In an eye-popping surprise, blindsided industry observers are tonight asking: is Lighthouse Financial Group, a broker dealer which includes prime brokerage unit Lighthouse Prime Services, going dark? It appears it is no longer looking at performing any trading activity, according to inside sources. The firm is sited in New York. Reports have been seen that Lighthouse has not been able to pay its employees for a period of weeks.
Lighthouse Prime Services, a division of Lighthouse Financial, specialized in customized prime brokerage, trading and execution, and technology services for high frequency trading groups, small to mid-sized hedge funds and large institutions. It boasted of its Premier Electronic Execution/ Direct Market Access capabilities and infrastructure, which were set up for seamless order entry, real-time reporting and accounting through selected leading front-end EMS/OMS providers. In the blink of an eye, the entire execution service has disappeared.
Visibly shaken, today Lighthouse informed clients that they could no longer place trades through the firm—they could only sell assets. The Lighthouse Financial Group’s website is showing the following message: “Effective August 3rd 2010 Lighthouse has suspended trading activities until further notice.” The implications are transparent.
A different source close to the firm gave insight that Lighthouse is in talks with a boutique firm that has eyes on becoming a much larger player and is making a bid for all of the divisions, and an announcement could come as early as this afternoon. If it doesn’t, prospects will be looking even worse.
Lighthouse executives did not see fit to return calls by press time, and one hedge fund that does business with the firm saw no reason to comment on the spectacle.
While Lighthouse Financial Group first saw the light of day in 1999, its prime brokerage unit didn’t come into view until March of 2009. The unit saw to the needs of hedge funds and high-frequency traders, and it is thought to have had between 25-35 hedge fund clients.
Lighthouse’s deathwatch must be especially gloomy to its prime services unit, since last year Hedge Fund Manager Week glaringly saw fit to award it for the “Best Capital Introduction Program for Small Prime Brokers.” Lighthouse brightly beamed about the award, stating “The award is a clear culmination of a very successful year for Lighthouse Prime which has seen significant growth in new accounts in 2009. Lighthouse Financial has capitalized on the recent dislocation within the financial industry and has been able to amass a potent team of industry professionals to bolster the robust platform consisting of trade execution, effective capital introduction and a fully hosted information technology solutions to their rapidly growing client base of emerging and growing hedge fund managers, while offering the security of custody services through their introducing broker relationship to Goldman Sachs Execution and Clearing.” It is not known yet whether this will also be a black eye for Goldman.
Watchful industry observers are not blind to the irony.