The $924.5 billion U.S. securities industry still relies on mainframe technology from the 1980s, according to Andy Volz, COO, Clear Street.
“The result is fragmented systems and interfaces that leave market participants struggling to react to market changes and meet the needs of investors and regulators,” he told Traders Magazine.
The mainframes that have supported global capital markets for decades were built to answer specific questions at a specific point in time, he explained.
“Over the years, modern technology has been layered on top of the antiquated infrastructure, only providing a temporary solution,” Volz said.
“This tech debt creates broken processes that form the operational inefficiency that plague firms today,” he added.
He said that in addition to that, the prime brokerage landscape is shrinking.
Even during recent periods of strong trading activity and returns, many prime brokers have been pulling back their services or exiting the business entirely, according to Volz.
This environment is particularly hard on smaller funds and emerging managers, who are often the least prepared for such changes, he said.
Volz added that these funds need to be as effective as possible in managing challenging markets, shifting regulatory regimes, and ever-increasing data requirements.
“In order to stay competitive and keep up with demand, funds require access to new tools and processes and increased levels of support from their prime partners for capital, technology, and data,” he said.
Founded in 2018, Clear Street has built a proprietary, cloud-native prime brokerage platform that processes more than $10 billion in daily notional trading value of U.S. equities.
“Clear Street’s business growth in 2022 was monumental. We’ve seen a 220% increase in financing balances, and are valued at $1.7 billion,” Volz commented.
The company launched its capital introduction and repo businesses, enhanced its securities lending capabilities, and updated and refined its client-facing position, risk, operations and reporting portals, according to Volz.
“This year, we’re looking to expand into more asset classes and broaden our reach globally,” he said.
On Tuesday, February 14, the firm received a strategic investment from IMC, that will support the fintech’s mission to build better infrastructure for capital markets.
“Following the successful launch of ATLAS (Automated Trading Locates Allocation System), our proprietary trading system, in October 2022, we’re exploring rolling out ATLAS to European Markets this year,” Volz said.
“ATLAS allocates stock loan inventory to incoming customer requests and is ideal for quantitative trading strategies and robo-advisors,” he added.
