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.

Those Fees Are No Laughing Matter!

Image Credit: Arpad Busson and actress Uma Thurman attend the premiere of Zulu during the 66th Cannes International Film Festival  - Hubert Boesl/DPA/Alamy He pressed "record" on the cassette machine, leaned back and took a long, deep drag from a cigarette. "Let's begin," he said with a heavy accent. In a risky break from protocol, and much to the frustration of my partner - Quantlab co-founder and chief scientist, Ed Bosarge - I asked if I could bum one of his smokes. "But, of course," the Frenchman said with a smirk... Scene: Swanky leather-drenched, art-stuffed office, midtown Manhattan, 1998. Arpad "Arki" Busson, then already at 35 a legendary rainmaker for legendary hedge fund managers, like Tudor Investment's Paul Tudor Jones, had agreed to meet with two of the top geeks from a quant trading upstart to pitch their new strategy to his EIM Group, a prestigious fund of funds (FoFs) platform of the era. In a bizarre twist of unacknowledged credentials, it was difficult to pretend to ignore the fact [...]

By |2021-02-05T15:28:55-05:00September 16th, 2018|Open|
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#Algorithm: Benchmarking the Cost of Post-Trade Processing

Patterns...  Preferably, persistent and predictable patterns...  It could be said that history is influenced by a series of pattern discoveries whereby new patterns are discovered with new tools, new technologies or new methodologies. Discovery always starts with variance of perspective, like a new pair of eyes.  And, that kind of trick never gets old - even during an era of hyper-intensive innovation. So, with that bit of philosophy as our backdrop, we arrive at today's lesson:  Alphacution discovered a persistent relationship between assets and headcount for asset managers, which led to new insights about strategy selections, technology spending, and workflow automation among a broad community of asset managers, hedge funds and others. This analysis was presented in its initial asset manager technology spending study, the Context Machine (April 2018). Upon further analysis, it turns out that there is also a persistent relationship between assets and headcount for asset servicers, like custodians and administrators. The significance of this discovery represents the beginnings of our ability to benchmark asset servicing costs and [...]

By |2020-10-05T21:22:35-04:00September 9th, 2018|Open|
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Alphacution Podcast Series Ep2 – Technology Strategy, Business Performance in the Digital Era

Many thanks to Clare Rhodes, Managing Director, Articulate Communications for hosting this podcast series. Here is a link to Episode 2 of the series - Technology Strategy and Business Performance in the Digital Era (August 22, 2018) where the podcast series was originally published.  

By |2020-12-03T21:18:42-05:00September 5th, 2018|Podcasts|
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Thomas Murray Covers Alphacution: Measuring the FinTech Payback

Originally published on the Thomas Murray website on August 20, 2018 Conversation with Paul Rowady, Director of Research, Alphacution Research Conservatory What is Alphacution? Alphacution is the first digitally-oriented research and strategic advisory platform focused on developing a centralized "market intelligence asset" by modeling, measuring, and benchmarking technology spending patterns, and the operational impacts of those investment decisions. The Alphacution platform is specifically designed to deliver an empirical and quantitatively-backed perspective on the effect of financial services industry spending for an institutional client network. This mission starts by modeling individual companies - banks, asset managers, hedge funds, solution providers, and others - using publicly available data. Our model library currently consists of more than 250 such companies. From there, sector composite models - like global banking, IT services, and asset management - are developed by aggregating individual models. Ultimately, sector composite models come together to represent the full view of the largest parts of the financial services industry. Where data on technology spending and other operational dynamics are not available, [...]

By |2020-12-03T21:24:28-05:00September 4th, 2018|News|
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Quant Invasion Continues As Data Infrastructure Overtakes Eyeballs

Clues... At it's core, this is much of what we are ever doing as a research and advisory operation: Looking for clues. Ideally, we are looking for the kinds of clues that recur as patterns. And then, tell the stories from those clues and patterns. (Better yet, if we can devise a mechanism to systematically discover more clues and more patterns with regularity, then we will have developed something quite valuable. But, I digress...) So, it was with great fascination that we discovered one of the next important clues; some evidence of the nature of transformation in the trading and investment world - and that which is indicative of so many other sympathetic movements in the broader financial industry. This is the falling of dominoes that we often refer to. Here's the gist: Quantitative methods are set to pervade much more of the traditional asset management community and a broader cross-section of the strategy spectrum. Likely more than expected. Reason being: Fee compression renders traditional investment processes too expensive and [...]

