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 techno-operational dynamics, and the business impacts of those decisions, in and for the global financial services (FSI) ecosystem. He is a 30-year veteran of the proprietary, quantitative / automated and derivatives trading arenas with specific expertise in strategy research / implementation, risk management, and technology development. Contact: feedback@alphacution.com; Follow: @alphacution.

@GoldmanSachs, @RBC: First to Put the #GFC in the Rear-view Mirror

Before we dig into the latest numbers, let's level set the motivations here because, in the helter-skelter nature of most people's day, some of this analysis tends to get brushed aside as pedestrian. There is only so much one can do to make a headcount index sexy and provocative. But, this is something folks should be paying attention to. Banks are the biggest employers, the largest providers of services, and the most voracious consumers of technology in the global financial services ecosystem. As innovations strip away their dominance and incumbencies, people should want to know how the dominoes are going to fall because these players are currently interconnected with most everything that goes on in this space... Anyway, preamble (and gentle finger-wagging) aside, here's the setup: Why do we care so much about tracking bulge bank headcount? There are at least two reasons. The first is, well, a bit pedestrian, actually: Since we use headcount to normalize the variance in scale between banks (and other #fintech buyers) in order to [...]

By | 2018-04-27T12:31:24+00:00 April 26th, 2018|Alphacution Feed|

Aite Group Publishes Alphacution’s Asset Manager Tech Spend Study (Press Release)

< Originally published by Aite Group > According to Aite Group’s data and analytics partner, Alphacution, technical and human capital leverage benchmarks can be developed to represent a framework with numerous practical applications for all asset managers. Boston, April 25, 2018 — Understanding patterns in firms’ technology consumption offers unique insights into shifts in both business strategy and operational efficiencies. But the main challenge in discovering technology consumption for the asset management universe is that these firms are mostly private, if not highly secretive; therefore, accessing the right data presents some challenges. Alphacution’s latest report, Estimating Asset Manager Technology Spending: The Context Machine, examines what asset managers are spending on technology and the relation that those consumption patterns have with the scaling of headcount, assets under management (AUM), and strategy selection. “Alphacution believes that this research is a dramatic first step toward extending its techno-operational benchmarking framework to the global asset management universe,” explains Paul Rowady, director of research for Alphacution. “How strong the empirical context is from this initial data set—and the [...]

By | 2018-04-29T23:05:09+00:00 April 25th, 2018|Alphacution Feed, News, Press|

What Does Citadel* Spend on Technology?

Take a deep breath... Focus your attention... Now, consider that there are only about five people on the face of the planet who actually know the answer to our opening question - What does Citadel spend on technology?  Moreover, someone would likely need to hold one of these folks at gunpoint for that executive to spill those beans. The same scenario plays out for a firm like Millennium or DRW or Jump Trading or Two Sigma or IMC or any other privately-held manager. Only a hand full of the most senior people at any one of these mythological shops actually knows the answer to the question: What does [manager name here] spend on technology? Now, if we took one giant step further into the realm of absurdity, and wanted to know what any two or more of these players spend on technology - essentially attempting to answer the question: What does any Manager X spend on technology? - then the odds become significantly more improbable. What are the odds that [...]

By | 2018-05-25T22:46:09+00:00 April 18th, 2018|Alphacution Feed|

Alphacution Publishes Groundbreaking Asset Manager Technology Spending Study

Alphacution has devised a method to arrive at the most highly credible estimate for what any asset manager spends on technology, no matter their level of financial disclosure. And, the implications for that discovery are huge... Clearly, this is a bold, provocative - if not, entirely ludicrous - claim. And yet, we still make it, out here in the open, with confidence - thanks to our collection of data. Here's why: There is a persistent relationship between assets under management (AUM), technology spending, and headcount. The change in these factors is predictable along a continuum of AUM - and repeatable from period to period. With a wink and a doff of the cap to our old pal, Pythagoras, we only need to know two of these factors - AUM and headcount - in order to reliably guess the third - technology spending. (And, sometimes, we only need to know one factor to get in the range...) Here's another way to think of it: If one were to build a "context [...]

By | 2018-05-25T22:46:51+00:00 April 18th, 2018|Alphacution Feed|

Riffs Ep 4 – What Do Hedge Fund Managers Spend on Technology?

Set aside some time to watch Alphacution Riffs Ep 4 wherein we walk through the foundational hypothesis; key highlights; an extraordinary case study involving Citadel, Millennium Management, Point72 and Vanguard (teaser); and, the strategy behind the release of our latest - and, most impactful - study to date, "The Context Machine: Estimating Asset Manager Technology Spending" (April 2018). And, for those of you with a slightly longer attention span, stick around for another "public service announcement" at the end of this one (starting around 11:17) - as we did in the Director's Cut for  Ep 3 - Proprietary Trading, Extreme Automation. The urge to provide value to the human capital component (i.e. - you, me, and everyone in our audience and beyond) - which is actually coming to life as a direct result of our technology focus - seems to be gaining momentum... Enjoy... And, as always, if you value this work: Like it, share it, comment on it - or discuss amongst yourselves -  and then send us feedback@alphacution.com. [...]

