Quantitative Trading

Man or Machine: Who Are The Real Trading Champions?

Despite dramatic changes to the fortunes of quantitative trading strategies of late, they still represent the extremes of "technology leverage" in the global markets ecosystem. This means that due to a high level of workflow automation, these types of firms generate more output - as measured by revenue per employee (RPE) - than any others in the industry. Or, so we thought... In the context of its broader research mission, Alphacution has been focused - perhaps even a little obsessed - on modeling, measuring and benchmarking the interplay between the two primary engines of productivity within the global financial services ecosystem: technology capital and human capital. The value of this research - something we call "navigational intelligence" - is to help technology buyers understand where they fit amongst the constellation of peers and competitors, and for solution sellers to understand the needs and spending patterns of their clients. Until recently, high frequency trading and market-making operations - like those found at Virtu Financial and its newly acquired KCG Holdings - [...]

By | 2018-02-28T16:31:28+00:00 September 20th, 2017|Alphacution Feed|

Automation May Require More People

Here's  a quick jolt of provocative thought, just in case your brain - like mine - has become a little soft over these summer months: Talk of AI and various other forms of process automation have reached a fever pitch. With that phenomenon comes a flood of new intelligence - and also a heavy dose of mythology. Sometimes the difference between the two is not immediately obvious. The idea that automation has a tendency to kill jobs is one of those if-then statements that is rarely if ever questioned. In the world of trading, quantitative (aka - automated) strategies have earned a reputation for becoming incredibly successful with few employees, thereby supporting the prevailing wisdom. Well, it turns out that "quant shops" just might scale headcount relative to assets under management (AuM) differently than other managers with other trading strategies - and not in a way that is supported by prevailing wisdom... Alphacution just sent a completed draft of its first major asset manager study over to the editor. This [...]

By | 2018-03-20T16:39:30+00:00 August 24th, 2017|Alphacution Feed|

Investors Beware: #Robo-Blindness Ahead

I'm on the fence when it comes to the "robo-advisory" craze. Clearly, given the gush of venture money and subsequent marketing buzz behind automated trading and investing methods for the masses, lots of very smart folks think that "robots" managing your money (on an highly automated or assisted basis) are here to stay. Note that in 2016 Betterment and Personal Capital bagged rounds of $100 million and $75 million, respectively. Here's the first shoe: Quantitative methods for retail investors were always inevitable once a sufficient level of maturity in the underlying mechanisms had been achieved. In an earlier generation of quantitative trading strategy development (ie - late 1990's), we used say, "You can either fish or sell bait." Meaning, simply, that you can either use your trading signals on a proprietary basis or sell your modeling output for a fee. For those who were good at it, the profitability in the beginning was - or at least could be - far too juicy to sell for a fixed fee. And, frankly, these methods were in a far too formative [...]

By | 2018-02-28T16:34:18+00:00 January 10th, 2017|Alphacution Feed|