At Clearpool, New Owner, Same Innovation
It has been an eventful year to date for Clearpool Group, as the trading-technology provider was acquired by BMO Financial amid a global pandemic.
While COVID-19 still has most employees working from home and yet to meet face-to-face, Clearpool continues to forge ahead on the innovation that has been its ethos since launching in 2014. The firm has already completed three software updates to its signature Algorithmic Management System (AMS) since the spring, and it expects to unveil major new strategies in the near future, according to company executives.
“We have been out front on transparency, on execution quality, on analytics. We plan to stay there,” said Ray Ross, managing director and co-head of electronic trading. “We have the right structure to do that — if anything, we’re accelerating the pace of change and the pace of innovation.”
Launched in 2014, Clearpool was acquired by BMO this past April. At the time, Clearpool CEO Joe Wald said the deal would “fuel our strategic growth and provide our partners with a more robust AMS that will continue empowering them to achieve better-quality executions.”
Normally a business deal closing might be celebrated with in-office Champagne and dinner out; BMO-Clearpool had to be fêted virtually via Microsoft Teams. Closing the transaction amid the sudden focus on employees’ health and safety and transitioning to work-from-home was a “surreal” experience, Wald told Markets Media on July 30.
“It was a really unique and scary and exciting time to get a deal done,” Wald said. “There was also incredible volume and tremendous volatility in the markets. Our technology performed exceptionally well, and the infrastructure of the marketplace really stood the test of that challenge.”
Wald said BMO’s approach to Clearpool — let it do what it does best while providing the necessary resources — fosters intrapreneurship and has enabled the firm to continue its growth among broker-dealer and buy-side clientele.
“BMO has been very thoughtful and strategic with the acquisition and with the integration,” Wald said. “Large institutions can learn from this, as a model for marrying financial technology companies that have innovation mindsets and creative abilities, with an environment of maturity and structure, as well as incredible opportunities for distribution.”
Outside BMO’s virtual four walls, there is no shortage of market-structure developments Clearpool is monitoring, foremost among them what transparency initiative(s) regulators may come up with in lieu of the recently scuttled transaction fee pilot. There’s also U.S. Securities and Exchange Commission Rule 606, which provides more transparency around order routing; the long-delayed Consolidated Audit Trail; and developing rule changes in Securities Industry Processor governance and content.
“That transaction fee pilot is not going to happen, but the effort to drive transparency and fairness and make sure that institutional and retail clients are getting best execution is going to continue,” Wald said. “There are a lot of things that continue to move forward.”
Ross likened Clearpool to an “innovation intrapreneurial pod” within the Equity Trading Products group at BMO. We’re continuing to look at expansion in regions and asset classes. We’ve continued to grow and add to the R&D and sales teams,” Ross said. “The structure that BMO has set up has really put us in a position to accelerate our pace of innovation.”
They can be used on quantum hardware expected to be available in 5 to 10 years.
Streaming blocks change the basis of matching and price discovery so institutions can find new liquidity.
Clients can fine tune their pricing function via APIs and exposed user-defined settings.
Orders executed away from public markets can have measurable implications on execution costs.
To level the playing field the rules should apply to both systematic internalisers and trading venues.