Apex is a proven leader in the clearing space and, having built a suite of sophisticated technology solutions over the years, has become the 'go-to' clearing firm for fintech firms. Indeed, it is currently the Custodian-of-Choice for tech-savvy firms like Betterment, Stash, Wealthfront and other robo advisors.
This year, to move beyond merely providing custody and clearing to retail clients (online brokerages and RIAs as well as fintech firms), Apex made the jump to provide prime brokerage services to the institutional community. This September, it launched a full-fledged prime brokerage solution and has already onboarded nearly 20 hedge fund clients.
Heading up Apex Clearing is CEO William Capuzzi (pictured), who joined from Convergex 12 months ago where he ran a number of different businesses including clearing and prime brokerage. Prior to that, Capuzzi spent nearly a decade at Pershing so he knows the clearing space well.
"The media sometimes talks of custody as being a commoditised service, but it is very difficult to do correctly. That's why, when you look at those who really do 'prime' an asset and provide custody and clearing to the broker-dealers, there are only a handful – less than 10 – the Pershings and Fidelitys of the world. We are one of the very few prime brokers who can self-clear.
"Apex has fintech running through its veins. Understanding fintech and getting straight-through processing right is the backbone of Apex," says Capuzzi.
The aim, for now, says Capuzzi, is to target hedge funds with AUMs of USD200 million or less.
Out of regulation has sprung terms such as Risk-Weighted Assets and Liquidity Coverage Ratios. There is a big focus on return on assets, with prime brokers constantly talking about this as a key measure when evaluating a hedge fund client.
"This has created a great opportunity for non-bank-owned primes. The small- to mid-sized managers are the first ones to get culled, so where do they go? There's the obvious culling, the "getting dumped by your prime broker" scenario, but there's also the service level. Large primes are looking to dedicate their resources to their largest clients and so even if smaller hedge funds do survive, the level of service they are getting is starting to significantly suffer. That's why providing consistently great customer service is a big focus for us and an integral part of the new Apex Prime offering," says Capuzzi.
Apex is very mindful of how it deploys its own balance sheet and uses Apex RiskCheckTM, a five-point risk management system that protects clients' assets. Embracing key tenets from its parent company, Chicago-based Peak6 Investments LP, which has run several successful hedge funds and operates a successful proprietary trading business, has helped Apex hone in on what are the pain points of providing leverage and what is needed from a stock lending perspective to be successful.
"You've got to provide access to markets and have security lending and margin financing capabilities, which we offer. However, we go above and beyond that by providing transparent credit risk management tools and methodologies, as well as reporting solutions. The bigger primes cannot provide those types of tools for smaller managers and that is an area where we are starting to win clients," confirms Capuzzi.
By embracing innovation, Apex, with its technology prowess, is shaking things up and reimagining what it means to provide prime brokerage for the 21st Century.
