Applications for APIs in Prime Brokerage

Clear Street is revolutionizing the backend of prime brokerage by building the financial infrastructure for today's institutions. We're pioneering a technology-first experience for prime brokerage using a platform built on modern technology rather than mainframes from the 1980s and other out-of-date technology reliant on batch processing.

Over the years, firms that rely on this antiquated technology stack have applied a facade of trendy solutions on top of an outdated core. However, this surface-level revamp of the interfaces can rarely hide the state of the underlying systems. These complex legacy environments often consist of a patchwork of systems that integrate poorly and require extensive reconciliations.

In contrast, Clear Street is building a unified platform using cloud-native, event-driven, and horizontally scalable technology. From front to back, our system acts as a cohesive whole, consisting of hundreds of microservices that can seamlessly communicate via a library of APIs (application programming interfaces). APIs can be thought of as a contract of service between two applications. Just like humans understand each other better when there is a common language, systems communicate more reliably and accurately when both sides use an agreed-upon way to represent information.

This API-first approach has allowed us to create a connected platform where no reconciliations are necessary because there is a single source of truth in the system for any given piece of information. This design also makes adding new capabilities a breeze - we started with clearing, settlement, and custody and subsequently added securities finance, risk management, trading, and the rest of the prime brokerage umbrella. We are now rapidly building support for multiple asset classes, geographies, and investor types.

Unlocking new workflows

Our customer-facing APIs will enable new use cases by allowing users to engage with us, their prime broker, programmatically while integrating immediate feedback and valuable information into their existing workflows and systems. We're excited to see what capabilities people will build using these APIs.

An example use case is risk and margin. Today, most investors work off overnight margin information received via reports. They often struggle to understand where they stand intraday—whether their contemplated trades are edging them closer to a margin call. Access to real-time margin information from a prime broker's API can mean the difference between getting a margin call and effectively managing risk. Accurate and timely risk information can transform risk management from a limiting factor into an enabler for the investment business.

Similarly, APIs that deliver rich portfolio analytics, such as returns over time or against benchmarks or risk-adjusted returns, can provide new insights when integrated directly into investors' dashboards and workflows.

Brokers and custodians rarely offer a timely, up-to-the-minute view of this information in machine-readable formats. Instead, investors get nightly PDF reports or implement vendor products, needing constant reconciliation with the custodians' official information.

These small frictions add up and cause a business to be bloated and inefficient—not to mention the added costs of third-party vendors, reconciliations, and breaks on a daily basis. An integrated system does away with that maintenance and offers trustworthy information directly from an investor's prime broker and custodian.

Rapid processing for T+1

Well-designed APIs have an endless potential to reduce friction in the capital markets - from improving workflows, to increasing processing speed, to facilitating massive industry shifts like T+1 settlement. On a day-to-day operations level, financial firms with faster and more accurate data processing have a clearer view of risk and opportunity.

The effective date for the move to T+1 settlement for US equities and corporate/municipal bonds is less than a year away. It will be a pervasive change affecting nearly every participant in the industry. A shortened settlement cycle will compress timelines for most steps involved in clearing and settlement. For example, firms must allocate, confirm, and affirm all institutional transactions by 9 pm ET on the trade date (as opposed to 11:30 am ET on T+1). With Clear Street's integrated platform that performs automated real-time trade processing every step of the way, this will be a straightforward change.

This compression of timelines will be a real challenge for legacy platforms where multiple systems are stitched together and need to be manually reconciled, often with human involvement.

Our ultimate goal is to extend the single-source-of-truth concept all the way to our customers' systems through our APIs. If the customer systems tap into our APIs, they won’t need to reconcile the information, which will streamline processes and make it easier to implement future transformational changes like the move to T+1 settlement.

Exciting opportunities ahead

A custodian's primary responsibility is to hold and safeguard assets, so absolute accuracy is crucial. The rigor we apply to our core clearing, settlement, and custody system echoes through our platform's other services. We're working to expose an API-based interface on top of that bedrock.

We can do this easily because of our API-first approach and because our team includes engineers with experience not just in finance but from across Silicon Valley and some of the largest tech firms in the world. Clear Street combines this innovative tech culture with seasoned finance professionals who have witnessed firsthand the problems with legacy prime brokerage technology.

It's high time for a tech-forward prime broker to come forward with APIs that bring significant efficiency to the ecosystem while focusing on minimizing risk and cost for investors.

Contact us to learn more.