Proof Trading Progress Update: 30 Months

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Proof Reading

4 min readJul 1, 2021

This quarter has been an interesting one. In some ways, we got a bit of a breather from the intense technology sprint leading up until launch; but on the other hand we still have a mountain of work in front of us, on top of all of the new daily operational tasks that come with being live in production. Plus with Brian now on the team, we have had a massive uptick in client conversations. The good news: the system and algo are working as well as we could have imagined. No significant trading disruptions yet (we documented all of our bugs and improvements so far here), and thanks to Prerak’s automation wizardry, the operational overhead has been manageable. We’ll see what happens as the complexity ratchets up when we onboard more pilot clients, start supporting more complex workflows like Omgeo account opening and post-trade allocations, integrate with additional EMS/OMS providers, and introduce more advanced routing and algo logic (plus the launch of our second algo!). Lots going on, and much more to come!

Major updates from Q2 2021

First quarter of full live production trading!
Deployed several substantial improvements to our first algo, VWAP, including upgrading the dynamic volume prediction logic and introducing order amendment logic.
Integrated and certified with Bloomberg EMSX. Contracted and began integration with Omgeo, Eze OMS, and Virtu Triton.
Published several pieces including a full overview of our tech stack (our most popular blog post ever!), a deep dive into our message bus, a breakdown of responsibilities across the team, and our thoughts on statistical noise and the value of publishing negative results.
Our co-founder Beau began a 3-month sabbatical, and our junior quant Matt Schoenbauer left the firm at the end of June. This was our first experience with employee attrition — but don’t worry, Proof isn’t going anywhere!

Goals from our previous update

Technology

Integrate with the EMS vendor(s) used by the next pilot customers.

(5/10) We are live with our EMSX integration, and there are two other integrations in progress, but this has been slower going than we would have imagined.

Add features that enhance system scalability.

(1/10) We did not work on this at all, as we spent some time documenting how we built our system, including some deep technical details. We did work on some performance tuning and stability-related projects.

Product/Research

Finish design, implementation, and testing of the second algo.

(6/10) We completed design of the second algo and are currently in the implementation and testing phase. We are targeting releasing it at the end of July.

Publish research on information leakage and the design of the second algo.

(5/10) We haven’t published this research yet, but it is being written up and we expect to publish it by the end of July along with the second algo’s release.

Analyze data from early trading activity and incorporate any resulting lessons into the process of improving the algos.

(8/10) We have made significant strides iterating and improving our first algo based on the experience of these first few months in production. It is still far too soon to start discussing high level performance numbers, but we have learned a great deal already and are pleased with the progress. We will also be releasing the designs of the metrics we use for analyzing our performance in the coming month. This includes a newer version of our “distilled impact” metric which we will be releasing a whitepaper on next week.

Sales/Marketing

Go live with at least 1 additional pilot customer, and have at least 5 pilot customers in the onboarding pipeline.

(7/10) We did not have any additional pilot customers go live this quarter, but we have 3 new pilot customers that are ready to go, gating on Omgeo integration which we expect to go live in mid-July, and several others expected to follow over the coming 6 months. This was a very busy quarter in terms of building new customer relationships.

Launch a new website and a new framework for how we think about progress and goals going forward.

(1/10) Unfortunately marketing took a backseat to technology, product, and client relationship building this quarter. We do still plan to do a website revamp in the coming months, and we have spent a good bit of time thinking about milestones and the roadmap going forward.

Complete our multi-part series covering what it takes to start an institutional equities broker-dealer from scratch (e.g. technology, team, vendors, financials, how to obtain a b-d license, etc).

(9/10) we have now published pieces on the technology, the team, vendors, obtaining a broker-dealer license, choosing a clearing firm, and connecting to the stock market. Our only planned post remaining in this series is a breakdown of our financials/costs in getting to this point.

Operations/Regulatory

Continue to automate operational processes, including integration with CAT CAIS and 606 reporting.

(9/10) We have automated nearly all day-to-day operational processes, and we integrated with CAIS and built out 606 reporting functionality.

Goals for the next 3 months