In a market landscape defined by increasing speed and complexity, there’s no universal approach to trading success. Why should correspondent clearing be any different?

Today, most market participants clear with brokers that rely on a small handful of closed-source, third-party providers for their core books-and-records functionality. The result is that correspondents have very little control over the infrastructure that defines processes including taking in trades, processing trades into positions, calculating margin requirements and tax lots, generating reports and the like. This lack of flexibility hampers flexibility and innovation and can prevent firms from efficiently carrying out their strategies.

At RQD, we take a different approach. Our modern technology stack and flexible platform enable us to do things that legacy providers simply can’t – and that includes supporting non-traditional workflows, new products, novel approaches and more. With this ability to take greater ownership of post-trade processes, correspondents can increase operational efficiency, differentiate themselves from the competition and ultimately pursue their goals with far greater precision.

Control Is Crucial

One of the defining features of RQD is that we are cloud native and in control of our own code base – a fairly standard configuration for fintechs, but nearly unheard of for clearing brokers.

Relying on third-party providers for books-and-records tools and the hardware they’re hosted on leaves most clearing brokers and, by extension, their correspondents with very little visibility and input into how their data is processed. In some cases, the clearing broker might be able to build a layer to make limited enhancements for flexibility or user experience. But when it comes to the core data, there’s only so much they can do.

This is essential, because while an increasing number of new brokers and trading applications are built on cutting-edge stacks, the majority of clearing brokers use significantly older technology. This requires these correspondents to simplify or “dumb down” their solution, which can greatly extend implementation timelines. In other words, innovation on the correspondent side has greatly outpaced that of the clearing side, causing significant friction for the market’s most innovative firms.

The rise of retail investing is another relevant trend. As this space becomes increasingly crowded, there is a growing need for firms to differentiate themselves from the Robinhoods and Webulls of the world, resulting in new and interesting tactics that may require a more flexible clearing partner.

One more factor is the increasing number of market participants seeking to become omnibus firms. Because omnibus firms handle all customer-facing interactions within their own walls, completing account transfers requires providing their clearing broker with client information it wouldn’t otherwise have, necessitating a dedicated interface. With legacy clearing providers, this custom functionality can take months or be impossible to stand up; with RQD, it’s a quick and straightforward process. With RQD, omnibus firms are able to instruct and respond to ACAT requests via API, allowing them to control the process.

Supporting these emerging business priorities is a major aspect of our custom approach, but it isn’t the only one. We strive to serve in a true partnership capacity to our clients – and that means liberally sharing our expertise on technology, risk and the industry at large. We have a keen understanding of operational best practices, regulatory priorities and other factors that can play a significant role in a firm’s trading success. In this way, our clients benefit not just from customizable technology, but also clear guidance on how to make the most of that customization.

Flexibility in Action

This combination of cutting-edge technology and industry expertise has enabled us to deliver custom solutions for a wide array of clients. The solutions we’ve built are as diverse as the clients we serve, but the common thread is greater efficiency and an enhanced ability to serve their own customers.

In one instance, a correspondent wanted to fully outsource its exchange fee calculations, including customized fees based on liquidity indicators received from exchanges. While this is typically done by the introducing broker, we were able to implement a powerful matrix that met the client’s needs, saving them from this highly technical work while empowering them with full control.

Another solution that we have implemented is pre-funding functionality, enabling the client to identify a set pre-funding threshold for inbound ACH. Instead of waiting multiple days for transfers to clear, we can instantly credit the customers’ accounts up to a certain amount, effectively enabling instant trading.

Other clients are working to support new asset classes and similarly innovative products. Beyond the technology, we also approach our pricing schedules in a custom and flexible manner to match whatever revenue model our clients are operating from.

We can support and streamline any and all of these priorities – and it’s all thanks to our unique tech stack, experienced team and custom approach.

Conclusion

If innovation and differentiation are keys to success in today’s markets, then legacy clearing providers inherently serve as obstacles to that success. “Good enough” isn’t good enough if it hampers your ability to achieve your vision and stand out from the competition. At RQD, we pride ourselves on offering the technology, people and support necessary for our clients to chart their own course, no matter what that may look like.

In continuing to hone our custom approach, we hope to not just aid our clients, but by extension bring about better outcomes for investors, greater market efficiency and innovation across the industry.

Interested in learning more about how we can build a solution that meets your every trading need? Get in touch with us via [email protected]