Paul

About Paul Rowady

Paul Rowady is the Director of Research for Alphacution Research Conservatory, the first digitally-oriented research and strategic advisory platform uniquely focused on modeling and benchmarking the impacts of technology on global financial markets and the businesses of trading, asset management and banking. He is a 30-year veteran of the proprietary, quantitative and derivatives trading arenas with specific expertise in strategy research, risk management, and techno-operational development. Contact: feedback@alphacution.com; Follow: @alphacution.

Schwab and Others Confirm Status as Casinos, Purveyors of Financial Opioids

“Learn how to see. Realize that everything connects to everything else.” - Leonardo da Vinci "There's no such thing as a free lunch." - Milton Friedman Maybe I imagined it, but a couple weeks ago, I thought I saw an article claiming that Jack Dorsey, CEO of the world's largest kazoo - you know, the thing with the familiar harmony and enough dissonance to over-stimulate your reptilian id - was set to replicate Robinhood's free trading platform on Twitter. Sure. Why not? What could go wrong?! All businesses should aspire to thrive on the basis of frictionless impulses and whatever "dumb money" is still left on the face of the planet... Anyway, it seems that the search for that gem of strategic intelligence may have been catalyzed by recent announcements by none other than Schwab, Fidelity, E*Trade, TD Ameritrade, and Interactive Brokers - which is pretty much everyone within spitting distance of the retail brokerage universe - that they were all dropping commissions on stocks, ETFs and options to $zero. [...]

By | 2019-10-13T20:11:55+00:00 October 11th, 2019|Alphacution Feed|

DRW, Jump and…Latour Trading?! A Brawl Breaks Out in the Futures Market – Part 2

"You can't connect the dots looking forward, you can only connect them looking backwards. So you have to trust that the dots will somehow connect in your future." - Steve Jobs   It's truly amazing what we find deep down in the weeds... The solution to any puzzle starts with the pieces that are easiest to fit into place. Translation: Solutions can start most easily where the most granular data is readily available and easiest to interpret. In this case, and though not (yet) flowing smoothly from a firehose, that means regulatory disclosures based on long positions reported by various trading and asset management firms that correspond with the quarterly-updated 13F securities list managed by the Securities and Exchanges Commission (SEC). At Alphacution, the core mission is to solve, and keep re-solving, a very large puzzle made up of many other smaller puzzles which, themselves, may contain even smaller, more detailed puzzles... Think of this like the claim made by the Kirk Lazarus character in the movie, Tropic Thunder - [...]

By | 2019-10-13T20:24:43+00:00 October 11th, 2019|Alphacution Feed|

Tradebot Systems: There’s Still Room Under the Radar

"Great things are done by a series of small things brought together." - Vincent Van Gogh In late 2001, $1.1 million in member contributed capital is dropped into Northtown Trading, LLC. By 2005, this operation becomes Tradebot Systems, Inc. and the rest has become a notable component of  high-frequency trading history - and mythology. In comparison to much of our other modeling, we don't know much about Tradebot. However, given the contextual evidence provided by that other modeling, we can leverage the data we do have on Tradebot much further than we'd otherwise be able to. For the trained eye, the exhibit below - wherein Alphacution presents the total assets and a summation of cash and net receivables found in Form X17A5 for the years beginning 2001 and ending 2018 - shows that this trading operation is mostly holding cash and receivables from brokers. This means that they're position exposure is limited, which further means that they are trading fast enough - and small enough - to be (mostly) flat [...]

By | 2019-10-03T00:19:30+00:00 October 3rd, 2019|Alphacution Feed|

DRW, Jump: A Brawl Breaks Out in the Futures Market

“All profound distraction opens certain doors. You have to allow yourself to be distracted when you are unable to concentrate.” - Julio Cortázar Sometimes we are working one research project, get a call and then need to go chase a squirrel that is part of a different research project. This is one of those squirrels... And as such, it's a chart that causes a reaction - but, we're not ready to say precisely what our reaction is (title and title image to this post notwithstanding), nor what that might mean. So - like many teasers - we're going to drop it here for now, and then follow up later, except for this: Significant growth in assets is not necessarily indicative of a corresponding increase in profitability, but there may be advantages as a result of scale. Let's see if we can make a stronger case, one way or another, and then come back with that... BTW, the dotted lines signify missing reports... Support the Feed! Individual Subscription Options Annual Subscription : [...]

By | 2019-10-02T21:37:48+00:00 October 2nd, 2019|Alphacution Feed|

Goldman Sachs and the Long Arc of Hull Trading

"And the men who hold high places - should be the ones who start - to mold a new reality - closer to the heart." - Rush, "Farewell to Kings" Strap yourself in for this one, as we take a fascinating and detailed walk through some of Alphacution's recent modeling on one of the long-standing Kings of Wall Street; a story that is on the one hand, not widely known and on the other, not typically spoken of... It was among the most exciting one-two punches of financial markets deals from the late 1990's and very early 2000's; one where Wall Street - much like other financial centers across Europe had done in prior years - had reached out, once again, to LaSalle Street for their unique prowess in derivatives trading. (Alphacution detailed the roster of leading players who were part of this wave of acquisitions in a Feed post focused on Susquehanna International Group - SIG.) In this case, the mighty Goldman Sachs had reached out to acquire Blair [...]

