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Professional OTC Brokerage business needs to rethink its business model.

February 5, 2009

Analysis of:ICAP in Talks on a Potential Bid for LCH.Clearnet | www.bloomberg.com

Demand for the services provided by the professional brokerage community has dropped dramatically. To survive, these brokerages must provide new capabilities, such as clearing.

Consolidation among Dealers is a Negative for OTC Derivatives Brokerage

March 17, 2008

Analysis of:JP Morgan Pays $2 a Share for Bear Stearns | www.nytimes.com

Inter-dealer broker revenue is vulnerable to the quantity of dealers that are available. Lower valuation of book value of investment banks as a result of the Bear Stearns acquisition by JP Morgan may increase consolidation among primary dealers of OTC derivatives. This will result in lower revenue to the inter-dealer brokers, as well as lower volumes of exchange traded derivatives.

Recent lawsuits over inappropriate investments will result in lower risk tolerance for asset managers.

January 4, 2008

Analysis of:State Street Corp. Is Sued Over Pension Fund Losses | www.nytimes.com

1) Lawsuits over "breach of fiduciary duty" will open the door to the legal system making a determination as to the appropriate riskiness of assets. 2) Money managers will give pause when looking at investing in complex financial structures (ex. CDO's) for fear they could be sued. 3) Financial Institutions that rely on income from selling these types of investments will see less business.

Credit Derivative Swap trading is ready to move to an exchange for the benefit of all participants.

October 9, 2007

Analysis of:Interview with NYSE CEO John Thain | www.gartner.com

With global exchanges looking to expand their product offerings and dealers looking to increase prime brokerage revenue, an opportunity exists to create an exchange based Over-the-Counter derivatives market.

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