for the year. It will also look to broaden the scope of its data center outsourcing agreement with Broadridge Financial Solutions, explore strategic options for its Australian subsidiary, pay down debt, and conduct a further streamlining of its operations. All told, it expects to free up as much as $24 million in annual cost savings and more than $100 million in regulatory capital savings.

The initiatives were announced alongside its second quarter results, which had the firm losing $3.5 million on revenue of $78.5 million, down 5 percent from the previous year. Revenue from clearing and commission fees was down 9 percent, from $44 million to $40 million.

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