Building the prime we need
08 December 2020
Clear Street says it is embracing discomfort as part the challenge of building a new kind of prime brokerage
Image: Clear Street
Like many of you, we’ve been paying close attention to changes in the prime industry. The market is evolving. Primes aren’t. If anything, they’re shrinking.
The primary problem is infrastructure. Primes run on clearing and custody systems that are old and brittle. They increase costs and limit service capacity, creating insurmountable hurdles for a growing number of fund managers who no longer make the cut. They also keep the customer experience stuck in the past.
Clearing and custody systems are the beating heart of a trading business. Replacing them is risky and complex. It’s understandable why primes are hesitant to make these changes, despite their growing costs.
A secondary problem is capital. Primes have access to vast financial resources, but those resources are increasingly being rationed. The largest and most profitable funds get access to the bulk of those resources, while smaller funds make do with less.
It’s hard to begrudge anyone, especially a player in this industry, for making a profit maximising decision. At the same time, don’t smaller funds also deserve access to the resources they need to grow their businesses?
Enter Clear Street
As my co-founders and I looked around the industry in 2018, the conditions were right for a new player, but no one had stepped up to the plate — and we knew why. It’s incredibly difficult to enter the prime brokerage market: client requirements are incredibly complicated, the regulatory environment is intense, and the capital requirements are significant.
Luckily, ‘embracing discomfort’ is a keystone of our culture at Clear Street. We believe that hard things are worth doing, because they help you grow. And that’s exactly why we chose to embrace the challenge of building a prime brokerage: to help the industry grow.
We want to build a new kind of prime brokerage. One that we, as former fund owners, operators, and developers, would want to use ourselves. One that’s simple, modern, and efficient. One where everyone gets access to great service, whether they manage an emerging fund or operate a multibillion dollar hedge fund.
That’s what we hope to achieve with Clear Street. It’s going to be a long road, but we are well on our way and moving fast.
Rapid growth
In a little over one year, we have:
Launched our clearing, settlement, and custody platform. We’re building our prime offering on a better foundation — an entirely new clearing and custody platform that’s engineered to help clients grow.
Started offering services such as execution, securities lending, financing, and more. We have recruited leaders with decades of experience to build out institutional-quality services.
Added over 40 clients. Our clients range from emerging funds to funds well in excess of $1 billion. Growth has been organic, largely driven by referrals from satisfied customers.
Grown our team from 50 to 150. We’ve attracted top talent from leading banks, brokerages, and technology companies. Also, Fortune Magazine named Clear Street one of the best places to work in New York.
We’re off to a great start. Our platform is live, core services are up and running, clients are happy, and the business is growing. Now, we are turning our focus toward expanding our initial prime brokerage offering and serving far more customers next year.
Preparing for prime
We are working quickly to deliver more of the services that are standard for any prime brokerage — services that require a good deal of time to set up.
We are also working quickly to add support for additional asset classes. Over the next several weeks, we will begin to offer invitation-only access to US options, so that when our initial prime product is complete, clients will be able to execute, clear, and custody US equities and options.
In time, we plan to offer access to every major asset class in every major market — fixed income, futures, derivatives, international securities, and more — using our brand new, cloud-based clearing and custody platform.
Multi-asset traders will be able to change when, where, and how they trade, just by changing the code. Clients will be able to expand trading into new asset classes in minutes, instead of months. They will also have access to clear, real-time data across their accounts.
Our goal is to have the fastest rate of innovation in the industry, so that the value of being a customer on the Clear Street platform is always increasing. And that’s what makes us different. At a time when most primes are pulling back, we are all in.
The primary problem is infrastructure. Primes run on clearing and custody systems that are old and brittle. They increase costs and limit service capacity, creating insurmountable hurdles for a growing number of fund managers who no longer make the cut. They also keep the customer experience stuck in the past.
Clearing and custody systems are the beating heart of a trading business. Replacing them is risky and complex. It’s understandable why primes are hesitant to make these changes, despite their growing costs.
A secondary problem is capital. Primes have access to vast financial resources, but those resources are increasingly being rationed. The largest and most profitable funds get access to the bulk of those resources, while smaller funds make do with less.
It’s hard to begrudge anyone, especially a player in this industry, for making a profit maximising decision. At the same time, don’t smaller funds also deserve access to the resources they need to grow their businesses?
Enter Clear Street
As my co-founders and I looked around the industry in 2018, the conditions were right for a new player, but no one had stepped up to the plate — and we knew why. It’s incredibly difficult to enter the prime brokerage market: client requirements are incredibly complicated, the regulatory environment is intense, and the capital requirements are significant.
Luckily, ‘embracing discomfort’ is a keystone of our culture at Clear Street. We believe that hard things are worth doing, because they help you grow. And that’s exactly why we chose to embrace the challenge of building a prime brokerage: to help the industry grow.
We want to build a new kind of prime brokerage. One that we, as former fund owners, operators, and developers, would want to use ourselves. One that’s simple, modern, and efficient. One where everyone gets access to great service, whether they manage an emerging fund or operate a multibillion dollar hedge fund.
That’s what we hope to achieve with Clear Street. It’s going to be a long road, but we are well on our way and moving fast.
Rapid growth
In a little over one year, we have:
Launched our clearing, settlement, and custody platform. We’re building our prime offering on a better foundation — an entirely new clearing and custody platform that’s engineered to help clients grow.
Started offering services such as execution, securities lending, financing, and more. We have recruited leaders with decades of experience to build out institutional-quality services.
Added over 40 clients. Our clients range from emerging funds to funds well in excess of $1 billion. Growth has been organic, largely driven by referrals from satisfied customers.
Grown our team from 50 to 150. We’ve attracted top talent from leading banks, brokerages, and technology companies. Also, Fortune Magazine named Clear Street one of the best places to work in New York.
We’re off to a great start. Our platform is live, core services are up and running, clients are happy, and the business is growing. Now, we are turning our focus toward expanding our initial prime brokerage offering and serving far more customers next year.
Preparing for prime
We are working quickly to deliver more of the services that are standard for any prime brokerage — services that require a good deal of time to set up.
We are also working quickly to add support for additional asset classes. Over the next several weeks, we will begin to offer invitation-only access to US options, so that when our initial prime product is complete, clients will be able to execute, clear, and custody US equities and options.
In time, we plan to offer access to every major asset class in every major market — fixed income, futures, derivatives, international securities, and more — using our brand new, cloud-based clearing and custody platform.
Multi-asset traders will be able to change when, where, and how they trade, just by changing the code. Clients will be able to expand trading into new asset classes in minutes, instead of months. They will also have access to clear, real-time data across their accounts.
Our goal is to have the fastest rate of innovation in the industry, so that the value of being a customer on the Clear Street platform is always increasing. And that’s what makes us different. At a time when most primes are pulling back, we are all in.
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