Paul

About Paul Rowady

Paul Rowady is the Director of Research for Alphacution Research Conservatory, a 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. Contact: feedback@alphacution.com; Follow: @alphacution.

Top 10 Stories of 2018

“Study the science of art. Study the art of science. Develop your senses — especially learn how to see. Realize that everything connects to everything else.” — Leonardo Da Vinci 2018 was a truly fascinating one here at Alphacution, thanks to you... A little over three years into this project - and a ton of diverse, experimental research on the impacts of technology within the global financial services ecosystem - and, in many ways, we have only just begun to hit our stride. This is mainly because of something you and me now have in common: It seems that I have finally figured out how to strike the chords that you want to hear... In 2018, our newsletter grew to be distributed to nearly 20,000 capital markets executives; mainly including those stakeholders related to the most advanced trading strategies and trading operations in the world. For each of the last 15 newsletters, average distribution was ~16,400 and average opens were ~5,500 (or, over 33%). This audience includes most of the founders, CEOs, senior executives [...]

By |2020-10-05T21:24:43-04:00December 27th, 2018|Open|
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Citadel Securities’ Book: Hiding in Plain Sight (Teaser #1)

Image Credit: Liu Bolin “The problems are solved, not by giving new information, but by arranging what we have known since long.” – Ludwig Wittgenstein Like discovering a secret doorway into a long-forgotten section of the Great Library of Alexandria, our recent focus on the data contained in the SEC's Form 13F has been nothing short of captivating. Yes, one interpretation of these reports - the most common interpretation - is that these reports merely represent a fleeting and illusory fragment of an asset manager's holdings. However, if you were hunting for puzzle pieces (to reverse-engineer the inner workings of a complex system) in the equivalent of a sensory deprivation chamber, and then someone lit a match for a split second, the amount of information you could collect off the back of that spark would be profound. In other words, the findings so far from this foray of ours into the 13F analysis has been quite valuable. As we will begin to demonstrate, even fragments of position- and portfolio-level attribution data can [...]

By |2020-10-14T21:50:14-04:00December 20th, 2018|For Subscribers|
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Digging Liquidnet With ITG’s Shovel

"Not that the story need be long, but it will take a long while to make it short." - Henry David Thoreau With the help of our ITG modeling - and a recently discovered S-1 filing for Liquidnet from 2008 - we present the following storyboard. Though some of you will miss the lyrical wordsmithing, this one is presented without the usual auditory accompaniment. Perhaps this will help lubricate some questions from the audience... Using data from our ITG model, and some old financial data from Liquidnet's S-1 filing in 2008, we were able to leverage current headcount and contextual revenue per employee (RPE) estimates to update the current revenue estimate for Liquidnet. This is one small example of the benefit of Alphacution's "Sudoku Puzzle" modeling methodology. As always, if you value this work: Like it, share it, comment on it – or discuss amongst your colleagues –  and then send us feedback@alphacution.com. As our “feedback loop” becomes more vibrant – given input from clients and other members of our [...]

By |2020-08-17T07:14:06-04:00December 19th, 2018|For Subscribers|
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Sorry, Virtu. You Still Need a Lift

"Don't get involved in partial problems, but always take flight to where there is a free view over the whole single great problem, even if this view is not a clear one." - Ludwig Wittgenstein For once, there might not be much more to say after a title like this one - and I'm not getting paid to offer strategic advice to the players on this rink - so I will be brief. First and foremost, my hometown Red Wings have recently been replaced in the sub-basement of the NHL's Atlantic Division by the Panthers, so hopefully some things have changed for the better for the boys in the D. Just sayin'. Second, we did a little work to update our Virtu + GETCO + Knight Capital + ITG pro forma modeling, and - uh - how about the good news first? Picking up from where we left off in the most recent post, Virtu, ITG: Much More Than Meets The Eye, which focused mainly on Virtu's Q3 print of [...]

By |2020-08-17T07:14:06-04:00November 29th, 2018|For Subscribers|
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Goldman Sachs’ Book: Hiding in Plain Sight

Image Credit: Liu Bolin "The problems are solved, not by giving new information, but by arranging what we have known since long." - Ludwig Wittgenstein It turns out, there is a ton valuable data lying around, hiding in plain sight - just waiting for any fool to come along and turn it into something else, something greater. And, it also turns out that I am one such fool who is captivated - perhaps even obsessed - with solving puzzles (like this 8,000-piece beauty purchased - unassembled - at the Louvre, on the right); turning what usually appears as scraps of data into something much clearer, much bigger, and much more valuable - like a piece of art. So, you might imagine my excited anticipation to finally work on unlocking some of the value contained in 13F holdings reports. (I know, right?! Who isn't?) Here's the gist: Basically, all institutional investors - whether they be public or private entities - with discretion over $100 million or more of US equity assets [...]

