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.

Fidelity’s Concentration Risk

Picking up where we left off with Fidelity's unprecedented shift in total (13F) position count in late 2018, we turn to another anomoly disclosed by our modeling: In the exhibit below, Alphacution presents its position concentration analysis for the entire 25-year 13F record for Fidelity. Here, we are not only looking at the value of the Top 10 positions as a percentage of all 13F positions, but also the fully-loaded Top 10 positions, which means across all reporting entities. We also look at the largest position as a percentage of total position value and the isolated Google / Alphabet values, since Class A and Class C shares were both in the Top 10 for a while. Anyway, long story short: What does it mean when Fidelity doubles its (13F) positions from roughly 5,500 to 10,100 - which in this case is likely all US stocks positions since there is not likely to be much if any short positions - at the same time that the aggregate value of the Top [...]

By | 2019-05-29T14:01:30+00:00 May 9th, 2019|Alphacution Feed|

Virtu Financial: When Life Imitates Art

"Life's just this game of inches. And, the inches we need are everywhere around us." - Al Pacino If it's any consolation, the original version of this started with a shout-out to Doug with a tribute to Duncan Keith, former defenseman for the 2010 Stanley Cup champion Chicago Blackhawks, who lost 7 puck-stopping chicklets in their series-clinching win of that year's Western Conference run for Lord Stanley's cup. Hockey stud that he was, Duncan returned to finish the game... No, instead, the modeling and charting overpowered even that gem of an opening to give you another timely tribute to our Avengers after last week's ode to Ant-Man and the Wasp... After all, we are committed to hacking your attention with Inception-like layers of metaphors to keep you entertained while serving up the latest morsel of intelligence about the trading and asset management world. Here's the gist for this one: Though it's disclosures about key attributes of  their business are quite good relative to others, Virtu - like any other public [...]

By | 2019-05-29T14:03:21+00:00 May 8th, 2019|Alphacution Feed|

After 25 Years, Fidelity Shakes Things Up

“Learn how to see. Realize that everything connects to everything else.” ― Leonardo da Vinci While it is true that we spend alot of time and energy of late exploring certain deep-in-the-weeds aspects of the trading world, if you think that we are only interested in providing intelligence about that neck of the woods then you may have lost the plot here. What is going on deep in those weeds has impacts on what appears to be the wide open spaces (where many traditional and less automated strategy managers operate). But, it also turns out, the traditional segment of the ecosystem has an impact on the cutting-edged segment, too. It's all a feedback loop - and this teaser is intended to provide a taste of ballast for the players that operate in that different, more traditional, region of our asset management ecosystem map. Fidelity is one of the largest asset managers in the world based on a long track record of success. From the vantage point of their 13F filings - [...]

By | 2019-05-29T14:04:00+00:00 May 2nd, 2019|Alphacution Feed|

Tower Research Capital: Keeping It Real…Tiny

“I can do this all day.” —Steve Rogers In honor of the big Avengers Endgame opening last week, I thought to pay a little tribute to Ant Man and the Wasp for this one... Like many of the trading firms we have been focusing on recently, Tower Research Capital (TRC) has a market making unit - Latour Trading - and a proprietary trading unit - Tower Research Capital Investments (TRCI), both of which are based on high-performance technologies, quantitative methods and extreme levels of workflow automation. (BTW, if you read the Citadel Securities case study summary then you might already be hip to what we are calling a nested alpha architecture. If not, now worries. We will be highly redundant about it.) Perhaps because we have been focused on some of the biggest market makers, prop firms and hedge funds in and around our structural alpha zone - plus knowing that TRC boasts a global headcount of roughly 900 folks - we were expecting to find something else in their [...]

By | 2019-05-29T14:04:40+00:00 May 1st, 2019|Alphacution Feed|

Susquehanna and the Option Gods: Hiding in Plain Sight

“The problems are solved, not by giving new information, but by arranging what we have known since long.” - Ludwig Wittgenstein Who are the buy-side's smartest and most powerful players today? Alphacution is working towards a clear answer to this question. Not just a list, but a ranking of the top players in global markets today - starting with the buy-side. Chances are high that the players that earn their way onto such a list - and, rise towards the top - are going to deploy a lot of technology to create a ton of automation (and, speed) to trade a big list of names across product classes, asset classes, regions and complementary strategies. Skipping a more detailed description and justification for now about the qualifications for our "Buy-side Leaderboard," one thing's for sure: The smartest and most powerful players on the buy-side are skilled in derivatives trading. Trading options, in particular, vs. not trading options, is like the difference between 3-dimensional and 2-dimensional chess. Mathematically, it's like the difference [...]

By | 2019-05-29T14:05:26+00:00 April 25th, 2019|Alphacution Feed|

#ICYMI: The King of ETF Trading?

