"The big question is whether you are going to be able to say a hearty yes to your adventure."Joseph Campbell The intensifying war between that which happens in the dark and that which happens in the light has finally moved equities exchanges fully within Alphacution's cross hairs. Given our belief that leading market makers and other sophisticated, technology-wielding trading firms are disrupting every stakeholder group in the ecosystem, it should come as no surprise to most of our readers that we would eventually arrive here. Since we are committed to following a trail of data - and harvesting insights based on that data - the arc of themes found here on the Feed are biased more to a combination of a somewhat serendipitous and a somewhat informed journey of old-school research than merely targeted at what appears to be popular in the moment. Besides, sometimes we get lucky and serendipity turns out to be prophetic... We don't know what we'll find until we find it, but we trust that something [...]
“It’s not bragging if you can back it up.” – Muhammad Ali While so many seem to be pleasuring themselves with the Tiger King, some of us continue to geek out with the latest data. Now, with March so freshly in the review mirror, certain monthly and quarterly data updates are going to be among our first chances to benchmark the significance of what has just happened in capital markets. We started with a focused comparison of the volatility patterns of the GFC period to the unfolding CVP period here and here, and then detailed the first trading casualties of that volatility here, here and here. Below, is our latest visual of that volatility comparison, where we are beginning to break down the components of volatility represented by the gap and range... Among the more fascinating aspects of this perspective is the illustration that there have been 8 volatility spikes with intraday ranges greater than 20 VIX points since January 2008, and the greatest of these occurred on February [...]
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 [...]
A quick math assignment: @Nasdaq earned $540 million in information services (aka - #marketdata) revenue in 2016, up 5.5% over 2015 (and, not to put to fine a point on it, but this growth is slowing as 2015 v. 2014 was +8.2%). @KCGHQ spent $148 million on communications and data processing in 2016. @VirtuFinancial is on its way to acquiring KCG - and is on record with a strategy to ultimately consolidate both operations onto a single, unified trading platform. No doubt, this is not lip service. What is the impact on Nasdaq - and other exchanges - whose revenue growth has become so dependent on market data sales? If you are ambitious, here's some additional intelligence that you could use in the analysis: (We have more in the can if you need it.) BTW, you have to guess that all #HFT leaders have really spiffy axes, no?