Proof Trading Progress Update: 33 Months

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Proof Reading

5 min readOct 1, 2021

As we near our 3 year mark, it is kind of nice to see the summer come to a close. Other than a couple big wins on the client side, this quarter was in a lot of ways a slog. Implementation of our second algo has taken longer than expected, and besides that, most of our time has been spent on operational enhancements and external vendor integrations. Also, our broker-dealer subsidiary went through its first annual FINRA exam. Not exactly the stuff dreams are made of.

Building out and certifying vendor integrations has got to be the most boring, thankless work this industry has to offer (sorry Pre!). Not to mention how depressing it is when you take a look beneath the surface and realize just how mediocre all these various embedded, legacy industry players’ offerings are, along with the vast amount of value they are able extract (extort?) just by the sticky nature of their businesses. No surprise so many folks are eager to scrap the whole system and start anew. But anyway, rant aside, as a new entrant that wants to play in this arena, these integrations are unpleasant but necessary, and at least we are gradually checking items off the to-do list.

On the bright side, we do have some more exciting updates on the horizon:

Release Allison’s white paper on the design of the impact minimization strategy for the upcoming algo (Monday).
Release our new policy on trading data ownership and privacy (by the end of October).
Release the liquidity seeker/impact minimization algo, aka the “Proof” algo, in production (ETA mid-November, and definitely by the end of the quarter).
Rollout our new website (by the end of the quarter).

This should be a busy and exciting quarter. Once we roll out our second algo, we can develop a better understanding of how the quantitative model behaves in the real world and remediate any unwanted mechanical quirks. Then once the mechanics are stable, we can shift our focus back to improving our trading logic through observation, research, and iteration.

Major updates from Q3 2021

Fully onboarded our second pilot client. Clients 3 and 4 are in the final onboarding stages and expected to go live within the next couple weeks, and there are a few more in the process behind them.
Integrated and certified with Omgeo ALERT and CTM, Eze OMS, Virtu Triton, Cowen Westminster, and Babelfish.
We released several pieces of content including an overview of the FIX protocol and our FIX engine implementation, an updated distilled impact white paper, and a report on retail trading by a student Allison advised over the summer.
We received our first press coverage: a feature article in WatersTechnology.
Our co-founder Beau rejoined us in a part-time capacity after completing his 3-month sabbatical. We are very glad to have him back.

Goals from our previous update

Technology

Continue integrations with the EMS vendors used by the next pilot customers.

(8/10) We continued integrating with EMS vendors, though some of these processes have been slower going than we would have liked.

Add features that enhance system scalability.

(3/10) We worked on the technical architecture for some of the auto-scaling enhancements we want to make, but these are not implemented yet. In general, such technical work will be ongoing even after the initial implementation.

Integrate with DTCC Omgeo ALERT and CTM products.

(8/10) We are live in production with both of these integrations. For CTM, some work remains to make the trade matching and clearing process more seamless.

Product/Research

Finish implementation and testing, and release the second algo.

(4/10) We have begun writing unit tests for the unit implementation, and plan to try it out in our UAT environment imminently.

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

(6/10) Our research for the design of the second algo is publication ready, and coming out on Monday. Our research on information leakage is in draft and we are planning to finish it up and release before the end of the quarter.

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

(6/10) We have designed some interesting statistics to add to a typical TCA report, and have been running these on our trading data so far and learning from it. We will soon be releasing the current design of our internal stats (within the next few weeks).

Sales/Marketing

Go live with at least 3 additional pilot customers, and have at least 10 pilot customers in the onboarding pipeline slated to go live within the following 6 months.

(7/10) We had 1 additional pilot customer go fully live this quarter, and we have 2 more on the finish line expecting to flip the switch within the next week or two. We do have several more in the pipeline behind them, although we haven’t been pushing too hard as we have plenty on our plate testing and iterating on the product with our initial pilot customers.

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

(2/10) Ok we haven’t done this yet, but at least we have finally put pen to paper and started planning out our website redesign. We do expect to complete it and roll it out in Q4.

Operations/Regulatory

Successfully complete all annual regulatory requirements (this quarter includes the one-year anniversary of our broker-dealer’s approval).

(9/10) Our broker-dealer subsidiary Proof Services LLC is 95% done with its 2020–2021 annual compliance tasks, and it also successfully completed its first annual FINRA examination.

Goals for the next 3 months