It was a holiday shortened week last week, and a lot of folks were OOO with brain settings dialed to low intensity. So, I thought we would try this one again, keep it short, tight and appropriately entertaining: With the heavy lift of the Citadel Securities case study ink (mostly) dry, we now turn our attention to the next series of puzzles. Generally speaking, the puzzles that captivate in the immediate future include 1) the rankings of market makers, prop traders and quant players (both, buy-side and sell-side, wherever applicable) operating within our structural alpha zone, 2) the ranking of players that are dominant in options trading - the Option Gods, 3) the ranking of players that are dominant in ETF trading, and 4) the subset of these rankings where players are strong across all of these factors. NOTE: If you are not directly involved in or with the market participants and stakeholders in the structural alpha zone, change the channel at your own peril. If you think what is [...]

By | 2019-05-29T14:05:55+00:00 April 24th, 2019|Alphacution Feed|

Deconstructing Citadel Securities: Overview and Expanded Executive Summary Available for Download

Image Credit: Fabian Oefner "Research is what I'm doing when I don't know what I'm doing..." - Wernher von Braun Overview It was July 18, 2018. The scene was the 8th annual CNBC- and Institutional Investor-sponsored Delivering Alpha Conference. One of the main highlights of the event is Andrew Ross Sorkin’s fireside chat-style interview with Citadel founder, Ken Griffin. Among the many topics covered, the discussion confirmed that “1 out of every 5 stocks is trading through Citadel Securities.” In complement to this claim, a Risk.net article, dated November 27, 2018, further revealed that Citadel Securities’ “total market share in US equities now exceeds the 20% it had 12 months ago and the 17% it clocked two years prior.” Assembling these disparate fragments together with a few additional clues of data lifted directly from the Citadel Securities website, it is possible to illustrate a very impressive path that culminates, in Alphacution’s estimation, at a US equities market share of between 23.5% and 25%, as of the end of [...]

By | 2019-05-29T14:07:55+00:00 April 24th, 2019|Alphacution Feed|

The King of ETF Trading?

It's a holiday shortened week and a lot of folks are OOO with brain settings dialed to low intensity. So, we will keep this one short, tight and appropriately entertaining: With the heavy lift of the Citadel Securities case study ink (mostly) dry, we now turn our attention to the next series of puzzles. Generally speaking, the puzzles that captivate in the immediate future include 1) the rankings of market makers, prop traders and quant players (both, buy-side and sell-side, wherever applicable) operating within our structural alpha zone, 2) the ranking of players that are dominant in options trading - the Option Gods, 3) the ranking of players that are dominant in ETF trading, and 4) the subset of these rankings where players are strong across all of these factors. NOTE: If you are not directly involved in or with the market participants and stakeholders in the structural alpha zone, change the channel at your own peril. If you think what is going on here in close proximity to the [...]

By | 2019-04-18T00:04:29+00:00 April 17th, 2019|Alphacution Feed|

Gamification and the Future of (Alternative) Data

"In good information visualization, there are no rules, no guidelines, no templates, no standard technologies, no stylebooks... You must simply do whatever it takes." - Edward Tufte Whether you are a consumer or purveyor of data for the application of financial markets risk transfer, there's something in here for you. Let's start with a quick trip in the Wayback Machine: In a report that I authored for TABB Group that was published in June 2011, "Quantitative Research: The World After High-Speed Saturation," one critical concept presented there that has proven itself to stand the test of time, and I expect to continue to do so for the foreseeable future, is this: "As strategies and quant directives change, the need for effective communication with stakeholders will march in parallel. Though quants are not usually known for their silver tongues, we strongly encourage them to meditate on one word: pictures. Rather than turning your backs on spreadsheets, embrace them as the best solutions for reporting, visualization, collaboration and concept development. At the [...]

By | 2019-04-11T00:26:38+00:00 April 11th, 2019|Alphacution Feed|

Alphacution Download Library

"The true sign of intelligence is not knowledge but imagination." - Albert Einstein The following downloadable content represent premium selections of output from Alphacution's ongoing research 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. Executive Summary: Deconstructing Citadel Securities In this 55-page, 45-exhibit case study on market making powerhouse, Citadel Securities, Alphacution continues to expand its Hiding in Plain Sight series to explore the unique trading engines and business strategies of the most successful, noteworthy - and mythological - asset managers in the world by presenting its latest storyboard based an assembly of data that lies open to the public. Full report available to premium subscribers or via individual report purchase. The Complete Case Study on Spot Trading In this 32-page, 38-exhibit case study on the proprietary option trading firm, Spot Trading, that closed in late 2017, Alphacution showcases the information and insights that can be harvested from a cache of [...]

By | 2019-04-26T11:06:53+00:00 April 10th, 2019|Alphacution Feed|