Fintech

Robinhood made stock-trading an app sensation. Parkside Securities wants to take the action global.

Buying U.S. equities is expensive for retail traders overseas. That requires rethinking the infrastructure, CEO Barry Schneider says.

Robinhood made stock-trading an app sensation. Parkside Securities wants to take the action global.

Cross-border stock trading is still too expensive, Parkside's CEO says.

Photo: Bill Oxford/Unsplash

Before Robinhood became the go-to place for commission-free investing — and the focus of Congressional hearings — Barry Schneider was trying to open up equity investing to small investors.

Schneider previously headed Loyal3, which was best known for placing IPO shares in the hands of small investors.

Now he's the CEO of Parkside Securities, which aims to solve a problem Loyal3 faced: building the infrastructure to offer trades cheaply and quickly for retail stock buyers.

"I learned quickly that the infrastructure wasn't up to speed," he said. "Loyal3 and other fintech innovators had cool front ends, but they were dependent on backend operators that were legacy. That compelled me in January 2019 to attack the infrastructure."

Parkside is an extension of what Schneider was trying to do at Loyal3: provide low-cost access to equities for retail investors. When Loyal3 got started, it wasn't possible to scale without compromising performance and provide real-time, low-cost, small transactions, Schneider said. With Parkside, he's offering the infrastructure for trading fractional shares, quickly and cheaply, focusing first on international customers.

It's often difficult for international investors to buy U.S. stocks, unless they are wealthy and have an account with a firm that can buy U.S. shares, said Schneider. Parkside aims to make it easier for international investors to access U.S. stocks.

"We're looking to get more millennial and Gen Z investors," Schneider said. "We want to do that by making sure the experience is easier and also allows smaller increments of investments."

Parkside, which is a clearing broker-dealer in the U.S., will work with counterparties that are licensed in each country. Parkside will be launching next quarter in a "very large country with a very large counterparty," Schneider said.

There are other brokerage-as-a-service companies, such as DriveWealth and Alpaca, that provide trading infrastructure for apps and financial advisers.

Parkside says it's different because it's focusing on fractional share purchases. While other companies have done fractional shares, Parkside says it allows investors to buy virtually any U.S. equity — 6,500 stocks, ETFs and ADRs — with fractional shares, and it has developed technology to ensure that fractional shares are priced the same as traditional shares. Fractional share prices typically receive worse pricing than whole-share purchases, Schneider said.

"It's all algorithmic-driven. As a rule our customers always get [National Best Bid and Offer] or better pricing," he said. "What we'll deliver is fractional shares delivered in real-time with always the best execution. In our system, with the rules of the algorithm, if somebody buys $1 of Amazon or 10,000 shares of Amazon, the price should be the same."

With other brokerages, fractional share orders are aggregated and traded in batches once or twice a day, Schneider said. But that doesn't provide the best prices. Others offer only certain stocks in fractional shares.

Parkside's focus on fractional shares is not just to grab Robinhood day traders, but to enable more international retail investors, because many retail investors overseas make stock purchases of as little as $10 or $1, Schneider said. In China, for example, the market is 80% retail investors and 20% institutional, while the U.S. is roughly the opposite. The average share price in China is $2 to $5 per share compared to about $100 in the U.S., Schneider said. That practice has made fractional shares less needed there.

Parkside was inspired by China's Yu'e Bao, once the world's largest money-market fund, which grew by focusing on small accounts for China's masses. "That inspired me to see the breadth and power of small accounts aligned," Schneider said. "We set about saying: 'Could a broker-dealer in the U.S. exist with that type of unit economics?'"

Parkside plans to work with traditional broker-dealers seeking to offer easier access to U.S. equities to clients, as well as digital banks and other fintechs that are already tech-enabled but need a U.S. partner.

Parkside's team includes President Marco Pellini, one of the first employees at E-Trade and later COO and president of E-Trade Capital Markets, as well as CFO Marc Metcalf, who was president of GE Capital Insurance Services.

Parkside charges its enterprise clients, who then decide how to charge clients or offer free trading, Schneider said.

"Every market has a different structure," he said. "The way people trade in Southeast Asia may be different than in other parts of Asia or Europe. It's not up to us to set that."

Payment for order flow is a practice that came under scrutiny after Robinhood temporarily stopped purchases of GameStop and drew Congressional attention. Parkside has agreements to optimize for price improvement. It can still use payment for order flow but it won't be a priority, Schneider said. "Practical implication is we'll never maximize [payment for order flow]," he said. "It won't be a major source of revenue because it's not a priority."

Parkside will use market makers for trading but will take inventory risk — buying shares — when necessary for fractional shares, Schneider said.

The San Francisco startup has raised $24 million in series A funding led by Shanghai-based Enlight Growth Partners, with existing investors Mubadala Capital, FinTech Collective and Colle Capital, and new investors Peak6 Investments and Entrée Capital.

LA is a growing tech hub. But not everyone may fit.

LA has a housing crisis similar to Silicon Valley’s. And single-family-zoning laws are mostly to blame.

As the number of tech companies in the region grows, so does the number of tech workers, whose high salaries put them at an advantage in both LA's renting and buying markets.

Photo: Nat Rubio-Licht/Protocol

LA’s tech scene is on the rise. The number of unicorn companies in Los Angeles is growing, and the city has become the third-largest startup ecosystem nationally behind the Bay Area and New York with more than 4,000 VC-backed startups in industries ranging from aerospace to creators. As the number of tech companies in the region grows, so does the number of tech workers. The city is quickly becoming more and more like Silicon Valley — a new startup and a dozen tech workers on every corner and companies like Google, Netflix, and Twitter setting up offices there.

