Much of the financial industry still operates on legacy technology, resulting in fragmented systems and interfaces which leave participants unable to be as agile and responsive as they need to be. Cloud-native clearing and custody systems can improve efficiency while minimising cost and risk. Andy Volz (pictured), chief operating officer and head of prime sales, Clear Street, explains further
Much of the financial industry still operates on legacy technology, resulting in fragmented systems and interfaces which leave participants unable to be as agile and responsive as they need to be. Cloud-native clearing and custody systems can improve efficiency while minimising cost and risk. Andy Volz, chief operating officer and head of prime sales, Clear Street, explains further
What are some of the biggest challenges your firm is facing in the current environment, and how are you overcoming them?
Industry participants are preparing for Basel III Endgame, which is anticipated to be the most significant change to U.S. banking regulations since Dodd-Frank and the Consumer Protection Act. The expected notice of proposed rulemaking (NPR) will have extensive implications for economic growth, credit availability, liquidity, and market stability.
The changing nature of the prime brokerage business and regulatory and reporting demands are impacting primes of all sizes. This pressure is felt as some firms pull back their services and innovation and investment disappear. Several major primes have left the business altogether, and other independent primes being acquired.
This cycle of cutting services has been an ongoing feature of prime brokerage for the last decade. Without a real move to invest in modern technology to manage risk in today’s markets, this pattern will continue. Modern technology, like Clear Street’s prime brokerage platform, allows for automation, data insight, and scale in a variety of market conditions, driving efficiency and reducing operational frictions.
What opportunities do you see emerging in the industry in the near future, and how are you positioning your firm to take advantage of these opportunities?
The move to T+1 settlement will have a great impact on hedge funds and asset managers. The bulk of the cost introduced by this move will be borne by broker-dealers, clearing firms, and prime brokers. However, some firms may not be aware of the breadth of implications of T+1 internally and on their buy-side clients. The throughput and integration demands for modern clearing platforms are not easily navigated in large organisations, especially when replacing a legacy solution in-flight.
Newer firms like ours, have built their infrastructure on modern technology and already operate with more robust data sets and in real time. At Clear Street, we don’t have a batch process, and we don’t have to worry about waiting until tomorrow to see stock record updates, matching of trades, or allocations. That all already happens real-time, making us well prepared for a move to a shorter settlement cycle.
What three key pieces of advice do you have for emerging hedge fund managers seeking to differentiate themselves in a crowded market?
For hedge funds, access to capital and the ability to shift directions with agility – to create, employ, and scale new strategies – is critical. That edge often comes from a fund’s partners like prime brokers, who can facilitate lending and trading strategy implementation, and offer tools for pulling real insights from the troves of data that are a byproduct of proper market engagement. Partners that see risk the same way hedge funds do are becoming rarer. With the right alignment and access to technology, many hedge funds will see coming landscape changes as alpha drivers. Firms that continue to make these investments and leverage the best technologies available will have the edge in 2023 and beyond.
With increased competition for talent, how are you attracting and retaining the best experts at your firm?
Since Clear Street was founded in 2018, we have worked tirelessly on our mission to build financial infrastructure for today’s institutions, with the goal of creating a single-source platform to serve all investor types, across all asset classes, globally. We only hire strong performers with deep intellectual curiosity who are committed to the effort it takes to succeed in this ambitious mission.
In addition to encouraging colleagues to take FINRA exams, the firm has several other programs designed to promote learning and sharing. We host regular Lunch & Learn sessions where leaders from across the company discuss their projects and goals. When new hires join, they participate in Clear Street Connect, a two-day onboarding program with presentations from the head of each department, from engineering, to trading, to compliance.
Are you leveraging technology to increase efficiency and reduce costs in your firm’s operations? How have you been putting this into effect?
Clear Street is investing heavily in modern tools that solve the industry’s most neglected problem: legacy technology. The $924.5 billion U.S. securities industry still relies on mainframe technology from the 1980s. The result is fragmented systems and interfaces that leave market participants struggling to react to market changes and meet the needs of data-hungry investors and regulators.
Over the years, modern technology has been layered on top of the antiquated infrastructure, only providing a temporary solution. Similar to building a new house on top of an old foundation, sooner or later the base will give way and the whole structure will crumble. This tech debt creates the operational inefficiencies that plague firms today—killing profit margins and increasing risk. The solution is to minimize manual intervention in favor of automation and cloud-based solutions.
This is where Clear Street comes in. We started from scratch by building a completely cloud-native clearing and custody system designed for today’s complex, global market. Our proprietary prime brokerage platform adds significant efficiency to the market, while focusing on minimizing risk and cost for clients.
Andy Volz, chief operating officer and head of prime sales, Clear Street – Andy Volz is Chief Operating Officer and Head of Prime Sales and Electronic Execution at Clear Street, an independent prime broker building financial infrastructure for today’s institutions. Andy oversees Clear Street’s sales and distribution activities, as well as new business initiatives across the organization. Prior to Clear Street, Volz spent five years at Jones Trading, most recently as COO. Prior to that, Andy spent four years in Prime Services Sales at Wells Fargo following the company’s acquisition of Merlin Securities, where he served as Head of Product.