By | 2018-04-18T00:22:11+00:00 April 17th, 2018|Alphacution Feed, Video|

Alphacution Riffs Ep 3 – Proprietary Trading, Extreme Automation

This episode of Riffs represents a case study on proprietary trading (including market-making and high-frequency trading) - using our ongoing analysis of Virtu Financial, including its recent acquisition of KCG Holdings. Here, we begin to frame our broader research on what asset managers - including hedge funds - spend on technology as well as the migration of automation along the entire strategy spectrum. More details about the publication of Alphacution's asset manager technology spending study - "The Context Machine" - coming up in Episode 4. Enjoy... Director's Cut with "Public Service Announcement":  

By | 2018-04-21T15:08:14+00:00 April 11th, 2018|Alphacution Feed, Video|

Amazon, Google and the Threat of the Digital Frontier

What happens when a company is smart enough, productive enough and wealthy enough to succeed in any business? One thing's for sure: the roster of incumbents and would-be competitors threatened by that kind of company becomes an extremely long list. This is a threat like none other before because never before has a type of company been able to be so disruptive in so many places simultaneously... In unprecedented fashion, the digital era has given rise to a few companies whose dominance symbolize such traits. This story is not particularly new, nor are the names of these digital darlings cause for surprise. Management consulting powerhouses, like McKinsey and Accenture, have been detailing the possible threats of Amazon or Google or Apple on the banking industry for the past three years, particularly since the launch of Apple Pay. All the major media outlets, like Bloomberg, and industry specialist reports, like American Banker, have been watching this story unfold as if they were slowly eating from an endless tub of buttery popcorn. [...]

By | 2018-04-11T00:03:40+00:00 April 11th, 2018|Alphacution Feed|

Alphacution Riffs Ep 2 – Measuring the Pace of Automation

Episode 2 of our new video series, Alphacution Riffs, picks up where Episode 1 left off - and begins to describe our research mission, modeling methodology and research workflow. We also begin to lay the foundation for our "T-Greeks" benchmarking framework that focuses on measuring and comparing "return on technology" (RoT) - otherwise known as "technical leverage" - for banks and asset managers. Here, we describe how much of our core research effort is currently built on the basis of just 3 simple data points collected for a model library that currently represents 200 large banks, asset managers, hedge funds, and even certain proprietary trading groups, among others - more than 250+ FSI-related companies in all - and how each of those models covers several years, with many of our core models beginning in 2005. With these 3 data points and our 360-degree modeling strategy, we can move beyond the benefits of various market-sizing exercises to more impactful benchmarking exercises. This tutorial is important for our clients and broader network [...]

By | 2018-04-25T22:01:21+00:00 March 28th, 2018|Alphacution Feed, Video|

Virtu Financial: More Acquisitions on the Way, If…

When we launched our first trading program at Quantlab in the late 90's, we didn't have direct market access yet. We generated an order list (overnight) that was worked throughout the subsequent market session at the discretion of an algo-equipped executing broker; some of whom now roam the halls at Jefferies / Leucadia. This was the era when 1- to 3-day portfolio turnover was considered fast - SOES bandits were still a thing - and Schwab would soon acquire electronic trading pioneer, CyBerCorp, from Philip Berber - a short drive down the road from our Houston headquarters in Austin, TX. Of course, everyone had nicknames then - as I suspect they still do now. Ed Bosarge, founder of what eventually became Quantlab (after at least 3 prior related incarnations that began for me around 1996), was known as Dr. Evil. Let's just say it's a hair-raising story about a swashbuckling pioneer of applied math involving a hideous toupee... I was known as Mr. Bigglesworth - or, "Bigsy" for short. No [...]

By | 2018-04-25T21:44:49+00:00 March 27th, 2018|Alphacution Feed|

Nasdaq and the Case of the Missing Market Data

In late April 2017, we noticed a new string of dominoes falling at the fast, automated end of the trading spectrum: With Virtu about to gobble up KCG - not to mention additional consolidations of principal trading groups like RGM Advisors (to DRW), Timber Hill (to Two Sigma) and Chopper Trading (to DRW), among others - it seemed pretty clear that one of the next dominos to fall would be in the direct-feed market data space. The question was: To what degree? (See: "Nasdaq Under Virtu Market Data Axe," April 28, 2017) And yet, when we went back to look - via updating our Nasdaq model - this picture showed up: As Paul Harvey used to say: "...And now the rest of the story..." Obviously this trajectory is the opposite of what was expected. Better yet, in a dictionary somewhere is this chart - at least, of late - next to the words, "fairly smooth sailing" or "strong growth." Over the last few years, data products (and the growth in [...]

By | 2018-03-27T21:44:23+00:00 March 22nd, 2018|Alphacution Feed|