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This report covers the behind the scenes story of Apex Fintech Solutions: from the curious way it came into existence, to its growing pains that ultimately drove Robinhood away and its little known private equity arm that holds warrants from nearly 100 fintech startups.
In this report, you’ll learn the real backstory:
Dive Deep Into Apex Technical Functionality:
Key trends examined in detail:
Need more context? Talk to one of the 21 Apex experts who helped write this report.
Apex Financial Solutions powers online brokers, robo-advisors, trading platforms and fintech firms in the US by providing clearing and custody services. Indeed, you’d be hard pressed to find a fintech who has not met them or used them at some point. Famously, they powered apps like Betterment, Robinhood and Wealthfront.
Apex made account opening very fast, which attracted a lot of fintechs initially. Traditionally, opening a brokerage account required filling out forms and mailing them in or using an electronic signature platform, Apex was one of the first custodians to offer digital account opening which was a major tailwind for online providers.
Apex makes money in four main areas:
Essentially, by providing technology as a custodian to fintechs, they are able to monetize their clients' underlying cash flows. Their SaaS income itself is negligible as their main goal is to get as many companies as possible to use them, therefore getting more assets under their custody and data on transitions to monetize.
As such, the operational incentive is to keep OPEX as low as possible because a fintech client is in a multi-year contract and has spent the time and technical cost on integration, they’re unlikely to move providers.
17+According to Apex, the company has:
Apex provides trading APIs to online brokers, robo-advisors, trading platforms and fintech firms. They summarize their API features as follows:
Apex powers many trading apps and fintechs, among the most notable clients include:
For full details on Apex's clients, schedule a private call with an Apex expert.
17+The story of Apex starts with Brad Goldberg. After spending 11 years at Microsoft as a product manager working on everything from SQL Server to Windows Vista (during its spectacular crash), Brad moved on to work for the trading firm PEAK6.
Brad joined PEAK6 in 2011, leading their consumer portfolio of apps built on top of its trading platform. Brad used his prior M&A experience to shape up the business and famously spun out and sold OptionHouse from $5M of revenue to a sale to General Atlantic (it was later bought by E*Trade in 2016 for $750 Million).
That early success meant Brad went from division head to overall President of PEAK6 within 2 years in 2011.
Before there was Apex Clearing, there was Penson Worldwide.
The relationship with PEAK6 and Penson started with Options House. As PEAK6 Cofounder Matt Hulsizer describes, “One of the businesses we started was a brokerage firm called OptionsHouse…. We had to pick a custodian or a clearinghouse to help house those trades. And that firm - that was a firm called Penson. “
In 2012, Penson Worldwide approached PEAK6 for strategic support. At the time, Penson was in deep trouble - while not publicly known until later, insiders claim Penson knew that the SEC would come down hard on them for securities lending violations. One industry insider maintains the SEC had approached PEAK6 with an ask to absorb Penson and take it private because its public collapse could destabilize the markets.
Before we get into Penson’s demise - it’s important to understand its scale and operations because that would later become Apex’s starting foundation.
Penson Worldwide, which would later become APEX Clearing, started out its life as a public company facing significant operational risks.
We depend on a limited number of clients for a significant portion of our clearing revenues.” - S-1 for Penson Worldwide
Penson Worldwide was a clearing firm that gained traction fast, scaling to 220 correspondents at the time of its IPO - this would later pose significant market integrity risk and cause the SEC to seek PEAK6’s support to keep the markets stable by taking Penson private.
Within 6 years of its IPO, Penson was in hot water with regulators due to its securities lending practices. Indeed, had anyone looked at Penson’s S-1 closely, it would be evident the firm was much more heavily involved and interested in margin trading than in its core business as a clearing agent. Margin trading is mentioned 129 times in Penson’s S-1 filing.
As disclosed to the SEC: “Penson provided customers nearly $100 million in margin loans secured mostly by risky, unrated municipal bonds”
The SEC would later go after Penson’s CEO for securities lending violations and discover a complex municipal bond scheme - tens of millions of dollars in margin loans Penson executives used fraudulently to mainly to purchase municipal bonds and to fund a horse racetrack and its operating expenses. The racetrack was ran by one of Penson’s directors: Thomas R. Johnson.
