Andy Volz is Chief Operating Officer at Clear Street.
What were the key theme(s) for your business in 2022?
Our mission is to replace the outdated infrastructure being used across capital markets. We’ve gone down to the bare metal to build a completely cloud-native system, designed for the modern needs of a complex global market. In May 2022, Clear Street raised $165m in our Series B funding round, and we’re using that funding to turbocharge growth, expand our engineering capabilities, and reach new markets and asset classes. Three themes defined Clear Street’s 2022: Business, Product and People.
Clear Street’s business growth in 2022 has been monumental. We achieved a milestone reaching 2.5% equity market share, have seen a 220% increase in financing balances, and are now valued at $1.7 billion. We launched our capital introduction and repo businesses, enhanced our securities lending capabilities, and updated and refined our client-facing position, risk, operations and reporting portals.
In the last 12 months, Clear Street has introduced a swath of new products and improvements to enhance the client experience. In April, we replaced our core transaction processing system with a faster, more scalable model to support our growing business. In October, we launched ATLAS (Automated Trading Locates Allocation System), our proprietary stock loan trading system, which allocates stock loan inventory to incoming customer requests.
None of this would be possible without our people. In 2022, we grew to almost 400 employees and opened five offices globally. We expanded our sales and engineering teams, and welcomed Wall Street industry veterans to support our rapid growth strategy. These hires bring credibility and knowledge to our already diverse sales team, and we look forward to broadening our reach to clients in the U.S. and in international markets.
What are your clients’ pain points and how have they changed from 1 year ago?
2022 presented a challenging environment for our clients. Recent market conditions place more weight on investment performance than usual. With the average YTD drawdown at 5% for all hedge funds and 12% for equity funds, some funds will not be receiving performance fees for 2022, and potentially for quarters to come. Many managers will only have management fees to finance their operating activities and working capital requirements. In this environment, it can be harder to maintain the staff and discipline required to properly manage risk. Clear Street helps managers through these difficult times by providing more real-time access to data and saving costs on third party systems.
On the regulatory side, 2022 was an exceptionally active year for the SEC, which proposed 30 new rules in the first 11 months of 2022, the most in over a decade. Whether and how all of these rules will be implemented has yet to be determined. However, 2022 has proven that when the SEC writes about a rule, advisers and investors alike should take it seriously, and create compliance policies and procedures sooner rather than later.
What are your expectations for 2023?
Market uncertainty and volatility will continue, and those funds best positioned to prosper and thrive are those that have invested significantly or work with service providers that can provide the real-time, structured data needed to manage risk, capitalize on opportunities, run efficient and compliant businesses, and communicate opportunities and risks with their investors. Clear Street’s cloud-native, proprietary technology platform adds significant efficiency to the market, while focusing on maximizing returns and minimizing risk and cost for clients.
Olympus, the broader Clear Street Securities Finance Stack (of which ATLAS is a part) will soon expand to include a marketplace for Stock Loan called Agora. In its first phase, Agora will be available for customers and existing partners of Clear Street. Agora aims to modernize the Securities Lending marketplace by introducing a standing order book, streaming prices and a seamless customer experience.
Additionally, Clear Street is rolling out a multi-asset and multi-market inventory and contract management system in 2023 that will improve the efficiency of our securities finance desk. It’s all part of our plan to modernize the market infrastructure across capital markets and improve market access for all participants.
