At Clear Street, we are working hard to improve access to financial markets.
In the last year, we’ve assembled a great team to get the company off the ground, made significant progress on our technology platform, and became members of FINRA, DTCC/NSCC, and OCC.
This month, we reached a significant milestone in the development of our platform: We are now clearing and settling transactions in U.S. equities markets.
As we continue to build the platform and prepare to serve customers, I wanted to take a moment to clarify what we’re building and why it matters.
The technology that powers financial markets was developed decades ago. It still does what it was designed to do in the 60s, 70s, and 80s.
The problem is — it doesn’t do what we need it to do today.
The engineering team at Wealthfront, an online investment advisor, recently discovered this problem. An engineer explained on the company’s blog that:
“Wealthfront, like many other fintech companies, was built on top of brokerage firms offering access to standard brokerage and banking capabilities through APIs. Unfortunately, these brokerage firms are running on legacy systems and infrastructure from the 1960s, and many of their APIs are built on top of semi-manual processes and disjointed systems. This blocks many desired improvements and hinders our ability to achieve end-to-end automation, a requirement to support our growth.”
In other words, the startup tried to layer a modern technology business on top of outdated infrastructure. The foundation would not support the business.
Wealthfront isn’t alone. Every business that trades financial instruments — from pension funds to trading apps — is limited by similar outdated technology.
The problem is clearing and settlement systems, an important piece of functionality that handles the secure transfer of funds and securities between brokerages. No new clearing systems have been developed in over a decade, since core technology concepts like public APIs and cloud-based architectures became standard features in enterprise software.
Companies that want to build products using modern technology infrastructure have only one option — building a clearing system from scratch.
Robinhood, a stock trading app, decided to take the build-your-own approach. According to the company, it now has 70 professionals dedicated to a platform that took two years to build.
Most startups probably aren’t willing or able to make that kind of infrastructure investment. We believe they should never have to.
It’s time for a modern solution to enter the market. The industry needs a solution that is simple, secure, and widely available.
The payments industry used to have a similar problem with payments. Ten years ago, businesses that wanted to sell products online needed to integrate with payment processors, banks, ecommerce systems, and more. It was expensive for businesses and frustrating for developers, who had to work with temperamental, outdated, and poorly documented systems.
Stripe recognized this problem. They built APIs that made it easy for businesses to accept online payments. Suddenly businesses could get online in hours to days, instead of weeks to months. It changed everything.
Stripe now powers payments for millions of businesses in 120 countries around the world. Today, its payments infrastructure supports business models that didn’t even exist when the company got started, such as crowdfunding and ride sharing.
Our goal is to do for financial transactions what Stripe has done for cash transactions. We will simplify financial transactions, make it easier to access financial markets, and become a platform for growth and innovation.
Clear Street will help all market participants get better access to financial markets: pension funds, hedge funds, banks, investment advisors, technology startups and others. Clients will be up and running in days to weeks, not months to years.
It’s an ambitious goal, but we’re well on our way. We have a growing team of professionals with proven experience leading financial operations, building fintech products, and scaling high-growth companies.
This month, after just six months of development, our technology platform is live. We are clearing and settling transactions in the U.S. equities markets for our first client.
I am looking forward to sharing more with you in the coming months. Be sure to follow this blog for news and product updates.
Our team is growing quickly. There are currently 30 of us at Clear Street and we expect to hire at least 20 more by the end of the year.
We’re looking for smart, collaborative professionals, who are passionate about upgrading the infrastructure that powers financial markets. If that sounds like you, please check our website for more information on open roles.
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