By | 2019-09-30T19:39:47+00:00 September 26th, 2019|Alphacution Feed|

Adding J. P. Morgan Securities to Bank-Owned Broker-Dealer Modeling

"The world is changing, and we recognize that a synergistic combination might be in the best interest of shareholders..." - James E. Cayne Alphacution has modeled the bank-owned broker-dealer operations for the following: Goldman Sachs & Co. Morgan Stanley & Co. Deutsche Bank Securities, Inc. UBS Securities, LLC Credit Suisse Securities (USA), LLC We now add J. P. Morgan Securities, LLC - formerly known as Bear Stearns & Co... Here's a brief summary of what that analysis shows, so far: Relative to the other five bank-owned broker dealers in our sample to date, J. P Morgan Securities ranks as the largest by total assets, as of year-end 2018: Relative to the other five bank-owned broker dealers in our sample to date, J. P Morgan Securities also ranks as the largest by a measure of gross cash equities - as in, equity securities owned plus equity securities sold, but not yet purchased - as of year-end 2018: Relative to the other five bank-owned broker dealers in our sample to date, J. [...]

By | 2019-09-26T17:49:24+00:00 September 25th, 2019|Alphacution Feed|

(UPDATED) Two Sigma Investments: How To Build A Nested Alpha Architecture

"Education is all a matter of building bridges." - Ralph Ellison   How trading firms, hedge funds and asset managers scale - as in, scale assets under management (AUM) or proprietary capital, headcount, data, technologies, and other operational ingredients to support a growing mix of market strategies when their initial market strategies reach boundaries of performance, liquidity, inventory or competitive challenges - is a significant point of fascination here at Alphacution. This is because scaling - real, sustainable scaling - requires simultaneous and interdependent success in both operational and trading strategies. Scaling also becomes a critical issue to measure and monitor from a market macrostructure perspective if you believe the hypothesis that the capacity of alpha is finite, as we introduced in the Feed post, "The Privatization of Alpha." Because if you believe that there are no constraints on the capacity of outperformance - or, "alpha" - then there is no need to pay attention to how various asset managers scale their strategies and their overall businesses. In this scenario, [...]

By | 2019-09-25T23:16:23+00:00 September 18th, 2019|Alphacution Feed|

(UPDATED) Blackstone Polishes Turd, LSE Bites, And Then…

"Don't hate the player, hate the game." - Jeff Jarrett "Don't hate the player, change the game." - Steve Harvey As we seemingly make a sharp turn from the classically-drunken "I love you, man" phase of the cycle and barrel headlong towards #peakinsanity - as if the wheels are still attached to the clown car blasting along a winding road upon which a noted hedge fund trophy hunter has just stitched a small $99 million coda onto his existing Griff-a-Lago compound (a quarter mile stretch of Florida's "Billionaire's Row" beachfront) as the latest addition to the rest of his discrete, not-compensating-for-anything display of uber-luxury real estate holdings; while some $17 trillion of European sovereign bonds have been issued with negative rates; and, the White House is 6 tweets away from causing the printing press for the global reserve currency to be moved from Mr. Powell's office into the Oval - we now have this: Hong Kong Exchange (HKex) is making an unsolicited $36.6 billion bid for LSE. Sure...  Why not? [...]

By | 2019-09-18T16:58:43+00:00 September 12th, 2019|Alphacution Feed|

Now Wrapped in Pedagogy – Wolverine Trading’s Book: Hiding in Plain Sight

“Not I, not any one else can travel that road for you. You must travel it for yourself.” ― Walt Whitman “The teacher is of course an artist, but being an artist does not mean that he or she can make the profile, can shape the students. What an educator does in teaching is to make it possible for the students to become themselves.” ― Paulo Freire We return to this post, "Wolverine Trading's Book: Hiding in Plain Sight," so soon after it was originally published, to make a critical point. Moreover, the timing of this exercise is particularly relevant given the catalyst that Alphacution was recently - and, to be fair, ever so politely - judged as lacking the level of insightfulness necessary to win an engagement that should have already been in the bag. (It ain't cash 'til it's cash...) Inherently configured as one who is typically long the challenges and short the easy road, and therefore game to make an appeal for what will eventually turn out to be [...]

By | 2019-09-11T23:01:25+00:00 September 11th, 2019|Alphacution Feed|

Wolverine Trading’s Book: Hiding in Plain Sight

"Study the science of art. Study the art of science. Develop your senses. Especially learn how to see. Realize that everything connects to everything else.” - Leonardo da Vinci With this one, we're just going to let the visuals speak for themselves, for now - and see how that goes... I lied... Except for this: We have modeled all the 13F reports we could find on Wolverine entities. With the recent post on Jump Trading in mind, notice anything missing? Support the Feed! Individual Subscription Options Annual Subscription : $275.00 USD - yearly Monthly Subscription : $25.00 USD - monthly Note: Business credit cards and bank accounts can be used via our PayPal payment portal. Alphacution is in the intelligence business. For those of you who are eager to derive greater value from this work and apply that intelligence to your own business interests, Alphacution is offering unaffiliated individual subscription options priced at $275 per year or $25 per month, cancellable at any time. Both of these options include a [...]

By | 2019-09-11T22:59:57+00:00 September 5th, 2019|Alphacution Feed|