Passfolio is a product of Passfolio Securities, LLC, an introducing broker, which means that it uses a clearing brokerage for back office support, like settling trades you place. Using a clearing broker is the industry norm when a company like us wants to let its users place trades. Our clearing broker is DriveWealth, a well-known investment platform from U.S., has been in the market since 2012 and its brokerage platform is used by hundreds of thousands of clients in over 150 countries! Below we put some more information clarifying the role of a clearing firm.
Clearing firms have three main tasks:
- Clearing: This is how brokerages make sure that the price and number of shares you expect to give or receive when you place a trade matches the price and number of shares the other person expects to give or receive. Most of this is automated, but every once in a while the numbers don’t quite match, and a human from each clearing firm will step in to iron out the details. This all happens behind the scenes, so you don’t have to worry about it.
- Settlement: Once the trade is cleared, and both the buyer and seller agree on which assets need to exchange hands, the clearing firm oversees the transaction and makes sure each side fulfills their obligation. Again, all of this happens without you having to think about it because the clearing firm acts on your behalf.
- Custody: Once cash or shares settle from a trade, someone has to look after them and keep extremely detailed records of where the assets go. Clearing firms have specific oversight from our regulators that enable us to do this. Securities bought in Passfolio are held in street name by DriveWealth, our clearing broker. It means that they are held under DriveWealth’s name, rather than the name of the user who bought it. Although the name on a certificate is not the user’s name, it is still the actual owner and has all the rights associated with the assets.