According to 2 industry insiders, the SEC began having conversations with PEAK6 in the end of 2010 to take Penson Worldwide private. By the time the horse racetrack disclosure hit the air in May, Brad Goldberg was already preparing to restructure Penson Worldwide - and make it Apex Clearing.
According to Matt Hulsizer, PEAK6 Cofounder, “ The Monday we get a call from the SEC, Securities Exchange Commission, and they said, there’s a problem here. You guys are really good at technology and you understand risk. We want you to help. We want you to send us $70 million by Friday. And I said to the SEC commissioner, I said, look, Mike, it’s - $70 million is a lot of money. There’s immense fraud in his business, and you want it in five days?... It took us 13 days and we closed.” -
Just a few months later, in June 2011, Penson Worldwidewould sell its US operations to PEAK6’s subsidiary Apex Clearing with Brad Goldberg leading the deal and the SEC’s blessing.
Apex Clearing would take on all Penson’s clients - and also some of its liabilities. It would also inherit its (not very reliable) technology.
Metrics for Apex at inception in 2011:
There was more going on than just a transfer of assets and technology. In the shuffle, corporate structure changed in a meaningful way - the expert clarifies that Penson Worldwide didn't truly shut down its operations, but it became restructured into Apex, even maintaining ownership share.
M&A Entity Structure of Penson Worldwide <> APEX Clearing Deal:
This timeline lines up with the SEC filings that follow the merger.
One industry insider shares:
Apex started as a way to wash the bad reputation of the troubled Penson Worldwide. It kept the same technology and people - many bigger customers left back then to safer options like BNY Mellon. That's why Apex went into fintech. None of the veteran brokers would trust the re-skinned Penson Financial.
Another Apex client, who was a customer at the time, says the timing of Apex’s IPO filing in 2023 seemed connected with a key vendor agreement with Broadridge.
The expert shares, “I remember at the time [in 2012] Broadridge gave Apex a 10 year contract to its trading technology - that should have expired in 2022. I’m guessing it got a lot more expensive for Apex to operate and as a customer I definitely felt the prices go up around that time”
SEC public filings leading up to the merger describe the arrangement: "Apex Clearing and Broadridge will enter into a 10-year master services agreement pursuant to which Broadridge will agree to provide Apex Clearing with certain technology and services, similar to those currently provided by Broadridge to PFSI, that are necessary or required for Apex Clearing to operate its securities clearing business following the Closing.”
Apex Clearing was originally a Frankenstein-like platform that was half Broadridge and half Nexa Technologies (Penson Worldwide’s platform).
Nexa Technologies operated as a subsidiary of Penson Worldwide since 2004, two years before its IPO. It was bought after 3 years of partnership between the two companies - where Nexa would act almost like an outsourced dev shop helping automate the heavily manual processes at Penson.
One expert shares:
Nexa was charging Penson through the nose for real-time market data and Level II access. Later I learned all the order routing, and advanced order types and back office administration tools were built by Nexa as well. In my experience, all those are legacy to Apex.
Another long-time industry insider says:
Nexa was building customizable securities trading platforms. Apex learned about this business from them - and started selling software to the clients that stayed from Penson, and eventually to fintechs. They didn't invest anything, just repackaged it. The tech is the same as 14 years ago.
Surprisingly, Nexa itself would be sold not to Apex but to a Canadian company in Quebec.
Apex’s first CEO would beDanny Rosenthal. A known figure inside PEAK6 - Danny started at CTO in 1999 and shuffled around multiple divisions before starting OptionsHouse (the company Brad Goldberg ultimately sold to General Atlantic). He would stay as CEO until 2015 - but he’d come back and forth between PEAK6 and Apex multiple times, most recently to start its crypto division.
