The commission pool may be flat to slightly up in 2011, prognosticators say, but that hasn’t stopped a group of American Indians from forming an institutional brokerage and becoming the New York Stock Exchange’s first ever tribal member.
NativeOne Institutional Trading, a Native American-owned broker-dealer, has opened its trading blotters and is now trading on behalf of institutional clients. The minority-owned firm offers the buyside high- and low-touch trading, direct market access and third-party research.
The game plan, as one might expect, is to court pension funds that have mandates to trade with minority brokerage firms, as well as American-Indian tribes that have a need to trade. NativeOne currently has three institutional clients, including CalPERs, the $218 billion California public employee retirement fund, which runs $145 billion in equities. It continues to look for other institutional clients as well as trading on behalf of Native Americans, such as the Navajo Nation and its $1.3 billion in assets, said Dennis Smith, co-founder of NativeOne.
NativeOne donates a portion of its commissions back to the Native American community. Money goes toward scholarships, internships, job training and other charitable causes.
"We want to help native Americans by educating them, providing job training, giving them access to things they’ve never had before," said Smith. "We want to help them own a piece of this rock."
Its New York-based trading desk is run by a trio of seasoned traders. Patrick Forbes works from the NYSE floor. Head trader Leo Decker and Jim Maguire, Jr., a former NYSE specialist, jointly coordinate upstairs trading operations and manage the firm’s order flow.
Decker said the firm’s order flow is about 60 percent high touch and 40 percent low touch. NativeOne is using algorithms from several bulge bracket firms and is contracting others to build its own. The desk plugs into several dark pools, such as Credit Suisse’s Crossfinder and UBS’s PIN. When it comes to executing program trades, the desk uses Deutsche Bank, where NativeOne gets the best service, he said.
Institutional clients can do business with either the trading desk directly or through Bloomberg Tradebook. By working through Tradebook, NativeOne hopes to expand its visibility and presence right on the buyside’s desktop.
Smith said that the firm doesn’t offer capital to clients yet, but might consider it in the future, as way to attract more trading flow.
NativeOne made its official debut on Wall Street on Dec 28, 2010. It is in the process of completing an acquisition for the majority ownership interest in an established New York Stock Exchange member firm, formerly known as Christopher J. Forbes, LLC.
Upon regulatory approval of the change of ownership control by Finra, which is expected in the next 30 to 45 days, NativeOne will officially become the first Native American-owned and member of the New York Stock Exchange.
NativeOne derives its minority status from Don Lyons, the firm’s chief executive and co-founder who is a member of the Morongo Band of Mission Indians in Banning, Calif. Lyons is the majority owner of the company. Additional ownership is held by a Navajo Nation member, a Mohegan member, and several other non-Native American investors.
Once the change in ownership has been approved by Finra, the firm will be 51 percent Native American-owned and the remaining 49 percent by private non-Native American individual investors.
