When Daron Lee set up investment banking boutique XCAP Securities (LON:XCAP) in 2009, the market for small cap stocks had been ravaged by the economic crisis, leaving companies and investors licking their wounds. While he readily admits that some of his friends in the City thought he was crazy to even consider the move, XCAP has nevertheless made a strong start and is now looking to capitalise on better conditions for small caps.

Lee has a habit of making waves in the City. As the founder of Proquote, the stock market data and trading system that he sold to the London Stock Exchange in 2003, the Cheshire-born stockbroker is once again eyeing an opportunity to fix market deficiencies. Together with Chris Potts, a former head of market-making at Evolution Securities, Lee raised £3m to start XCAP before floating it on the Alternative Investment Market last September and raising another £5m to boot. With the rigorous FSA approval process now behind them and two offices – in Cornhill in the City and Wilmslow in Cheshire – up and running, the team is gaining ground.

The landscape for small cap brokers has changed dramatically during the course of the economic crisis. Numerous firms have either switched allegiance to mid and larger cap stocks or merged, closed or collapsed altogether. As a result, the pool of expertise available to smaller companies has been depleted. For Lee, those circumstances have conspired to antagonise already difficult liquidity problems for smaller quoted companies and it is that issue that he is aiming to rectify. To do it, XCAP has been set up as a broker that has market-making at the heart of its operations. Lee wants to build out a full service business that takes the best traits of broking from the past with a technology twist and an added dash of hunger. Companies have warmed to the approach, with the likes of Arian Silver (LON:AGQ) , Medavinci (LON:MVC) , Avacta (LON:AVCT) and Conroy Gold & Natural Resource (LON:CGNR) among those that have signed up. All of them have since seen their trading volumes surge.

Daron, small cap broking has been a challenging part of the market…

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