I joined Clear Street as COO and Head of Prime Sales just under two months ago. As with any other new job, there’s been a flurry of activity since then — people to meet, products to learn, etc. What’s been different is the conversations that I’ve had with customers.
The biggest players in the prime brokerage industry have been pulling back on access for years. Now, with events like Archegos, meme stocks, and more, banks are having a hard time moving with the markets. Instead, they’re pulling back on prime even further.
Want to open a new account? Maybe next year. Want to trade SPACs? Good luck.
Clear Street stands in stark contrast with the broader industry. As the first credible entrant to the prime brokerage market in over a decade, Clear Street has quickly become a home for traders ranging from professionals to multi-billion dollar funds.
I could easily list 20 ways that Clear Street is unlike any other prime out there. Instead, I’d like to share the top three reasons why customers are switching to Clear Street today.
Since I’ve joined, we’ve added 15 new accounts including hedge funds, prop traders, and other financial institutions, some with trading assets in the billions. Here’s what they had to say about what they need from primes, the state of the market, and ultimately what brought them to Clear Street:
The big primes are actually small divisions of large banks. They share personnel, policies, and other practices that banks need to manage large, heavily regulated businesses. All of that is good for the bank, but it doesn’t necessarily improve the prime brokerage experience.
One recent example is meme stocks. Over the last few years, the volatility of meme stocks has created significant trading opportunities. The problem? All of that trading has exposed numerous weaknesses for banks. So much so that they’ve asked some of their customers to take their trading elsewhere.
Let me say that again: primes are asking traders to find a new broker because they are trading too many volatile stocks too often. How does that make sense?
Clear Street is managed by a team that’s obsessed with trading. They founded Clear Street because none of the existing primes offered the tools and services they really wanted as traders themselves. Clear Street is purpose-built for trading, from the infrastructure that powers our service to the people who provide it.
One example is risk management. Our risk management team has tools at their disposal which enable them to monitor risk, run stress tests, and conduct scenario analysis in real-time across our entire client base. Now, they don’t have to rely on end-of-day reports to understand positions, which makes volatility easier to understand and manage. It makes all the difference in the world to risk managers who manage risk, and to customers who rely on primes to understand the products they trade.
Some large primes have stopped accepting new accounts for the remainder of the year. Others have delayed openings even further. With Clear Street, that’s not the case. We designed our service so that most clients are onboarded within weeks.
Part of our speedier process is a massive technology investment that streamlines the onboarding process. The other is our people.
Christy Moccia, who runs compliance at Clear Street, has hired a team of highly experienced professionals. They know what questions to ask and when to ask them. It’s been tremendously helpful as we’ve onboarded accounts with complex, highly specialized requirements that require a bit of extra time and care to understand. Christy and her team work alongside the client service team to make the process efficient and effective for everyone.
Most primes fall into two buckets: those that are owned by banks and those that introduce business to banks.
Introducing primes can be attractive, especially since firms can say that client assets are held at a brand-name bank. The problem is that the introducing primes pay clearing fees to the custody bank, which increases the cost of trading for clients. Those costs can add up, especially for high-volume traders.
Clear Street is self-clearing. We don’t have to give a piece of each transaction to a custody bank. Clients also experience fewer post-trade reconciliation problems because all of our clearing, settlement, and custody operations run on a single platform, one we built ourselves. All post-trade data lives on the same platform in the same format, which simplifies everything.
We also own all of our own policies, procedures, and products. We aren’t subject to the timelines and requirements of the same big banks that compete in the prime brokerage space, on a direct basis, for larger accounts. It’s a much better set-up for growing firms.
Those are just a few of the reasons why customers are choosing Clear Street today. As I spend more time in my new role, and out in the field with clients, I will share more with you about the state of prime today, what’s driving change, and the future of prime as we see it.
And I also want to hear from you. What trends do you see? Are they similar? Different?
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