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.

Tradeweb Completes IPO, MarketAxess No Longer Lonely…

"There is no avoiding pain, especially if you’re going after ambitious goals." - Ray Dalio The dominoes started falling years ago. It is only now - last week, on 4 April, to be precise - that we receive a new perspective on the data. Here's the setup: Quantitative methods and automated trade workflows started to shift the consumption of market data from eyeballs to servers way back in the 1990's. As automation of front-office (i.e. - signal generation) and middle-office (i.e. - trade execution) increased, the shift of market data consumption from eyeballs to servers increased as well. When the austerity regimes of the post-GFC period hit in 2010 and after, the convergence with the quantitative migration caused the shift in market data consumption to accelerate. Lower-cost cloud-based offerings for less-intensive use cases only exacerbated this shift. Those market data solution providers that were more heavily weighted to equity markets and revenue concentrations to the sell-side were hit the hardest. We can see these dynamics play out in the Eikon [...]

By | 2019-04-10T23:14:14+00:00 April 10th, 2019|Alphacution Feed|

The Global Stock Market: More of These, Less of Those

"Learn how to see. Realize that everything connects to everything else." - Leonardo da Vinci Given our ongoing fascination with 13F reports and the undulating list of 13F securities, which recently gave rise to our post, US Stock Market: Made of These, we have now turned to our old friends - and the data they curate - at the World Federation of Exchanges (WFE) to 1) corroborate some of our findings from the 13F dataset, and perhaps much more importantly, 2) assign a more global perspective to our ongoing analysis. So, with that said, here are a few tasty tidbits to chew one while we bake this research into a more comprehensive meal behind the scenes: In the Exhibit below, Alphacution presents aggregate global stock listings for the full sample of 192 months beginning January 2003 and ending December 2018. Today that figure stands at ~52,000 stock listing among the WFE member exchanges. Meanwhile, the portion of global stock listings in the Americas region - which includes US, Canada, Latam [...]

By | 2019-04-04T01:09:30+00:00 April 4th, 2019|Alphacution Feed|

Jim Simons, Godfather of the Quants: Hiding in Plain Sight

"Don't let the noise of others' opinions drown out your inner voice." - Steve Jobs "There is no real substitute for common sense - except for good luck, which is a great substitute for everything." - James Harris Simons It was the late 90's, a time when the moniker of "Godfather of the Quants" may have still been open for debate. Edward Thorpe, of Princeton / Newport Partners and among the first mathematicians to study patterns in financial markets, was still active. And, the protagonists for the fascinating tale about beating a Vegas roulette wheel with custom made computers embedded in their shoes (and told in the book, the Eudaemonic Pie), Doyne Farmer and Norman Packard, were still active at the Prediction Company, a unit of UBS O'Connor (which, BTW, was later sold to Millennium in 2013 and ultimately shut down in 2018 with a 27-year stat arb strategy track record including only one down year). And yet, today, the legacy that seems to remain the strongest is that of [...]

By | 2019-04-04T00:29:46+00:00 April 3rd, 2019|Alphacution Feed|

Citadel’s Secret Special Sauce (Updated)

As excerpted from the case study, Deconstructing Citadel Securities Alphacution believes that Citadel’s core competitive advantage – its secret sauce – can be found on display every day, out in the open, and is not related to a specific product, asset class, region or even a specific trading strategy or temporal wave of theoretical alpha. No, the thing that makes Citadel so unique is its focus on process. You just need to know what to watch for. Everything this company does has first been disassembled and deconstructed down to its smallest, atomic parts and then reassembled with a maniacal sensitivity to details, best-practices and processing – whether that be a decision-making process or a data management process or a strategy launch process. In all activities front-to-back, this team seeks opportunities for efficiency and to catalog incremental intelligence at every step. And though the company has developed a stellar reputation for the application of technology to its workflows, it is only by virtue of the additional ingredients of culture and excellence [...]

By | 2019-04-04T00:27:04+00:00 March 30th, 2019|Alphacution Feed|

Robinhood: Payments for Order Flow 2018, Up 227%

The latest figures on order routing revenue are easy to find. With the exception of Robinhood Financial - the new, no commission, retail-focused trading app for stocks and cryptocurrencies - order routing revenue is clearly disclosed by the incumbent trading platforms; namely, TD Ameritrade, Schwab, E*Trade and to a lesser extent, Interactive Brokers. However, in any case, something seems to be heating up as aggregate payments for order flow (PFOF) breaks from the range of the previous five years (2013-2017) to grow 42.3% for 2018, see exhibit below: Now, as for identifying the other side of this ledger - those who make the payments for order flow - that continues to be a bit more opaque. We know who should be on that roster because they are also likely to be a subset of our Top 100 Players in US Listed Market Structure ranking. But that doesn't mean the PFOF figures are dangling from easy-to-find places. To the contrary, they are likely comingled with other figures and obfuscated by aggregated [...]

