EXCLUSIVE From Bitcoin 2022: DriveWealth Iterates Embedded Investing Experiences

Detroit-based Benzinga, a media and data provider bridging the gap between retail and institutional investors, sent its team to Miami, Florida April 6-9, for Bitcoin 2022.

During that time, Benzinga sought to recognize the latest innovation in digital assets, and spoke with founders, investors, and beyond.

The following is a conversation with Harry Temkin, the CIO of DriveWealth, a digital trading technology provider of cloud-based, AI-driven brokerage infrastructure.

Benzinga: Hey, Harry, nice to chat with you, again! What has changed since we last spoke at Money 20/20 nearly half a year ago?

Harry Temkin: We launched over-the-counter (OTC) trading in about 100 new names. Top brands like Adidas AG ADDYY and Nestle ADR NSRGY.

There was a lot of demand, from our customers, particularly those who are overseas, and so, we made that available to our partners.

We also extended trading hours. Now, we trade from 4 a.m. to 6 p.m. and we’ll extend a little bit further, shortly, as this is important for our international partners who now get more real-time trading during their daytime than was previously available.

We launched cryptocurrencies, too, starting with Bitcoin BTC/USD and Ethereum ETH/USD.

What makes you stand apart from a lot of your competitors?

Our crypto offering, for instance, is fully integrated into our existing API stack. We normalized the API so customers could use the one stack and easily onboard to both equities and crypto.

Our philosophy is that we wanted the technical effort to be minimal.

We’re providing the liquidity ourselves. That’s really important when you look at the way we’ve built the company. We’re a leader in fractional securities with our fracking technology. We effectively trade every security on our platform, in real-time, down to one ten-millionth of a share.

Every order resides on our tech stack. We’re providing, for a customer, an explicit quote, and we fill their order at that quotation that we provide from our liquidity.

We’re not exhausting out to other markets where there can be volatility. The technology is ours.

Was adding those new features difficult?

Not technically. Those are just different markets. With OTC, you need additional market data to bring onto the platform for the unique quotes.

There are some additional things you need to do, too, but, ultimately, for our customers, there’s nothing they need to change. Those 100 new names are available, and they simply can send an order just like they do with any other symbol.

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With the extended hour's trade, did you have to hire additional staff? How does that all work?

There is the additional staff you have to have. We review all orders as they come in overnight and then, they are released to certain market centers.

At 4:00 a.m., there’s an opening auction on Arca and then, it’s certain markets that can handle these types of orders.

We really did have all of the routings in place via our executing broker – DriveWealth Institutional – which we brought on just not too far ago Cuttone & Company, one of the largest independent NYSE Member firms.

We already have the routes in place, and it’s just a matter of adjusting our systems, so we allow customers to choose if they want the order to participate in the pre-opening or rest and open it in regular way trading.

Explain some of the motivations behind the crypto offering.

It’s been on our strategic roadmap for quite some time. Our partners certainly were seeing a lot of demand from their own customers to enter the market, and we knew it was an important part.

DriveWealth is warehousing liquidity and trading it?

We, effectively, will make markets. We’ll trade the inventory ourselves through very sophisticated algorithmic engines.

We have our own pricing engines and trading models that enable us to make that a profitable venture and enable our customers to work with us on what that spread will be to the customer.

We provide a quotation or price, and we’ll guarantee that fill at that price.

DriveWealth is physically present at the exchanges, right?

We have a presence at the Intercontinental Exchange Inc-owned ICE New York Stock Exchange.

Cuttone is one of the oldest floor brokers of the NYSE, and it’s good for brand and exposure. We’ll often do something called Broker Bootcamp. We’ll invite customers and allow them to spend a whole day on the floor.

They’ll get educated and actually do mock trading.

What’s DriveWealth’s biggest differentiating factor?

Redundant and scalable technology. We’re tried and tested, battle-ready. In having technology that is able to process millions of transactions per second, we can work with some of the biggest wallet providers who want to reward their customers in crypto or stock.

The number of transactions we’re talking about in a day could be tens of millions, alone. You need a platform that’s scalable.

We also have capital. We raised $450 million in our Series D round. A good portion of that capital went directly into our broker-dealer for clearing.

We’re a self-contained, multi-clearing broker-dealer and so one of the things that’s important to us, when we’re at this level, is ensuring we can clear every trade, particularly if there is another sort of meme stocks scenario.

With billions in capital and constant monitoring of risk, we ensure that we will continue trading without any interruptions where some of our competitors don’t have access to that capability.

Also, the fraction share investing is unique. We frac every single security including Berkshire Hathaway Inc Class A (NYSE: BRK-A) which no one does.

It’s an arms race with respect to some of the money some of these crypto exchanges have access to and their intent to consolidate and move into markets like traditional equities. How does this impact DriveWealth?

We want to be the exchange of things. Our technology, today, empowers equities and crypto. We’ll be adding more asset classes as we go down the line and, ultimately, we want to be a one-stop-shop for partners who want access to all these various asset classes.

As we evolve, we want to provide that level of integration across a multitude of asset classes like crypto. As we see into the future, there’s demand for so many varieties of coins, NFTs, and, then, the fractionalization of those things.

There’s going to be a huge demand to fractionalize real-state, art, and collectibles, too; we’re well-suited to evolve and be able to offer that kind of embedded investing experience.