Revitalizing Prime Brokerage with Chief Administrative Officer Kevin McCarthy

The last few years have seen compression and consolidation in prime brokerage and clearing providers, creating barriers for new entrants and making it more difficult for fund managers to find a prime broker who puts their needs first.

Clear Street is in a unique position to address these issues. Where other firms are relegated to outdated technology and increasing Banking regulations, we have the agility to develop new solutions without the constraints of legacy technology.

Kevin McCarthy, Clear Street’s first Chief Administrative Officer and Head of Clearing, sees an opportunity to further Clear Street’s existing fintech platform and expand our services to quickly address ever-changing marketplace needs.

One month into his tenure, Kevin shares why he joined Clear Street and his plans to develop the firm across asset classes, personas, and geographies.

Opportunity for disruption

I joined Clear Street because I saw an opportunity for a new entrant to disrupt the marketplace. Before Clear Street, I spent more than 30 years at Bank of America Merill Lynch launching and managing professional clearing and prime brokerage financing services for sophisticated professional traders, hedge funds, asset managers, and major financial institutions.

I knew that the clearing industry was in need of innovation and that there was potential for a technology-forward firm to revitalize the industry. It’s exciting to me that Clear Street has entered the market with modern infrastructure and an Industry pedigreed leadership team. I want to broaden our reach and show how the innovation coming from Clear Street can benefit the industry overall.

As Chief Administrative Officer, I’m looking strategically across verticals to create continuity and support business growth. My role is to oversee and expand our clearing services for introducing brokers, equity market makers, ETF market makers, and options market makers, while creating synergies across the businesses Globally.

Technology is our differentiator

At Clear Street, our cloud-native technology enables our competitive advantage. We have the agility and underlying infrastructure to support a client base that needs a better risk model and seeks policies that are aligned to their businesses.

The industry is responding to what we have to offer. We’re backed by $700 million in capital, and over the past year the number of institutional clients on our platform increased by 500% and our daily transactional volume increased more than 300%.

Amid an increased focus on capital regulations, institutional managers should use a holistic approach when choosing a prime broker and diversify funding to counterparties with fewer correlated capital requirements. This becomes more challenging when the prime brokerage landscape continues to shrink, leaving fewer outlets for funds to decentralize risk.

Choosing a prime broker with the flexibility to collaborate with the fund’s financing needs allows investment managers to be nimble and scalable. This in turn lets managers differentiate themselves from competitors and attract a more diverse investor base. In an ultra-competitive landscape, prime brokers using modern technology like cloud computing and APIs will be ready to adapt to market changes, so fund managers can focus on what’s important - growing their business.

Building on a strong foundation

Expanding our scope across products and asset classes, like fixed income and futures, supports what we can offer new client types. Today, we offer emerging managers and institutions everything they need to clear, custody, execute, and finance U.S. equities, options, and fixed income. Our mission is to build a modern, single source-of-truth platform capable of handling every asset class, in every country, and in any currency.

In pursuit of that mission, I’m focused on developing our global clearing services for introducing brokers, equity market makers, ETF market makers, and options market makers on our proprietary, cloud-based prime brokerage platform. As we continue to grow, I’m committed to creating synergies across all business functions, from capital introduction to execution and prime financing.

All of this stems from our proprietary technology platform. For other firms, back-office processes are a cost center, but our single-source of truth platform has the potential to optimize operations across teams, asset classes and geographies, reducing cost, complexity, and risk. Clients are onboarded in days instead of months, and access accurate and up-to-date data.

In this prime brokerage landscape, modern technology that powers decision-making with clean, up-to-date data matters more than ever. Fund managers should focus on providers who offer high-touch white glove service and are prepared to grow with the fund - without limitations on firm size, return profile, or strategy.

I’m looking forward to making that happen at Clear Street.