By | 2019-04-03T21:42:39+00:00 March 29th, 2019|Alphacution Feed|

Citadel Securities: Estimated 2018 Revenue

"Above all else, show the data." - Edward Tufte "Torture the data, and it will confess to anything." - Ronald Coase   While a lot of folks are allowing their attention to be hacked by the latest tweet, squirrel or AI-vowel combo to float by - and the entire landscape begins to suffer from an increasing left-brain imbalance - let's not forget the value of authorship. You know, the thing that reminds you that your "AI" is still just a bunch of nested if-then statements - and can't possibly solve the puzzle you are about to solve for the distant foreseeable future. That kind of "AI" is a snob that can only function on data that is somehow cleaner than reality... Turns out, there remains a ton of valuable data lying around - as I have been saying on our Feed lately - hiding in plain sight. And, it turns out, that that data has been disclosed in small, hard-to-reach, chunks precisely because it's quite valuable once distilled properly, like [...]

By | 2019-04-11T23:13:13+00:00 March 27th, 2019|Alphacution Feed|

Deconstructing Citadel and Why It Matters

Image Credit: Fabian Oefner "The voyage of discovery is not in seeking new landscapes but in having new eyes." - Marcel Proust “Learn how to see. Realize that everything connects to everything else.” - Leonardo DaVinci In my mind, memories of the childhood home are dominated by those of vast spaces. A colossal stairway, a living room like a grand ballroom, the front and back yards both like baseball stadiums. My father is there - like a giant sitting at the head of the kitchen table - savoring his freshly unscrolled newspaper. And yet, upon visiting this place as an adult, it presents itself as your basic 3-bedroom layout - barely 2,000 square feet - with postage stamp yards. It turns out, my memories are somehow locked in when I was the size of a toddler. Perhaps, you share the experience of this illusionary twist of perspective... Recently, listed markets have started to mimic this duality of perspective for me. There was a time when the totality of stocks and [...]

By | 2019-04-03T21:04:19+00:00 March 21st, 2019|Alphacution Feed|

Meanwhile, High Above the Grand Havana Room with Izzy Englander

Image Credit: John Rowady, Havana, Cuba "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. You have to trust in something - your gut, destiny, life, karma, whatever. This approach has never let me down, and it has made all the difference in my life." - Steve Jobs There was a time, years ago, when I had a cigar attached to some part of my body pretty much 24/7. Like a disgustingly satisfying man-binky, if I wasn't smoking it, I was definitely chewing on it - and it didn't matter where I was. Polite company or public spaces did not deter the guile to sneak a chomp on the soggy end of a previously-lit robusto. And then, Cigar Aficionado magazine came along and ruined my enjoyment with the oncoming herd of the impending fad. Now, this is not to suggest that there aren't occasions - usually a golf outing or as an accompaniment to a fine bourbon - that [...]

By | 2019-04-03T21:02:49+00:00 March 14th, 2019|Alphacution Feed|

Marshall Wace’s Book: Hiding in Plain Sight (in London)

"There's an old saying: If you want to hide the treasure, put it in plain sight. That way no one will see it." - Larry Dossey It was only a matter of time. Sooner or later, Alphacution would need take its analysis further out on the road. Sure, we recently sent a warm shoutout to the AmsterdamTrader with our article focused on Optiver and IMC, so this would not be the first time we ventured outside our own backyard. However, in this case, our storyline makes a long overdue heading for London, where fans of Alphacution - both high and low - help point out the next collection of raw grains for our growing sand castle of market intelligence... Today's subject is Marshall Wace Asset Management (MWAM), the $39 billion AUM systematic and quantitative hedge fund powerhouse based in London - and we set the stage for much deeper future analysis by presenting the following shape of the full history of net turnover: Note that the missing 2008 (for obvious [...]

By | 2019-04-03T21:01:49+00:00 March 13th, 2019|Alphacution Feed|

Merging the Market Structure Schematic with the Context Machine

Alphacution's Top 100 Players in US Listed Market Structure schematic (v1.0) was a huge hit last week; breaking almost all content engagement records on our various publishing channels to date. Apparently there is a demand for eye candy. Who knew? While we develop some of the specific underlying modeling that supports that vision, this is a quick teaser for how that schematic fits onto our asset management ecosystem map. It only appears complicated. We are working on some simpler illustrations. There is definitely a method to our madness... 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. We are uniquely focused on harvesting, packaging and distributing intelligence about the impacts of technology in financial markets and on the businesses of trading, asset management and banking. Our growing model library is our intelligence asset. Today, this intelligence asset primarily [...]

By | 2019-04-03T21:00:13+00:00 March 7th, 2019|Alphacution Feed|