Alphacution Feed

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 [...]

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 [...]

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. [...]

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 [...]