According to Insights Distilled’s recent State of Enterprise Tech report, API-first development is streamlining software, with respondents claiming they are ready to start utilizing APIs at scale, with 43% naming it a top priority for 2023.
Additionally, a survey from Insight Partners’ portfolio company Postma discovered that API-first companies are happier, able to ship code faster, eliminate threats sooner and build higher-quality software. Businesses are increasingly relying on APIs to connect internal tools, replacing traditional information-sharing methods like file transfers, database sharing, and email, modernizing the industry.
Prerak Sanghvi, Vice President of Engineering at Clear Street, has discussed how API-first development is the future of software and how APIs are impacting the space.
Sanghvi joined Clear Street in June 2022 and oversees its Product, Securities Finance, Risk, Electronic Execution Services and Fact Data engineering teams. Most recently, Sanghvi served as CTO of Proof Trading. He also previously served as Head of Venture Technology at IEX Group, Inc. and has held senior roles at RBC Capital Markets, Myrias LLC, and Bank of America Securities.
Clear Street is building financial infrastructure for today’s institutions. Founded in 2018, Clear Street is an independent, non-bank prime broker replacing the legacy infrastructure used across capital markets. The firm started from scratch by building a completely cloud-native clearing and custody system designed for today’s complex, global market. Clear Street’s proprietary prime brokerage platform adds significant efficiency to the market, while focusing on minimizing risk and cost for clients. The firm’s goal is to create a single source-of-truth platform for every asset class, in every country, and in any currency.
Our conversation with Prerak Sanghvi is shared below.
Crowdfund Insider: According to Insights Distilled’s recent State of Enterprise Tech report, API-first development is revolutionizing software, with respondents claiming they are ready to start utilizing APIs at scale, with 43% naming it a top priority for 2023. What’s your reaction to this news? Are there priorities companies still have time to tackle in the back half of this year?
Prerak Sanghvi: In the capital markets industry, well-designed APIs have an endless potential to reduce friction by 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 approaching May 2024 shift to T+1 settlement for U.S. equities and corporate and municipal bonds is a top priority for financial firms this year. This pervasive change will affect nearly every participant in the industry. Clear Street’s API-first platform ensures that all components communicate via established contracts, which allows straight-through processing every step of the way, so this is a straightforward change for us. However, compressed timelines will be a bigger 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 APIs all the way to our customers’ systems. 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.
Crowdfund Insider: How is API-first development the future of software? How will it impact the fintech and prime brokerage space?
Prerak Sanghvi: While APIs have taken hold in other sectors, capital markets infrastructure still largely relies on mainframe technology from the 1980s. The result is fragmented systems and interfaces that leave market participants struggling to react to changes and to meet the needs of data-hungry investors and regulators. For many firms, replacing these antiquated systems would be like removing the engine from a plane in mid-air. It’s time-consuming and difficult to execute with antiquated technology.
It is much harder to add APIs to outdated, monolithic platforms like those used by our competitors, many of whom are in the digitally nascent stage referenced in the Insights Distilled report. These companies often layer modern technology on top of antiquated infrastructure, only providing temporary solutions and creating tech debt, broken processes, and operational inefficiencies.
As a result, 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.
In contrast, Clear Street is building the financial infrastructure of the future on a modern technology stack where APIs are a native part of the ecosystem.
APIs are already starting to play a critical role in buy-side trading strategies and are being leveraged for automated and customized solutions. APIs that deliver rich portfolio analytics or allow trades to be placed based on real-time risk views can provide new insights and streamline complex trading workflows.
Crowdfund Insider: What does an API-first approach mean to you and how necessary is it for companies to have it?
Prerak Sanghvi: At Clear Street, it means building our own unified prime brokerage platform using cloud-native, event-driven, and horizontally scalable technology. Our 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. Since every component of the system communicates internally as well as externally via published APIs, we can upgrade or replace significant parts of our system without affecting the overall platform.
We are dogfooding these platform APIs to build a multi-asset-class prime brokerage product. Today our platform supports U.S. equities, options, and fixed-income, and the goal is to have a single integrated platform that supports any asset class, any geography, for anyone.
Crowdfund Insider: For Clear Street, by utilizing an API-first approach to add new capabilities since inception, where do you see the company in five years from now? How is this approach a competitive differentiation?
Prerak Sanghvi: Clear Street is a prime broker building the financial infrastructure for today’s institutions. In 2018, we started on the bold mission to build a cloud-native prime brokerage platform from the ground up that is designed for a complex, modern global market.
Our tech stack utilizes modern cloud-native infrastructure, including resilient service orchestration, event-driven real-time processing, and scalable data warehousing — a sharp contrast to the batch processing offered by the mainframes used across the capital markets industry. Our entire suite of software systems is built upon this consistent and cohesive technology stack, enabling the components to communicate seamlessly and stay in sync, eliminating the need for tedious reconciliation processes.
Clear Street’s proprietary, API-first prime brokerage platform started with clearing, settlement, and custody, and we’ve scaled to other parts of the market including securities finance, execution, and risk management. Our platform adds significant efficiency to prime brokerage, while focusing on minimizing risk and cost for clients.
Today, we provide clients, from emerging managers to large institutions, with everything they need to clear, custody, execute, and finance U.S. equities and options securities. We’re currently building capabilities for fixed income and futures clearing, which we can do much more efficiently than incumbent prime brokers because of our tech stack.
In the future, our integrated platform will serve a variety of investor types, across multiple asset classes, on a global scale. Our customer-facing APIs will enable new use cases by allowing users to engage with us, their prime broker, programmatically. Customers will be able to integrate immediate feedback and valuable information into their existing workflows and systems.