But with growth comes growing pains. Los Angeles, especially the burgeoning Silicon Beach area — which includes Santa Monica, Venice, and Marina del Rey — shares something in common with its namesake Silicon Valley: a severe lack of housing.

Keep Reading Show less
Nat Rubio-Licht

Nat Rubio-Licht is a Los Angeles-based news writer at Protocol. They graduated from Syracuse University with a degree in newspaper and online journalism in May 2020. Prior to joining the team, they worked at the Los Angeles Business Journal as a technology and aerospace reporter.

While there remains debate among economists about whether we are officially in a full-blown recession, the signs are certainly there. Like most executives right now, the outlook concerns me.

In any case, businesses aren’t waiting for the official pronouncement. They’re already bracing for impact as U.S. inflation and interest rates soar. Inflation peaked at 9.1% in June 2022 — the highest increase since November 1981 — and the Federal Reserve is targeting an interest rate of 3% by the end of this year.

Keep Reading Show less
Nancy Sansom

Nancy Sansom is the Chief Marketing Officer for Versapay, the leader in Collaborative AR. In this role, she leads marketing, demand generation, product marketing, partner marketing, events, brand, content marketing and communications. She has more than 20 years of experience running successful product and marketing organizations in high-growth software companies focused on HCM and financial technology. Prior to joining Versapay, Nancy served on the senior leadership teams at PlanSource, Benefitfocus and PeopleMatter.

Policy

SFPD can now surveil a private camera network funded by Ripple chair

The San Francisco Board of Supervisors approved a policy that the ACLU and EFF argue will further criminalize marginalized groups.

SFPD will be able to temporarily tap into private surveillance networks in certain circumstances.

Photo: Justin Sullivan/Getty Images

Ripple chairman and co-founder Chris Larsen has been funding a network of security cameras throughout San Francisco for a decade. Now, the city has given its police department the green light to monitor the feeds from those cameras — and any other private surveillance devices in the city — in real time, whether or not a crime has been committed.

This week, San Francisco’s Board of Supervisors approved a controversial plan to allow SFPD to temporarily tap into private surveillance networks during life-threatening emergencies, large events, and in the course of criminal investigations, including investigations of misdemeanors. The decision came despite fervent opposition from groups, including the ACLU of Northern California and the Electronic Frontier Foundation, which say the police department’s new authority will be misused against protesters and marginalized groups in a city that has been a bastion for both.

Keep Reading Show less
Issie Lapowsky

Issie Lapowsky ( @issielapowsky) is Protocol's chief correspondent, covering the intersection of technology, politics, and national affairs. She also oversees Protocol's fellowship program. Previously, she was a senior writer at Wired, where she covered the 2016 election and the Facebook beat in its aftermath. Prior to that, Issie worked as a staff writer for Inc. magazine, writing about small business and entrepreneurship. She has also worked as an on-air contributor for CBS News and taught a graduate-level course at New York University's Center for Publishing on how tech giants have affected publishing.

Enterprise

These two AWS vets think they can finally solve enterprise blockchain

Vendia, founded by Tim Wagner and Shruthi Rao, wants to help companies build real-time, decentralized data applications. Its product allows enterprises to more easily share code and data across clouds, regions, companies, accounts, and technology stacks.

“We have this thesis here: Cloud was always the missing ingredient in blockchain, and Vendia added it in,” Wagner (right) told Protocol of his and Shruthi Rao's company.

Photo: Vendia

The promise of an enterprise blockchain was not lost on CIOs — the idea that a database or an API could keep corporate data consistent with their business partners, be it their upstream supply chains, downstream logistics, or financial partners.

But while it was one of the most anticipated and hyped technologies in recent memory, blockchain also has been one of the most failed technologies in terms of enterprise pilots and implementations, according to Vendia CEO Tim Wagner.

Keep Reading Show less
Donna Goodison

Donna Goodison (@dgoodison) is Protocol's senior reporter focusing on enterprise infrastructure technology, from the 'Big 3' cloud computing providers to data centers. She previously covered the public cloud at CRN after 15 years as a business reporter for the Boston Herald. Based in Massachusetts, she also has worked as a Boston Globe freelancer, business reporter at the Boston Business Journal and real estate reporter at Banker & Tradesman after toiling at weekly newspapers.

Fintech

Kraken's CEO got tired of being in finance

Jesse Powell tells Protocol the bureaucratic obligations of running a financial services business contributed to his decision to step back from his role as CEO of one of the world’s largest crypto exchanges.

Photo: David Paul Morris/Bloomberg via Getty Images

Kraken is going through a major leadership change after what has been a tough year for the crypto powerhouse, and for departing CEO Jesse Powell.

The crypto market is still struggling to recover from a major crash, although Kraken appears to have navigated the crisis better than other rivals. Despite his exchange’s apparent success, Powell found himself in the hot seat over allegations published in The New York Times that he made insensitive comments on gender and race that sparked heated conversations within the company.

Keep Reading Show less
Benjamin Pimentel

Benjamin Pimentel ( @benpimentel) covers crypto and fintech from San Francisco. He has reported on many of the biggest tech stories over the past 20 years for the San Francisco Chronicle, Dow Jones MarketWatch and Business Insider, from the dot-com crash, the rise of cloud computing, social networking and AI to the impact of the Great Recession and the COVID crisis on Silicon Valley and beyond. He can be reached at bpimentel@protocol.com or via Google Voice at (925) 307-9342.

Latest Stories
Bulletins