Lighthouse Financial Group, a New York-based prime brokerage and trading firm, has ceased trading activities as of Tuesday and is up for sale.
The decision to cease trading appeared in a tersely written single sentence on the firm’s website. Founded in 1999, Lighthouse Financial launched its prime brokerage unit in March 2009. The firm also provides trade execution services for high-frequency traders.
Two senior-ranking executives at competing prime brokerage firms, say that Lighthouse has notified its 22 hedge fund clients that they can no longer execute new orders. Those executives, who spoke on condition of anonymity, also said that the firm has put its prime brokerage and trading units up for sale and has met with other larger prime brokers about this.
As a so-called mini-prime broker, Lighthouse has an estimated $200 million in assets, according to one of the two executives. “Lighthouse ran out of regulatory capital and overcommitted itself in real estate and other costs without bringing in sufficient clientele,” said that executive.
Lighthouse shut down trading at the request of the Financial Industry Regulatory Authority, said the two executives, because it did not meet its minimum daily capital requirements. Ed Canaday, a spokesman for Goldman Sachs Group, confirmed that Goldman Sachs’ Execution & Clearing unit serves as Lighthouse’s clearing agent and holds the assets of its hedge fund clients. He declined to comment further.
InfoHedge Technologies, listed on Lighthouse’s website as its technology provider, said that the firm is still using its hosted platform. “We stand by our client during this difficult time and await word as to what its next step will be,” says Alexander Kouperman, president of InfoHedge in New York.
An initial call to Lighthouse in New York late Wednesday night went unanswered and a second call on Thursday morning was answered by a receptionist who said: “We have no comment for the press.” FINRA could not immediately comment on Lighthouse’s news.