Clear Street’s clearing and custody platform launched two years ago this month. In short order, we’ve reached the point where we’re handling over a billion dollars in trades daily. How did we get here? There are lots of reasons, including a lot of hard work. In the past year alone, our engineering team has added over a million lines of code. We’ve created over 75,000 CICD pipelines, representing every test, build, and deployment we’ve accomplished. We’re building quickly.
As we look ahead, I wanted to take a moment to highlight key decisions we made as a team to propel the growth of the company and our platform:
1. We solved the problem behind the problem
If you ask anyone who trades thousands of shares per day and doesn’t have a billion dollars in their account what’s wrong with their current broker, they’ll probably say at least one of the following things: it can be hard to get access to the services I need, the tools aren’t very good, and the data is slow and messy. All of those are problems, but they’re just surface problems.
The real problem persists under those problems. Brokerages, if you think of them as a technology company, run on clearing systems, which exchange cash and assets after a trade is made. The problem is that the clearing systems most brokerages run on are really outdated. Think mainframes. Mainframes just aren’t built for modern trading.
When we built Clear Street, we decided to solve the problem behind the problem — outdated clearing systems — so that we could deliver a better experience to all of our clients. Today, our platform gives clients access to U.S. equities and options. In the future, clients will have access to every major asset class in every major market: fixed income, derivatives, swaps, futures, international equities, even crypto currencies. It will also help solve some of the bigger problems facing clients today, such as true, accurate real-time risk modeling.
2. We found the market and expanded it
We opened our platform in July 2019. Our early customers were mostly friends and colleagues from our years in the business. Soon, though, those customers began referring other customers, and those customers did the same. Our business started taking off, before we’d even gotten around to marketing it. There was clearly a need for our services in the traditional prime brokerage market — funds, asset managers, and other types of institutions.
We also believed that there was an opportunity to expand the market to individuals. Highly experienced professional traders use the same type of trading strategies as large funds. They just have a much harder time getting access to the products they need to compete with the big guys.
We decided to partner with CenterPoint Securities, a boutique broker-dealer specializing in the professional trader segment, to offer clearing, settlement, and other services such as securities lending, to their customers. We’ve seen countless professional traders thrive in recent months, due to strong market conditions and access to a wider array of higher quality brokerage products.
Our platform helps active, high-volume traders grow, whether they’re individual, professional traders or massive, multi billion dollar funds.
3. We hired highly experienced leaders
We’re rebuilding the core infrastructure of the markets. Not only are we operating in a highly regulated market, but there is also a lot riding on our ability to get everything *exactly* right. With that in mind, we recruited experienced leaders with decades of experience and deep industry knowledge to run all of our core business functions. We’ve also attracted talent from top technology companies, who work in combination with industry experts, to build products that will move the industry forward into the future.
When we launched the platform, there were just 30 of us building the Clear Street business in Manhattan. Today our team has grown to nearly 250 and we have offices in San Diego, Chicago, Tel Aviv, and more.
4. We followed an unusual capital plan
Most fintech startups follow the same game plan. Build a deck, get seed funding, build an MVP, close an A round, build a working product, close a B, find the market, and so on. It’s a path that everyone knows and understands. It has advantages — each of those rounds creates a milestone that everyone in the industry recognizes: “Look, this startup has raised $100 million at a $1 billion valuation. They must be on to something. Let’s go work for them, or work with them, or partner with them, etc.”
We didn’t follow that path. We raised funds on our own, used profits to build our capital base, and issued bonds to raise additional funds. We now have more than $300 million in capital on our balance sheet and remain 100% founder/employee owned.
Why did this approach make sense for us? As a self-clearing broker-dealer (aka a broker that clears its own trades) our capital base needs to consistently go up, not down. Traditional fintechs raise money to fund product development. When they’re running low, they raise more. Instead, we’re focused on constantly increasing our capital base to support the sort of massive-scale trading that our clients engage in. We then fund the development of our product with the profits.
This approach has allowed us to scale the business in a way that makes sense for this market. It’s also allowed us to retain ownership of the business, which has been helpful for all of our stakeholders.
Now, $300 million sounds like a lot, but we’re really just getting started. Our goal is to have more than $1 billion in capital within the next two years to support our continued business growth.
The Clear Street we are becoming
Those four decisions — solving core problems, expanding the market, hiring experienced talent, and self-funding — helped form the Clear Street we are today. They’re also the foundation of the company we will be tomorrow.
We’ve solved complex challenges, delivered products, and begun scaling our business, but some of the biggest opportunities and challenges facing our business are still in the days ahead. We’ve built core infrastructure that will allow our business and our clients to grow, but we still have work to do before we can deliver more of the tools and services that will really accelerate and improve trading results for our customers. You’ll be hearing more about those in the days, months, and years to come.
Until then, I would like to thank everyone on the Clear Street team for all of their hard work. We wouldn’t be where we are today without the hard work of each and every one of you.
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).