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:; Follow: @alphacution.

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|

Jump Trading Confirms Our Congregational Feedback Loop

"...We are not now that strength which in old days Moved earth and heaven, that which we are, we are; One equal temper of heroic hearts, Made weak by time and fate, but strong in will To strive, to seek, to find, and not to yield." - from "Ulysses" by Alfred, Lord Tennyson "It ain't about how hard you hit, it's about how hard you can get hit and keep moving forward. How much you can take and keep moving forward. That's how winning is done!" - Rocky Balboa The clues can be very subtle, but they are there - if you choose to pay close enough attention. We stumbled over one such clue recently. Or, did that clue somehow announce itself to us? You be the judge... Here's the setup: In January 2019, Alphacution published a post entitled, "Jump (Experiments In) Trading, LLC" wherein we note, among other highlights, that there may have been a mistake in one of their 13F filings; specifically, a report for Q4 2014. In [...]

By | 2019-09-04T23:59:25+00:00 September 4th, 2019|Alphacution Feed|

Throwing in the Towel on US Equities? UBS or Credit Suisse Could Be Next…

“Turning points in human consciousness occur when new energy regimes converge with new communications revolutions, creating new economic eras.” – Jeremy Rifkin Like watching a movie in slow motion, this week Alphacution adds some incremental modeling on UBS and Credit Suisse to its recent analysis on bank-owned broker-dealers.  We start with this metaphor to emphasize the caveat that anything observed in slow motion may be prone to some illusion. So, this opening is simply fair warning - and a grain of salt. Also, for those of you who are new to the thread and want to catch up, we started with "Remembering Deutsche Bank: A Market Macro-Structure Canary?" and then followed with "Goldman, Morgan and Deutsche: Comparing Bank-Owned Broker-Dealers in Equities." Both are worth a read... (The rest of us will wait here while you do so.) Anyway, if we were to take Deutsche Bank Securities, Inc. (DBSI) as a guide, wherein 18-year lows of measures like gross cash equities - which is the sum of equities owned and equities "sold [...]

By | 2019-08-29T21:33:42+00:00 August 28th, 2019|Alphacution Feed|

Virtu Financial: The Frying Pan and the Fire

"If you are not growing, you are dying." - Tony Robbins On August 8, Virtu reported Q2 earnings and the stock (VIRT) fell 18%. Non-GAAP EPS came in lower than Street estimates. In addition to the costs of integrating the ITG acquisition, disappointing results in the market making segment were blamed on lower volatility and trading volumes. Now, here's what you're never going to hear from the company: The Frying Pan: Both the market making and execution businesses are under significant spread and fee pressure. If there isn't an ongoing arms race for speed - which there still is - then there's intense competition around execution costs. Payments for order flow continue to rise as a result. And, some are exiting the equities brokerage business... 2. The Fire: They claim to be diversified. They try to become more diversified. And yet, they remain grossly over-weighted to equities and ETFs. The increased balance sheet that resulted from the KCG acquisition has not been lightened up, now 2 years later, despite the [...]

By | 2019-08-27T15:04:48+00:00 August 22nd, 2019|Alphacution Feed|

Alphacution Download Library

"The true sign of intelligence is not knowledge but imagination." - Albert Einstein The following downloadable content represent samples of premium research from Alphacution's ongoing mission to measure, model and benchmark the evolutionary impacts of technology on global financial markets and the trading, asset management, and banking businesses they serve. Inquiries on how to establish enterprise subscriptions and access the complete library of premium content should be directed to UPDATED Executive Summary: Case Study on Susquehanna International Group, LLP In this 55-page, 64-exhibit case study on one of the most legendary proprietary option trading firms of all time - Susquehanna International Group, LLP - Alphacution publishes the next installment in its unprecedented Hiding in Plain Sight series that leverages an assembly of publicly-available data and a growing library of models based on some of the most impactful market participants in the global asset management ecosystem today. The complete case study is available to premium subscribers or via individual report purchase. Executive Summary: Deconstructing Citadel Securities In this 55-page, [...]

