Alpaca Successfully Transitions to Self-Clearing at DTCC

Hi, I am Hitoshi, Co-founder & Chief Product Officer at Alpaca. Today, I have big news. Alpaca has successfully transitioned to self-clearing at DTCC. This is a huge milestone since we started a regulated brokerage business five years ago. It’s a pivotal milestone for us 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 phenomenal event proves us as one of the mature players amongst the latest fintech companies.

How thrilling is this? When Yoshi and I started the brokerage business out of Y Combinator, we thought it would be ridiculous to spend so much time and money to become self-clearing ourselves. As our business grew quickly, we learned so much about the inefficiency and too many intermediary layers between customers and the core market, and we found big opportunities to innovate it as part of our mission, to provide financial access for everyone on the planet.

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 are we developer-first and API-first, but also we are a group of true technologists who build with the latest innovations to solve these problems.

Today’s achievement is not just stemming from our technology and cost reasons. Throughout our journey with hundreds of fintech players and hundreds of thousands of developers who come to our platform to build their next dreams, we learned so much about what Alpaca needs to do. Self-clearing opens 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. We are very appreciative of everyone who taught us about this.

Technology Innovation

Alpaca’s proprietary clearing and settlement platform has 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, we 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. Our 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, we introduced our distributed WAL-based in-memory Order Management System, and high-throughput non-blocking ledger for 24x7/365 operations. Not only do these play important roles in this self-clearing, but we have also made another innovation by building a fully event-driven clearing system from scratch. With this architecture, we 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.

Dream Team

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 us believes in Alpaca’s innovative approach, its business future, and the opportunity to change the industry with our own hands and brains, like many of our customers feel. Not only does this team build and run the self-clearing journey, we are also here to provide the best experiences for our customers because we are the same innovative-minded team as our customers are.

Business Opportunities

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. We have already announced that options trading is coming soon, but we can bring more business and product opportunities while we keep enhancing our operational efficiencies for our customer experiences.

In the next few quarters, we hope to reveal more exciting products to both Broker API and Trading API customers. As a matured platform being self-clearing, we are also expecting to expand our segments of customers, such as institutional businesses, U.S. broker-dealer clients, and hedge funds with proven track records.

There is a lot more to talk about for our self-clearing journey, but this is good enough for now. We look forward to accelerating our mission from here.

Let’s keep building!

Hitoshi


Options trading is not suitable for all investors due to its inherent high risk, which can potentially result in significant losses. Please read Characteristics and Risks of Standardized Options before investing in options.

Securities brokerage services are provided by Alpaca Securities LLC ("Alpaca Securities"), member FINRA/SIPC, a wholly-owned subsidiary of AlpacaDB, Inc. Technology and services are offered by AlpacaDB, Inc.

This is not an offer, solicitation of an offer, or advice to buy or sell securities or open a brokerage account in any jurisdiction where Alpaca Securities are not registered or licensed, as applicable.

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