26 October 2006

RBC to Acquire Carlin Financial Group

The Globe and Mail, Boyd Erman, 26 October 2006

With brokerages increasingly focused on providing fast trading services to hedge funds, Royal Bank of Canada's securities arm is bulking up by buying a New York-based firm that specializes in helping small funds make big trades.

With the purchase of Carlin Financial Group, RBC Dominion Securities Inc. increases the number of shares it trades on U.S. markets by 40 per cent, or almost one billion a month. About half of that addition is on the New York Stock Exchange.

Traders at hedge funds, seeking lower costs and more control, are increasingly doing business via firms like Carlin that offer computer systems with direct access to order books at exchanges rather than placing orders through brokerages where human beings handle purchases and sales. Banks, and brokerages they own, risk being cut out of the loop unless they can buy or build systems giving the direct market access that hedge funds want.

With Carlin, RBC gains a business focused on small hedge funds of less than $1-billion (U.S.) in assets, as well as professional traders.

"What Carlin presented us with was the opportunity to cover a client segment that to a large extent we don't cover in any sort of depth, and that is the emerging hedge fund manager community -- the smaller hedge fund managers -- as well as the professional trader community," said Greg Mills, RBC head of global equity sales and trading.

RBC also plans to tie the U.S. trading platform to its Canadian market-access systems in a bid to attract business from U.S. managers who want to trade in Canadian securities, Mr. Mills said.