The most recent CEO is Bill Capuzzi, a BNY/ Pershing veteran whose installment was meant to stabilize the perception Apex is a stable institutional player.
An Apex client recounts his experience with Bill:
Bill meets every founder coming onto the Apex platform personally. He's a fixture in fintech. I can't think of a fintech founder who doesn't have his personal cell phone.
Another Apex client shares his experience:
Bill has a great reputation but he's constantly on an apology tour. It's clear his team is not as responsible as he is - it's a lot of push and pull to get something resolved, even when he's personally involved.
In 2019 Bill Capuzzi became a partner at PEAK6. With this, came a new priority to meet every fintech onboarding onto Apex — not just to sell the product but also to evaluate startups for investing.
The general attitude at PEAK6 is that Robinhood, famously an Apex customer, was a missed opportunity. Part of Bill’s job became to convince founders to take warrants in place of charging fees. In the first few years as CEO, Bill clocked in the highest metrics of new onboarding.
Apex added 30 fintech startups to its platform in 2015, 25 in 2016.
According to industry insiders, the power players at Apex include:
17+You might have noticed by now that Apex and PEAK6, despite being different entities, are largely run by the same people. They’re also synonymous - inside PEAK6, Bill Capuzzi is part of the team and he appears on the company wiki as part of the leadership team. Apex itself is essentially treated as a business division, not its own business.
PEAK6 is run by Jenny Just and Matt Hulsizer (who are also the original founders). The business is part equity trading, part private equity, part hedge fund, part VC. A simple way to describe them is - there’s not a single deal they’d pass on if they could. At times that meant their ventures ranged from poker/ esports to chicken coops to ferris wheels to - you guessed it - Apex Clearing.
According to an industry expert, PEAK6 started, bought or turned over 15 companies in 24 years. Some of those have spun out, while other brands remain in house. That’s not counting its venture investments or other holdings
A lot of its success in fintech is through being at the right place at the right time - first, being asked by the SEC to take on Penson Worldwide and create Apex Clearing the process, then going into venture capital with Robinhood almost by accident:
“The one thing I would say at that time, Vlad, they couldn’t really pay us. So, they asked us to take equity, which proved to be somewhat serendipitous. I think we can say that now. It doesn’t make us great venture investors, because I think if they’d have offered us cash, we might have taken it.” - Matt Hulsizer, Co-Founder of PEAK6, talking about Robinhood using APEX Clearing
PEAK6 still maintains its original core business- options market making, although now it’s just a part of the overall pie of businesses they operate. They tried to take PEAK6’s trading division public in 2001. While they didn’t succeed, the S-1 gives a lot of information about their trading house’s inner workings and finances.
17+As one PEAK6 portfolio founder cautions,
Most people don't realize Apex Clearing is so tied to PEAK6. I'd say you wouldn't know that unless you're a fintech founder and they tried to invest in you. They tend to be very secretive.
Or they did, at least, at the time of the last IPO attempt. At the time the documentation filed with the SEC paints a murky picture of how Apex and PEAK 6 finances are deeply intertwined with loans, equity and expense sharing arrangements.
As of 2021, PEAK6 owned 80% in Apex Financial Services. Not only that, but Apex consistently pays its parent company for a number of expenses ranging from rent to technology.
Up until recently that included a 2% “gross revenue fee”, according to SEC filings: “The Company also paid to PEAK6 Group LLC a “Revenue Fee” which was equal to 2% of the Company’s consolidated gross revenues.”
PEAK6 also held multiple loans out to Apex, totalling over $200M:
To learn more about Apex's relationship with PEAK6, schedule a private call with an Apex expert.
Apex is loved for its quick onboarding and good API documentation, but particularly for clients at larger firms there are painful growing pains.
| The good | The bad |
|---|---|
| A+ onboarding experience | Many non-automated manual processes |
| Good self-administration tools | "Tech from the 90s" |
| Recent Service Center improvements | Low customer support score |
| Good API documentation | Missing APIs in critical areas |
| High OPEX costs | |
| For more information on Apex functionality, schedule a private call with an Apex expert | |
Apex is known to roll out the red carpet for new clients. In general clients spoke positively of its high-touch onboarding and good API documentation. One client shared:
We're just getting started on our technical integration but so far very impressed by the API documentation and the integration help during onboarding. We're happy we chose Apex.
