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.

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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@VirtuFinancial: Yes, There Are More Acquisitions on the Way!

No problem can be solved from the same level of consciousness that created it. - Albert Einstein On October 4, news broke on all the major market news outlets that - after feasting on a meal formerly known as KCG Holdings, Inc. (KCG) in 2017, which itself was a combo platter made up of GETCO and Knight Capital - Virtu Financial, Inc. (Virtu) was returning to the all-you-can-eat buffet to consider the total consumption of multinational agency brokerage and financial markets technology firm, Investment Technology Group, Inc. (ITG). Of course, this news generated a chuckle around here because it seemed that it was not too long ago that someone was predicting that this kind of pairing would make sense for Virtu - if conditions were such that they needed to bolt something else onto their expanded frame. Oh, wait a sec, that was us... To wit, from Alphacution's post "Virtu Financial: More Acquisitions on the Way, If..." (March 27, 2018): "One other notable move for significant growth for a firm [...]

By |2020-08-17T07:14:06-04:00October 31st, 2018|For Subscribers|
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Adventures in Speed: @VirtuFinancial, @FlowTraders

“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 (~1500) It has been a little while - since here - that we updated our analysis on the market making and high-speed trading strategy end of the playing field. And, during that time it came to our attention that our friends at Flow Traders N.V. (FT) had begun to feel a little left out of the fun. After all, it seemed we had inadvertently given that impression by showcasing our thoughts on Virtu's progress and outlook as if it were the only remaining stand-alone public market making firm - now that the KCG acquisition had closed. (For those of you who are just joining us, you might refresh the thread on prior work around this topic, most notably, here...) Personally, I don't think Virtu will mind sharing a bit of the spotlight. With the Panthers near the basement of the NHL's Atlantic division, [...]

By |2020-08-17T07:14:06-04:00October 23rd, 2018|For Subscribers|
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Vision and the Pace of Innovation: A Little Perspective…

“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 Da Vinci is now known to have been able to "see things" that he had the tools to make real in the period, and see some that he couldn't. For those visions he couldn't bring into reality, that disconnect - I have concluded - was mainly a function of the underlying pace of innovation. Da Vinci simply would not live long enough for the pace of certain innovations to intersect with his lifespan. Today, the pace of innovation is so severe, it's difficult to imagine what might not intersect with our own lifespans. Food for thought...  

By |2020-10-05T21:23:35-04:00October 18th, 2018|Open|
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