Case Study: History of Jane Street

"I don't stop when I'm tired, I stop when I'm done." - James Bond Alphacution publishes its 125-page, 149-exhibit, 26,000-word case study, "History of Jane Street," with notable expansions into regional, US option strategy and revenue estimation details. The following is the Opening to that report with Table of Contents, including download of the full Executive Summary. Access to this report is available to Premium Subscribers. Subscription and individual report purchase inquiries can be directed to NOTE: No representative of Alphacution has been in contact with any representative of Jane Street Group, LLC or affiliated entities for the preparation of this report. This report is solely based on the author’s interpretation of Alphacution’s ongoing assembly of raw, open-access data; library of contextualized modeling; and, internally-developed content. This report does not benefit from, nor include, any material non-public information (MNPI). Introduction Volatility... It’s like the highest-octane fuel in the engine of every proprietary trading and market making firm – and it is very difficult to capture, harvest or [...]

By |2020-12-03T21:08:05-05:00May 28th, 2020|Open|

Blast Off: First Look at Q1 First Responders

"It is action, not rest, that constitutes our pleasure." - John Adams   Amidst the doom and uncertainty of any unfolding saga, there are always bright spots, if you know where to look. After all, every problem can be an opportunity in disguise. And so, besides the uptick in all things online relative to most things not online during a pandemic lockdown, the expectation has been that there would be some bright spots for listed market first responders - the market makers and high-turnover arbitrageurs - given the unprecedented volatility that erupted in global markets in late February. This week, Alphacution has begun to confirm some of those expectations as critical data necessary to fill in the picture of what actually happened below the unprecedented volatility headlines began flowing... To create the proper gravity of perspective, let's start with average daily volume (ADV) in US cash equity markets for March arriving at more than 15.6 billion shares. This is an all-time high and a level not even remotely approximated since the [...]

By |2020-10-05T16:04:51-04:00April 23rd, 2020|For Subscribers|

Virtu Financial: Musical Chairs

"No good opera plot can be sensible, for people do not sing when they are feeling sensible." - Frank Zappa   On Tuesday, February 11, Virtu reported Q4 and full-year 2019 financials. What follows are a few thoughts and charts on the latest data: Net trading income came in at $228.7 million for Q4 - not great, not terrible - based on a QoQ uptick in core equities; some weakness in global FICC, options and other (whatever that is) relative to Q3 2019; and, flat execution services revenue relative to Q3 and Q2 2019 (basically since the ITG acquisition closed last March). The chart below visualizes an historical quarterly decomposition of net trading revenue components relative to the ratio of SPX realized to implied volatility for the 24 quarters beginning Q1 2014 and ending Q4 2019 to emphasize the importance of unexpected volatility spikes in the grand scheme of profitability for market making and execution firms. When the other components of Q4 2019 NTI became available, we will circle back [...]

By |2020-08-17T07:14:02-04:00February 13th, 2020|For Subscribers|

A Brawl Breaks Out in the Futures Market – Part 2

"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   It's truly amazing what we find deep down in the weeds... The solution to any puzzle starts with the pieces that are easiest to fit into place. Translation: Solutions can start most easily where the most granular data is readily available and easiest to interpret. In this case, and though not (yet) flowing smoothly from a firehose, that means regulatory disclosures based on long positions reported by various trading and asset management firms that correspond with the quarterly-updated 13F securities list managed by the Securities and Exchanges Commission (SEC). At Alphacution, the core mission is to solve, and keep re-solving, a very large puzzle made up of many other smaller puzzles which, themselves, may contain even smaller, more detailed puzzles... Think of this like the claim made by the Kirk Lazarus character in the movie, Tropic Thunder - [...]

By |2020-10-14T22:40:14-04:00October 11th, 2019|For Subscribers|