Longer-term clients had more mixed feelings but were overall still happy with Apex. One client shared:
Yes, dealing with Apex is frustrating. Some days it feels like dealing with the DMV. But the truth is that nothing comes close. There's just no other option on the market that would have allowed us to build our product at this scale.
Another client expressed a similar sentiment:
I know people love to hate on Apex. Without Apex it wouldn't have been possible to build this company and for that I'm incredibly grateful.
Clients reported mixed experiences with Apex's customer support. Recent improvements to Apex Service Center were appreciated but clients said it was thought to get help from technical people at Apex. 'Once you're no longer a sales prospect good luck getting a hold of any technically competent people” said one client.
Many clients struggle with Apex's dated and buggy systems as they scale. One client described Apex's APIs as full of limitations and requiring frequent manual processes to rectify issues. A former Robinhood employee said there were entire department dedicated to handling Apex limitations:
When we still were with Apex we had an entire department sitting on phones dealing with Apex issues all day. There's no way we could have scaled to where we are today with Apex.
And when things go south — there's often little resources from Apex to help, according to one Apex client. The Apex client recalls an experience where Apex miscalculated tax statements for the year:
It was a shitshow. We had to revise thousands of tax statements. Clients were calling and asking questions and we didn't know what to tell them. Apex was doing their usual: deflecting blame. To this day I still have a sour taste in my mouth about it.
One client described Apex as “tech from the 90s”. Another said that was too generous - “more like the 80s”, he said, recounting his experience navigating the “Apex mainframe” to perform certain operations.
One of the names synonymous with Apex is Robinhood- as an early client and a big success, they became a testimonial for other fintechs to join and use the platform.
What very few people outside of both companies know, however, is that this marriage was toxic from the very beginning. Early Robinhood employees have told us that since they could not afford to pay for the platform, they took an investment from PEAK6 instead and were granted free access to Apex. That, in part, played into the friction.
As two ex-Robinhood employees recall:
There were problems at every corner. The account opening was very smooth and everything past that was downhill - our operational costs early on were through the roof from just having to staff ops people to deal with Apex on various client issues all day long.
Some departments are ran by literally one person. If they were out, both us and the client were out of luck. We had to wait more than a week sometimes on a simple issue.
According to another Robinhood employee, it’s not widely known that Apex Financial entered into a JBO (Joint back office) agreement with CapMan (PEAK6 Capital Management LLC) in 2015. That meant some of the critical functions that Robinhood would have to rely on would be affected.
17+Following Robinhood, more large fintechs chose the self-clearing route versus working with Apex. Experts who work for these companies paint a bleak picture of the operational side of Apex Fintech Solutions day to day—
One former Wealthfront software architect shares:
Unfortunately, these brokerage firms are running on legacy systems and infrastructure from the 1960s, and many of their APIs are built on top of semi-manual processes and disjointed systems. This blocks many desired improvements and hinders our ability to achieve end-to-end automation, a requirement to support our growth.
Another client shares:
It cost us a significant amount of the venture capital we raised just to staff a team to deal with Apex operationally. The APIs had so many problems, there were multiple security issues and the phone support felt like dealing with the DMV.
Adding to that, the expert continues:
We learned quickly that there’s one or two people in each department knew the systems and everyone else was not up to par. Engineers would share the names of these folks - then suddenly Apex cut off phone support.
It's a common pattern by now, according to one industry expert:
People get started on Apex and once they start being successful they leave - Apex really needs to figure out how to retain its larger clients.
Another client still with Apex shares the struggles but says it's getting better: “ It was bad in the beginning but as we grew over $1B AUM they started paying more attention to us and we got an assigned contact.”
Launched in 2019, Apex Crypto was Apex's custody solution in the cryptocurrency space. According to one company insider, it entered into a crowded space with high expectations from the start from Bill.
