Hitoshi, Co-founder & Chief Product Officer at Alpaca notes that Alpaca has transitioned to self-clearing at DTCC.
As noted in a blog post, this is a key milestone since they started “a regulated brokerage business five years ago.”
It’s a pivotal milestone for them because this means Alpaca has “joined the deepest layer of clearing and settlement in the U.S. marketplace.”
As it took us years of effort, this event proves them “as one of the mature players amongst the latest fintech companies,” the company claims.
When the founding team started the brokerage business out of Y Combinator, they had thought it would be unreasonable “to spend so much time and money to become self-clearing ourselves.”
As their business grew, they claim to have “learned so much about the inefficiency and too many intermediary layers between customers and the core market, and they found big opportunities to innovate it as part of our mission, to provide financial access for everyone on the planet.”
As explained in a blog post, Alpaca builds a global de-facto financial platform “from the ground up to achieve this mission.”
The traditional brokerage businesses “have been built upon layers on top of layers, with legacy vendor technologies, and pay enormous amounts of money.”
This is one of the things that still “prevent everyone on this planet from having fair access to the desired financial markets.”
At Alpaca, not only do they claim to be developer-first and API-first, but also they “are a group of true technologists who build with the latest innovations to solve these problems.”
Today’s achievement is not just “stemming from their technology and cost reasons.”
Throughout their journey with hundreds of fintech players and hundreds of thousands of developers who come to their platform “to build their next dreams, they learned so much about what Alpaca needs to do.”
As noted in the update from Alpaca, self-clearing is said to “open up many more opportunities for our platform to enable, from seamless asset transfers to securities lending, as well as more sophisticated solutions such as DVP/RVP for institutional trading.”
Alpaca’s proprietary clearing and settlement platform has reportedly “been built with modern architecture in mind.”
It was built from the ground up “with an idempotent event driven architecture.”
In order to facilitate bidirectional communication with DTCC and NSCC, they created event abstraction adapters “for bidirectional external via FIX, IBM MQ and SFTP to simplify the services producing or consuming and improves resilience and fosters composable testing and event sequence replay.”
Their underlying event platform, The Alpaca Universal Transaction System (UTS), uses Flatbuffers “for zero-copy data interchange on top of Redpanda for efficient high-throughput and low latency messaging with elastic tiered storage that scales without sacrificing performance for highly active message topics.”
In the past articles, Alpaca says they “introduced their distributed WAL-based in-memory Order Management System, and high-throughput non-blocking ledger for 24×7/365 operations.”
Not only do these play important roles in this self-clearing, but they “have also made another innovation by building a fully event-driven clearing system from scratch.”
With this architecture, they are ready “for the transition to T+1 that’s coming up soon, but also poised for a foreseeable T+0 future migration as well as current same day settlement for institutional trade processing.”
Self-clearing requires complex business processes, “managing risks of settlement for large numbers of investors, and keeping everything in compliance to protect customers and the markets.”
To run smooth operations and be in compliance with everything required, Alpaca has gathered star players who “bring tons of experience from their past lives in the industry (don’t get it wrong, many of us are from the latest fintech space, not only decade-old firms).”
Why? Because every one of them claim to believe in Alpaca’s innovative approach, its business future, and the opportunity “to change the industry with their own hands and brains, like many of our customers feel. Not only does this team build and run the self-clearing journey, they are also here to provide the best experiences for their customers because we are the same innovative-minded team as our customers are.”
Becoming self-clearing is definitely not a goal, but it is “just the beginning.”
What excites us even more from here is “that this paves the road to building more businesses because of our full control of the process.”
They have already announced “that options trading is coming soon, but they can bring more business and product opportunities while they keep enhancing our operational efficiencies for our customer experiences.”
In the next few quarters, they hope to “reveal more products to both Broker API and Trading API customers. As a matured platform being self-clearing, they are also expecting to expand segments of customers, such as institutional businesses, U.S. broker-dealer clients, and hedge funds with proven track records.”