Sanocki has a legal background with stints at a large New York-based law firm, the Securities and Exchange Commission as well as US options exchange ISE, ultimately bought by Nasdaq in 2016. In the past five years he has been leading the legal and compliance programs at Volant Liquidity, a SEC-registered options market maker. He recently became the CEO of RQD Clearing, the clearing firm spun out of Volant in 2021.

RQD is built on cloud native tech using Microsoft Azure. Compared to other clearing firms, RQD has technical advantages such as controlling its own code base and not being constrained by vendor technology, explained Sanocki. Along with that come benefits related to real-time data and a testing environment that mirrors the production environment, the latter which makes it easier for onboarding firms to integrate. Sanocki added that another advantage is “a flexible system to support differing client needs” and that the tech is backed up by a team with expertise in operations, development, and compliance for clearing.

RQD has been onboarding clients since exiting stealth mode in November 2021 at a rate of “several clients each month” and has a “long pipeline of clients that we expect to continue through to 2023”, he added. There are three categories of clients: retail broker-dealers, active traders and institutional. An announcement detailing some of the relationships is expected in Q2.

While integration is straightforward, Sanocki noted that moving away from a clearing firm can be difficult, with a 3- to 6-month cycle between contract negotiations, technology integration, testing, and production. Currently, RQD’s focus has been on broker-dealers that have retail accounts, in part because of the growth of new brokers such as Robinhood and Webull, for example. Initial products are US equities, options and ETFs, with a horizon view to expand to fixed income and mutual funds.

Real-time compliance

Becoming a clearing firm requires going through a lengthy approval process with FINRA, DTC and NSCC for equities clearing and settlement, and OCC for options. Even as a start-up, all compliance requirements are equal to those of any large market participant under SEC and FINRA regulations, said Sanocki.

Moreover, clearing firms face greater scrutiny than any other participant, in part, because they hold customer funds and securities. He added that RQD’s “number one priority is to make sure customer funds and securities are properly segregated and that we keep proper records of cash and securities moving in and out of customers’ accounts.”

Internally, tapping into real-time data eases several compliance and operational burdens. Anti-money laundering checks, for example, can be done quickly and accounts can be opened in seconds. Another aspect of real-time data benefits reporting and internal analysis capabilities for both RQD and its clients. Bespoke reports, which are augmented by push notifications, can be developed and pushed to production the same day.

Sanocki describes the compliance approach as “proactive and high touch”, some which relates to “having an organization-wide culture of compliance and strategy for working closely with clients on compliance related matters.”

For the execution arm of the business, to monitor market abuse, RQD has an external relationship with trade surveillance software firm Trillium to detect manipulation and other prohibited activity. Data protection is backed up by Microsoft for cybersecurity and encryption protocols. For margin and collateral requirements, RQD has real-time risk monitoring, with a model that keeps track of market volatility, concentration risk, and liquidity risk.

“If (clients) have a customer that builds up too big of a risky position and blows out, they can end up losing a lot of money…So being able to see all that in real time is a huge value add,” Sanocki said.

To read the full article, click here.

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Clearing firms are not interested in low latency in the same way the front office is—i.e., how fast a trade can be done. For them, the technology burden is about scale and capacity, the ability to ingest this data reliably and quickly, and reflect it back to their counterparts efficiently, says RQD CTO Jon Fowler.

“The interesting part here is that’s really where most of the risk, or at least a lot of the risk, lives,” he says. “Especially when we’re talking about increased volumes, and especially with options then being leveraged and derivatives themselves, it doesn’t take much slippage to find yourself in a big hole.”

When it launched, RQD wanted to be able to perform all risk management, reconciliations, and monitoring in real time. With that goal in mind, Fowler and his team built the company’s system using its own codebase and with the ability to ingest data from its clearing correspondents in real time. Many back-office providers, in contrast, often bolt their services onto legacy mainframes or clunky databases, Fowler says.

To read the full article, click here.

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Spun out from Volant Trading, RQD supports U.S. equities, options and ETFs, and has three main components – clearing, custody and execution services – all of which are accessible by advanced API. The clearing and custody solutions are fully hosted on Microsoft Azure, eliminating the need for any on-premise infrastructure. Both are highly scalable, offer real-time trade reporting through a web-based GUI and enable automated, paperless account opening.

The colocated trading execution services include smart order routing, an advanced suite of algorithms and ultra-low-latency direct market access (DMA). 

Michael Sanocki, CEO of RQD Clearing, said the industry has been waiting for this type of advanced technology.

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Thus RQD’s mission is to reach out to firms that are “sorely underserved” and “ripe for disruption.” RQD, which officially launched last month, offers a suite of clearing, custody, and execution solutions for broker-dealers in the retail and institutional realms, and for active traders, foreign financial institutions, and proprietary trading firms.

The RQD platform has been live for six months and has been used by multiple broker-dealers for clearing U.S. equities, options, and exchange-traded funds (ETFs), accessed via an application programming interface (API). The cloud-native solutions are hosted on the Microsoft Azure cloud computing platform. Sanocki oversees the strategy and company-wide operations at RQD. FTF News recently got time with him to learn more.

To read the full article, click here.

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Michael Sanocki, chief executive of RQD, said the clearer was spun out of Volant Trading, an established market maker with regulatory approval. However, RQD had to file a continuing membership application with FINRA and also do testing with the DTCC, the US clearing infrastructure.

Sanocki told Markets Media: ‘That entire process took about a year and part of that was demonstrating the entire system.”

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“Clearing, for lack of a better word, is broken. Legacy clearing firms have failed the market,” Sanocki told Traders Magazine.

Today’s clearing and custody solutions leave correspondents with increased risk, additional costs, minimal support, and an overall inability to meet the needs of modern financial institutions, Sanocki said.

He added, that modern technology, flexibility, efficiency, and real-time solutions are what’s required to fix it. 

Sanocki mentioned cloud-native, server-less architecture that allows seamless customization and extension as well as real-time APIs to provide an ‘of the moment’ view into more than just account openings and transfers, but real-time margin, positions, balances and risk. 

To read the full article, click here.

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“We’re seeing a spotlight on post-trade and settlement across all asset classes,” says Stephen Bruel, senior analyst on the market structure and technology team at research firm. “For example, with the prospect of shortened settlement cycles, the industry needs to look at all post-trade settlement work that will need to take place. So the post-trade space is definitely emerging in importance.”

In fact, Bruel says there’s so much focus on post-trade right now that the industry is at an inflection point that may create the opportunity for new, disruptive players such as RQD to emerge.

To read the full article, click here.

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