In keeping with the tradition of kafkaesque corporate structuring, Apex did not directly build Apex Crypto but it was instead incubated inside of PEAK6. Apex Crypto was run and started by Danny Rosenthal — if you remember him from a few paragraphs earlier, he’s the first Apex CEO.
After building Apex Crypto, PEAK6 leased it to Apex Financial — with an option to buy. Apex clients were initially intrigued by the offering but Apex was already late to a crowded market. Clients report it had limited functionality and Apex's system struggled to deal with the 24 hour trading cycle of cryptocurrencies.
One Apex Crypto client shares:
It was unusable. Transfers from and to fiat Apex accounts were unreliable and plagued with issues. Apex Crypto had a very limited number of currencies on offer and constant downtime every week. It felt like a second-class citizen.
Another large Apex client shares their experience:
We briefly evaluated Apex Crypto. Boy am I glad we went with Gemini.
Apex was competing with many existing players that had a head start building in the space, like Coinbase Custody, Bitgo or Gemini Custody.
According to one former employee, Apex Crypto was only able to sign up about 30 clients. Competitor Bakkt acquired Apex Crypto for $55M cash with up to an additional $145M to be paid after hitting performance milestones.
The timing wasn't great for Bakkt - only two months later the SEC sued Coinbase and Binance for selling “unregistered securities”. While the SEC battle rages out in court, Bakkt had to delist most of their more risky (read: profitable) coins, ncluding Solana and Cardano.
As fintech has grown as a sector, more and more competitors have been giving Apex a run for its money. The largest is DriveWealth - for context on any of these competitors, schedule a call with an expert.
DriveWealth is an Apex competitor that has ~100 clients compared to Apex's 220 clients. People like it because it has more modern APIs and cleaner technical systems which makes integration faster.
One DriveWealth client shares his experience:
DriveWealth is so much cleaner than Apex. I can't imagine exchanging files over FTP and all the other junk that Apex does.
Cash App is DriveWealth's largest client. Cash App initially went with DriveWealth because they wanted a more developer-friendly product but it's been a tumultuous relationship, according to one Cash App employee:
Our DriveWealth relationship is complicated... They try very hard to make things work for us but it's not easy.
To speak to a DriveWealth expert, schedule a call.
According to clients, Alpaca Markets is a lot easier to use and get started than Apex. Unlike Apex, people can get set up entirely on their own without speaking to sales staff or engaging in a months-long RFP process. It's popular with individual traders and quants and increasingly it's being considered by venture-backed startups and fintechs.
An Alpaca client shares their experience:
Alpaca is great. It's really easy to use and allowed us to prototype and get set up super quickly.
To speak to a client of Alpaca, schedule a call.
Schwab focuses mainly on serving independent RIAs and financial advisors instead of fintechs. It's not as API-focused as Apex, at least for now — in recent years Schwab has been increasingly digitizing and adding APIs. Because of that, it's getting consideration by clients across the board that would have normally gone with Apex or DriveWealth.
Plus, Schwab offers its product for free (speak to an expert for more details about their model). As one Schwab client shares:
We use Schwab at our firm, they don't have a ton of APIs but it's been fine for us so far. It's way cheaper than Apex and people just trust the brand.
The former CEO of Cash App Investing started a new clearing firm to take on Apex, called Embed Clearing. There was a lot of excitement and anticipation with Embed raising $40M from investors like Bain Capital. In 2023, with Embed making large strides challenging Apex's throne, FTX acquired the company for $250M. Problem: they didn't have the liquidity to pay for the deal. In the run up to cobbling together the cash to pay for Embed, FTX triggered a liquidity crunch and the house of cards came falling down. Yes, that's right — according to a DriveWealth insider the acquisition precipitated the fallout of FTX.
Alas: we'll have to wait longer for a modern Apex competitor.
Several other competitors exist, including in specific regional markets or specific verticals. For a full run-down of the competitive market, schedule a call with an Apex expert.
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