By |2020-08-17T07:14:07-04:00August 29th, 2018|For Subscribers|
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Forbes Loves Alphacution: “Software is Eating the World, Starting With Finance”

< Originally published by Tom Groenfeldt, Contributor, Forbes - July 31, 2018 > On its way to eating the world, software is eating up bank IT budgets, according to Paul Rowady, CEO of the consultancy Alphacution. Marc Andreessen, the venture capitalist, is the author of the famous quote about the general rise of software. Rowady, who is developing sophisticated models around finance and technology, sees software eating up IT budgets and crimping spending on hardware at banks. He thinks that compliance is to blame, something he plans to look at in more detail  in a future study. “Going back a few years I saw software needs crowding out hardware needs, and that led to the adoption of cloud and infrastructure as a service (IaaS). There is no off-the-shelf solution for enterprise-wide compliance, so a lot of budget went to that and couldn’t be used for other needs.” Compliance presents a challenge for big banks. “A lot of these larger players were loose conglomerations of businesses that had been bolted together for [...]

By |2020-10-05T21:21:38-04:00August 21st, 2018|Press|
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Exposing Franklin Templeton’s Greatest Challenge: #ETFs

Exchange-traded funds (ETFs) may have their critics, but with nearly $3.5 trillion in total value represented by over 1,900 unique funds as of June 2018 (according to the Investment Company Institute - ICI), this segment of the market has grown faster and is now larger than total assets under management (AUM) of hedge funds (which BarclayHedge estimated at nearly $3.0 trillion for Q1 2018). Success is always the sweetest revenge... Sure, the naysayers point to numerous complexity factors - like variance in replication methods, tracking errors, liquidity issues, exotic-exposure risks, and others - to make their cautionary case and to send up warning flares to novice investors, but the blunt fact of the matter is that the well-designed, cost-efficient ETFs have had a profound impact on the financial landscape. That the downward trajectory of fees with competing financial products (like hedge funds and mutual funds) and the dramatic shift in asset allocations toward ETFs are among the most commonly cited attributes of the shifting landscape is obvious to most by [...]

By |2020-08-17T07:14:07-04:00August 14th, 2018|For Subscribers|
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A Game of Thrones Breaks Out in #BigFinTech

The incumbency of incumbents continues... This play has been well-established in the hardware and technical infrastructure arena for banks. And, for students of this game, the drumbeat of clues has been steady in the software solution arena for all types of financial asset-handlers, as well. However, with the $1.45 billion acquisition announcement of Eze Software Group by SS&C Technologies Holdings, Inc. (SSNC) on July 31, 2018 - an event that comes a mere 11 days after State Street (STT) announces its acquisition of Charles River Development (CRD) for $2.6 billion - it is clear that the turf war in what Alphacution calls "Big FinTech" has heated up to a new level of intensity. Here's why: There's a greater chance of controlling the "means of production" - the toolbox for trading and investment workflows - from the middle than from the front or the back. Yes, at-trade solutions like order and execution management systems (O/EMSs) are quite sticky, but these latest maneuvers with CRD and Eze are much more than that. [...]

By |2020-10-05T21:21:19-04:00August 2nd, 2018|Open|
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When Market Makers Ate Their Own…

Right out of the gate, this story might emit a whiff of last year's news. Maybe. But, that sense would only last until you realize that this is also a template for improving predictions about future events. And, that kind of predictive power relies upon the bet that more markets and opportunities are becoming winner-take-all in the digital era... (Hint: As the functioning of markets - and other economic opportunities - become more "digital," a single leader can emerge in that market. This is how we end up with the "FANG's" - Facebook, Amazon, Netflix and Google. It's also how US equity markets end up with ~80% lit market-making flows being split between Virtu and Citadel. Here are some facts to fill in the background: In the three years beginning 2006, the Timber Hill market making unit of Interactive Brokers Group (IB) had an annual revenue run rate of around $1 billion, peaking at over $1.3 billion in 2008. By 2017, Timber Hill's revenue run rate had declined 94% to [...]

By |2020-10-14T21:51:05-04:00July 18th, 2018|For Subscribers|
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