Proof Trading Progress Update: Q1 2023

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Proof Reading

4 min readApr 4, 2023

It comes with the territory of running a startup that some quarters will be exciting, some will be disappointing, and some will be a grind. The last quarter of 2022 was exciting: we successfully completed a fundraise, went live with some major new clients, and added multiple incredible new hires to the team! By comparison, the first quarter of 2023 was a grind. Nothing at all bad happened, and we were actually very productive. It was just all about the less than glamorous parts of running this business: year-end regulatory and financial audits, new hires completing their requisite FINRA Series exams, mitigating concentrated operational risk by adding new partners on the DMA and banking side, and slowly but surely advancing through the onboarding process with our next round of new clients. All very important, but not exactly the stuff fairy tales are made of.

We did also make good progress on the design and implementation of our upcoming third algo, and we did begin the paperwork/onboarding process with some exciting new client relationships. Now that we have moved up to a larger tier of institutional firms, we are finding the onboarding process generally takes longer than it did with our earliest adopters, so perhaps we just need to recalibrate expectations for how fast things move.

We also placed a greater focus on recruiting this quarter, and we hope to reap the fruits of those labors soon. We have a lot to be proud of, but as always, there is a ton more work to be done.

Major updates from Q1 2023

Proof was highlighted in the press again with an outstanding feature article in Business Insider about our co-founder and President Allison Bishop (paywall). This was a great follow up to the Bloomberg article about Nila and Marcio last quarter.
Allison submitted comment letters to the SEC on two of their recent market structure proposals: the Order Competition Rule and proposed changes to Reg NMS.
Nila published a blog post on common pitfalls and misconceptions around recruiting for diversity.
We certified with Barclays as our second DMA partner to alleviate any concentrated risk on Credit Suisse, and we established an additional banking relationship with Morgan Stanley to alleviate concentrated operational risk from working with First Republic.
Our broker-dealer subsidiary Proof Services conducted its annual PCAOB financial audit and AML audit.
Filed for MWBE certification with NY state.

Goals from our previous update

Technology

Conduct testing in the AWS NY local zone, and relocate our production trading platform there once it is ready.

(5/10) We conducted additional testing with AWS’s local zones, but we don’t feel it is mature enough yet to host our primary trading infrastructure, particularly from a capacity and reliability perspective. We will continue to test and evaluate migrating to the AWS NY local zone as Amazon continues to invest in it.

Complete all necessary external integrations to onboard new clients in the pipeline.

(8/10) No additional EMS or post-trade integrations were necessary for new client onboarding this quarter, but we did largely complete integration with Barclays as our second DMA partner. Development is complete and we are now preparing the Production migration.

Product/Research

Design, build, test, and release our third algo: an aggressive liquidity seeker.

(5/10) We had dozens of client conversations around the new algo, the design is crystalized, and we made good progress on the build. It’s not yet finished, but we hope to release it around the end of Q2.

Publish our quant researcher training materials as a freely available course.

(4/10) Not yet, but imminent!

Submit theoretical research on information leakage to a scientific publication venue.

(6/10) We are making good progress toward this and targeting a conference submission deadline at the end of May.

Sales/Marketing

Go live with at least 3 new clients and begin the onboarding process with at least 2 new clients.

(5/10) While we didn’t go live with any new clients in Q1, we did begin the papering process with 4 new clients, and 3 additional should be underway shortly. As we mentioned earlier, we may have under appreciated how long this tier of larger institutional clients takes to onboard.

Develop and begin implementing a more systematic business development strategy.

(8/10) We continue to make progress through our more systematic approach to outreach; it’s helped us reconnect with some potential clients and cultivate new relationships. We have also decided that our next phase in development will include a dedicated sales hire. We’re full steam ahead in our search for that role!

Operations/Regulatory

Obtain NY State WBE Certification for our broker-dealer subsidiary, Proof Services LLC.

(5/10) We filed for certification in January, but our application has not been processed yet.

Successfully complete all year end audits and exams.

(9/10) These are all largely complete, but there are still a few remaining open tasks.

Goals for the next 3 months