The System for Clearing and Settling Equities Is Antiquated. This Is About to Change. | Paxos

Charles Cascarilla
3 min readSep 21, 2020


Twenty years ago, the advent of electronic trading and resulting regulatory changes completely changed the equities industry. It opened up access for institutional and individual traders to be able to trade any stock in real-time with better execution. Trading became much more efficient and dynamic, and this led to a huge period of growth and innovation. Unfortunately, while this was all happening on the front-end, the back-end systems stayed largely static.

In fact, today in the US, we are still using the antiquated clearing and settlement infrastructure built many decades ago. The upkeep of this infrastructure and its capital-intensive model is too expensive. With essentially no competition in 40 years, it has languished without innovation. At the same time, US equities trading businesses have faced significant revenue compression as execution fees have dropped to fractions or a penny or even free. Yet, post-trade infrastructure has remained stagnant, leaving participants to pay the proportionally high price — in costs, capital and time.

It does not have to be this way; in a static system, outside innovation is the solution. And we at Paxos are excited to drive that change.

We are upgrading clearing and settlement to meet the speed and efficiency of trading. Starting in the US with Street-side US equities settlement, Paxos has built a platform designed to alleviate market participants’ core concerns with the legacy infrastructure they rely upon today. Our solution, Paxos Settlement Service, is built with the latest technology and modern thinking about how financial infrastructure should operate.

After obtaining No-Action relief through the third quarter of 2021 from the staff of the US Securities and Exchange Commission (SEC), we were eager to prove that we could make settlement better by leveraging new technology. We worked closely with our first-mover clients — Credit Suisse, Instinet and Société Générale — to address their unique back-office needs to launch our pilot program early this year settling live trades. We seamlessly integrated with their systems and have been clearing and settling trades daily ever since. All our early adopters are benefitting from cost savings, unlocked capital and improved operational efficiency. These firms have seen first-hand how a modern clearing platform can operate.

This is only the beginning of the story. In the next chapter, Paxos intends to become a fully registered clearing agency with the SEC. We’ve submitted our draft application to the SEC staff with a goal to become the second Clearing Agency actively settling US equity trades for broker-dealers in 2021. If approved, broker-dealers will have a choice of clearing agency solutions for the first time in decades. We will deliver the benefits of faster, cheaper and more capital efficient to the equities markets — and then to many other assets in the near future.

Originally published at on September 21, 2020.