18/08/2010 Author: Elana Margulies

Lighthouse Prime Services closes its doors

Troubled mini-prime Lighthouse Prime Services has officially closed after failing to secure a last-minute buyer for the business.

Lighthouse Prime Services and its parent company, Lighthouse Financial Group, had been in negotiations to offload the troubled division for some time, HFMWeek has learned.

Most recently, Jersey City-based Hudson Securities looked to strike a deal before pulling out of discussions. Earlier in the year, Miami-based Ladenburg Thalmann & Co had also considered acquiring the mini-prime before stepping back.

Meanwhile, Lighthouse had already lost a steady stream of its hedge fund clients to competing prime brokers. Boutique prime brokers Merlin Securities, Jefferies & Co and EFX Prime Services were among those that have benefitted from Lighthouse Prime Services downfall, signing some of its hedge fund accounts, according to sources familiar with deals.

This could be the first sign that the rapid acceleration in the mini-prime broker marketplace has hit reverse.

“With the VIX declining into the 20s, fewer new hedge funds and interest rates near zero, we are seeing many low-capitalised execution firms exit the mini-prime business,” said Ron Suber, senior partner, Merlin Securities. “Their hedge fund clients are moving upstream to the mid-primes who provide the solutions these funds and their investors require.”

HFMWeek previously reported that Lighthouse Financial Group was shopping for a buyer for its prime brokerage division following the company’s decision to cease trading earlier this month. Earlier this year, the firm struck a deal with Brighton House Associates to boost the capital introduction capabilities of its prime services division.