Proof Trading Progress Update: Q3 2022

After the emotional rollercoaster of Q1 and the exhausting CTO transition that consumed our Q2, I am pleased to report that this past quarter was one the brightest we have ever had!

At the start of the quarter we posted a list of six major new initiatives for the firm. We wanted to leap forward and put that tough stretch squarely in our rear view mirror. We have made significant headway on all of these initiatives. It feels wonderful to be fully focused on product, research, and client conversations again.

Additionally, Q3 was highlighted by two unbelievable additions to our executive team, Marcio Moreno as CTO, and Nila Das as COO. As I wrote earlier this week, there is no greater joy in running a company than when someone you tremendously admire decides to join your cause. Still a ton more hard work ahead of us, but we are feeling great!

Major updates from Q3 2022

• Marcio Moreno joined our team as VP of Engineering on July 5th, and we just promoted him to CTO effective October 1st. Quite an eventful quarter for Marcio!
• We welcomed Nila Das to our team as COO! (Bloomberg article on Nila and Marcio)
• Built and deployed our first partner algo. More details to come soon.
• Marcio completed his first major code release, a complete overhaul of our production and uat deployment process.
• Allison advised two full-time summer interns and a team of part-time researchers. Their first projects represent improvements for our VWAP algo, and we will be implementing and releasing their research soon.

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.

• (8/10) We spent a great deal of time working with Amazon on ways to improve our existing setup and hopefully migrate to the NY local zone as soon as possible. They are not quite ready to support our needs, but there does seem to be progress.

Continue work on our client portal.

• (0/10) We decided to table this project to focus on other things.

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

• (10/10) We completed integration and certification with Trafix EMS, and we are in the late stages of integrating with Flextrade and Portware. Generally there is not much work for us to do for these EMS integrations as it mostly depends on the vendor, but we try to help where we can and do our part in a timely fashion.

Product/Research

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

• (3/10) We completed an initial design for this algo, but that’s it so far.

Explore potential algo partnership opportunities, and if we decide to proceed with any, complete at least the algo design phase.

• (10/10) We actually took our first partner algo all the way from design to deployment in production this quarter, so we exceeded this goal.

Iterate on the existing algos, including an update to our volume prediction model.

• (6/10) Our quant team completed updated versions of several of our models, including a new form for the the volume prediction model that will be released in the next few weeks.

Publish our quant researcher training materials as a freely available course

• (8/10) These materials are nearly ready to ship, but we haven’t published yet. Soon!

Enhance our capabilities for quantitative research consulting

• (5/10) We now have a trained team of part-time consultants for quantitative research, and we expect to be producing consistent and publishable work using historical market data in the next quarter. We made some progress speeding up our internal processes for tailored research projects for clients, but we still have a ways to go to make this more easily repeatable and scalable.

Sales/Marketing

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

• (7/10) We only went live with 1 client, but we had ~5 new ones begin the onboarding/integration process. I think I have generally been overly optimistic with my expectations around onboarding timelines, especially when third party vendor integrations are involved. We do have pretty good EMS coverage at this point, so hopefully these timelines will actually shrink over time.

Formalize and publish our client pricing policy.

• (0/10) I continue to struggle with the right timing to finalize and publish this. We do have it drafted, and we do use our policy in pricing conversations, but I want to go through the onboarding process with more clients and make sure we’re 100% confident in our approach before making it public. I’ll table this item for now, and come back to it in a few months.

Operations/Regulatory

Begin the process for our subsidiary Proof Services to become a certified WBE broker-dealer.

• (10/10) We made a lot of progress on this front this quarter. We drafted the legal documents, and our broker-dealer subsidiary filed Form CMA with FINRA. Once it receives FINRA approval, it can execute the legal documents and then file for state WBE certification with NY. So far, the process is moving along very smoothly. A big thank you to Shannon at Regulatory Ridge for helping us navigate the process.

Successfully complete all audits and exams.

• (N/A) There weren’t any audits/exams in Q3, but this item will be more relevant this coming quarter, especially around year end.

Goals for the next 3 months

Technology

• Migrate our database to SingleStore Managed Services infrastructure
• Conduct testing in the AWS NY local zone, and relocate our production trading platform there once it is ready.
• Complete all necessary external integrations to onboard new clients in the pipeline.

Product/Research

• Design, build, test, and release our third algo: an aggressive liquidity seeker.
• Publish our quant researcher training materials as a freely available course.
• Complete several quantitative research projects for clients and prospective clients.
• Submit theoretical research on information leakage to a scientific publication venue.

Sales/Marketing

• Go live with at least 3 new clients and begin the onboarding process with at least 2 new clients.
• Develop and begin implementing a more systematic business development strategy.

Operations/Regulatory

• Continue the process for our subsidiary, Proof Services, to become a certified WBE broker-dealer.
• Successfully complete all year end audits and exams.