By |2020-08-17T07:14:06-04:00November 28th, 2018|For Subscribers|
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Alphacution Debuts on TD Ameritrade Network

Many thanks to Oliver Renick (@OJRenick) and the team @TDANetwork for this one. We had some fun discussing the IBM-RedHat deal, and the implications for the larger cloud infrastructure and AI segments of the enterprise IT arena. Also touched on some thoughts for NVIDIA, AWS, Google and HPE. Based on our recent post, IBM Hides Watson Under a Red Hat. Link to Video here. It's a good one. Enjoy... As always, if you value this work: Like it, share it, comment on it – or discuss amongst your colleagues –  and then send us feedback@alphacution.com. As our “feedback loop” becomes more vibrant – given input from clients and other members of our network, especially around new questions to be answered – the value of this work will accelerate. Don’t be shy…

By |2020-12-03T21:37:18-05:00November 27th, 2018|Video|
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Virtu, ITG: Much More Than Meets The Eye…

"The real voyage of discovery consists, not in seeking new landscapes, but in having new eyes." - Marcel Proust (1923) “Develop your senses — especially learn how to see. Realize that everything connects to everything else.” — Leonardo Da Vinci (~1500) If you  - like the precious thousands of other professionals, mostly notably from the high-performance end of the global trading spectrum, who will venture this way - have come this far in search of Alphacution's unique brand of irreverent spin on Virtu's 3rd quarter earnings announcement, then you are about to miss most of the intelligence that is on offer from the growing portfolio of evidence that we are assembling here. Yes, our modeling and charting and narratives surrounding this latest catalyst from Virtu - along with its and others' exploits in this rare corner of the financial world - can be found here and throughout our Feed. But, for those who choose to stretch their go-to frame of perspective, there is much more going on here than initially meets the eye... What is actually going on [...]

By |2020-10-14T21:44:34-04:00November 15th, 2018|For Subscribers|
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Robinhood and Payments for Order Flow

It was a recent father-son (and dog) road trip. Several hours in the car, on our way to support daughter / sister, Emma, at her final regatta of the season. Head of the Hooch in Chattanooga, Tennessee. And, an opportunity for some undistracted conversation. Among the many topics was our ongoing debate about how to trade Tesla (TSLA). Eddie has proven himself to be fairly decent scalper of this volatile name, so I usually ask how he is positioned and the levels he thinks are meaningful. Anyway, it turns out, he is trading on the Robinhood platform - no more than a few shares at a time - and paying zero commissions which, of course, improves his net profitability. This is the main attraction on top of the fact that he can toggle between trading stocks, playing video games, watching YouTube, Instagramming with his friends and listening to music all on the same device. (No wonder he is always wiped out!) So, this got me to thinking about some of [...]

By |2020-10-14T21:50:30-04:00November 14th, 2018|For Subscribers|
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IBM Hides Watson Under a Red Hat

A charitable assessment might have called it an experiment, really; an experiment to find out if the headwinds on the hardware and infrastructure services side of the house could be mitigated to some meaningful extent by perceived tailwinds on the software side of the house. A less charitable assessment might have called it a gamble... But now, with the (Sunday evening) October 28, 2018 announcement that it will be acquiring open source software leader, Red Hat for an astounding multiple of nearly 12x FY2018 revenue, or $34 billion, IBM signals that the promise of the high-profile experiment / gamble within their software group - relabeled, Cognitive Solutions in 2015, and where "Watson" became the poster child for the recent hyperbolic expectations of artificial intelligence (AI) - was not likely to arrive soon enough to stem the internal bleeding caused by competitive threats within the cloud infrastructure services market. With Red Hat, IBM now turns to defend its 3rd fiddle position in the cloud market (just ahead of Google) - which [...]

By |2020-10-05T21:23:58-04:00November 12th, 2018|Open|
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When #ETFs Ate The Beta

These days, making a point - and then creating enough initial magnetism to draw folks' attention further down into that point-making exercise - has become quite an art form. Would anyone even notice if a piece of writing had already been published under a different image and title? Perhaps someday we will perform that exercise. ;-) In any case, this post completes the natural progression of our tour of the three primary segments of Alphacution's asset management ecosystem "map" and our attempt to illustrate the overarching driver that is impacting each of them: automation. We started this tour back in July with the highly popular post, When Market Makers Ate Their Own, wherein we showcased how advancements in technical performance by a declining roster of players had led to the current self-destructive extremes of consolidation and concentration within the market-making zone of our map (since relabeled, structural alpha zone). Following on the heals of that came the post When Hedge Funds Ate Their Own wherein we introduced the hypothesis that [...]

By |2020-08-17T07:14:06-04:00November 11th, 2018|For Subscribers|
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