By | 2019-08-22T00:54:33+00:00 August 22nd, 2019|Alphacution Feed|

Goldman, Morgan, Deutsche: Comparing Bank-Owned Broker-Dealers in Equities

"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 In a Feed post entitled, "Remembering Deutsche Bank: A Market Macro-Structure Canary?," Alphacution hinted that our modeling of Deutsche Bank Securities, Inc. (DBSI) was really a "first step towards quantifying the ongoing battle between and among bank and non-bank broker-dealers (BDs) and market makers..." Well, perhaps this post is the second step. So, let's briefly revisit why measuring and comparing various BDs at the center of the market ecosystem - otherwise known as the structural alpha zone - might be important: By now, many of you are familiar with Alphacution's asset management ecosystem map and our core hypothesis that since the capacity of alpha is finite, dominant players that operate in closest proximity to sources of liquidity ultimately impact the capacity of residual alpha that is available to be harvested in neighboring sectors of the map, namely the active [...]

By | 2019-08-08T20:48:24+00:00 August 7th, 2019|Alphacution Feed|

According to D. E. Shaw: Strategy Reverse-Engineering Risk

"If you can't join them, beat them." - Mort Sahl In accordance with Rule 24b-2 of the Securities Exchange Act of 1934 (the "Act"), D. E. Shaw & Co., L.P., on behalf of D. E. Shaw & Co., Inc. and their affiliates (collectively, the "Firm"), hereby requests confidential treatment of the information contained in the enclosed Form 13F for the quarter ended September 30, 1998 (the "Form 13F"). Such request is made pursuant to Section 13(f)(3) of the Act, which allows the Securities and Exchange Commission (the "Commission") to prevent or delay public disclosure of information contained in the Schedule 13F. The Firm believes that the information contained in the enclosed Form 13F falls under Exemption 4 of the Freedom of Information Act ("FOIA"), which states that "trade secrets and commercial or financial information obtained from a person that is privileged or confidential" may be withheld from disclosure. In addition, in accordance with Rule 24b-2 of the Act and with Interpretive Release No. 65 under the Freedom of Information Act, [...]

By | 2019-08-09T09:42:12+00:00 August 6th, 2019|Alphacution Feed|

Susquehanna International Group Case Study: Overview and Executive Summary Available for Download

"Research is what I'm doing when I don't know what I'm doing..." - Wernher von Braun Overview The modern capital markets era begins in the mid-1970’s with the emergence and then convergence of three critical factors: derivatives, computers and data feeds. Together, these factors symbolize the birth of the quantitative research revolution and beginnings of trade workflow automation, and therefore, propel the conception of some of the most consequential product developments, trading strategies and trading firms that the financial world has ever known. A subset of the most notable players were the pioneers in the emerging listed option market. In some ways, they were also the pioneers in quantitative research – the “first quant shops” - developing advanced capabilities in the modeling of option pricing frameworks by way of computers and mathematics. Of these, the primary leaders included Chicago’s O’Connor & Associates (OCA), founded 1977; Chicago Research & Trading (CRT), founded 1977; and Hull Trading, founded 1985. Philadelphia was strongly represented by Cooper Neff & Associates, founded 1981; [...]

By | 2019-08-03T10:17:23+00:00 July 31st, 2019|Alphacution Feed|

Ranking Strategy Speed for Top Quants, Market Makers

"When we try to pick out anything by itself, we find it hitched to everything else in the Universe." - John Muir, Mountaineer It's one thing to build models and share insights about specific players in the trading and asset management universe. It's an entirely different thing to perform comparative analysis of that specific modeling to develop various rankings of a community of players. This latter point is precisely where the accumulation of Alphacution's modeling and research is now taking us, and that new level of insight is, frankly, a bit mindblowing. Our previous Feed post that illuminated an apparent anomaly with Jane Street's stock selection strategy was one of our first examples. For this one, we look at a ranking of average stock positions by shares for a selection of leading quant hedge fund managers, market makers and proprietary trading firms.  Now, what's truly fascinating here is if you consider these players in order of average stock position (by shares) you realize that what you are simultaneously looking at [...]

By | 2019-07-29T09:47:18+00:00 July 25th, 2019|Alphacution Feed|