“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In other words, the startup tried to layer a modern technology business on top of outdated infrastructure.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 Every business that trades financial instruments — from pension funds to trading apps — is limited by similar outdated technology.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.
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 faced a similar problem
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 It was expensive for businesses and frustrating for developers, who had to work with temperamental, outdated, and poorly documented systems.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.
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.
Improving access to financial markets
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.
Clear Street does not provide investment, legal, regulatory, tax, or compliance advice. Consult professionals in these fields to address your specific circumstances. These materials are: (i) solely an overview of Clear Street’s products and services; (ii) provided for informational purposes only; and (iii) subject to change without notice or obligation to replace any information contained therein.
Products and services are offered by Clear Street LLC as a Broker Dealer member FINRA and SIPC and a Futures Commission Merchant registered with the CFTC and member of NFA. Additional information about Clear Street is available on FINRA BrokerCheck, including its Customer Relationship Summary and NFA BASIC | NFA (futures.org).