Case Studies
Case Studies2020-10-04T16:45:26-04:00

Welcome to Alphacution’s Document Library. The purpose of this repository is to showcase Alphacution’s deeper and more comprehensive research relative to the analysis found on our Feed. Note that some of the reports found here may have been commissioned by clients, excerpted and distributed by alliance partners, or developed in conjunction with our network of collaborators.

Note that these documents are available as PDFs. Depending on your browser’s behavior and Acrobat Reader Plugin availability, the PDF will display within your browser or will automatically download.

The Robinhood Effect – Executive Summary

In this 193-page, 272-exhibit, 30,800-word case study, “The Robinhood Effect,” Alphacution brings together data and modeling from 25 entities – 11 retail brokers and 14 wholesale market makers – to explain a new phenomenon that now lives at the center of the US capital markets ecosystem. Alphacution’s most ambitious research project to date, this report covers the governing liquidity economics framework that defines PFOF rates, the mechanics of Robinhood’s aggressive retail brokerage model, the transformation of the retail brokerage industry, the sophisticated strategy architectures of wholesale market makers, and the “retail flow factors” that impact all market actors in the ecosystem – among many other themes and avenues for future research. An executive summary is available for review and download by open subscribers (w/ free registration). The complete case study is available to premium subscribers or via individual report purchase.

By |July 29, 2021|Open|

The Robinhood Effect

In this 193-page, 272-exhibit, 30,800-word case study, “The Robinhood Effect,” Alphacution brings together data and modeling from 25 entities – 11 retail brokers and 14 wholesale market makers – to explain a new phenomenon that now lives at the center of the US capital markets ecosystem. Alphacution’s most ambitious research project to date, this report covers the governing liquidity economics framework that defines PFOF rates, the mechanics of Robinhood’s aggressive retail brokerage model, the transformation of the retail brokerage industry, the sophisticated strategy architectures of wholesale market makers, and the “retail flow factors” that impact all market actors in the ecosystem – among many other themes and avenues for future research. An executive summary is available for review and download by open subscribers (w/ free registration). The complete case study is available to premium subscribers or via individual report purchase.

By |July 29, 2021|Premium|

Payment For Order Flow 2020, Part III: The Retail Flow Factor

In this 17-page, 21-exhibit presentation – Part III of Alphacution’s case study on payment for order flow (PFOF) – we present our preliminary development of the “retail flow factor” for 2020 based largely on a reconciliation of 606 data (from 10 retail brokers / 11 entities) and 605 data (from 7 wholesale market makers). The results include estimated monthly penetration of retail order flow relative to the full U.S. cash equities market for 2020 – including estimated breakdowns of odd lots and round lots – as well as some hints on where we will need to look next to further refine this factor in preparation for extending this analysis throughout 2021 and beyond…

By |June 3, 2021|Premium|

Payment For Order Flow 2020, Part II: Broker Personas

In Part I of Alphacution’s case study on payment for order flow (PFOF), we focused mainly on the rates paid by wholesale market makers to retail brokers under a full range of securities categories and order type scenarios. In this 22-page, 20-exhibit deck, Alphacution presents PART II of its upcoming comprehensive case study, The Robinhood Effect, with a focus on a concept called broker personas. Alphacution’s working hypothesis on this topic is that each retail broker – in fact, all order flow intermediaries – have a unique persona. This persona – a unique pattern formed by order type distributions – is a distillation of client trading behaviors. In this presentation, Alphacution demonstrates that broker personas are partly due to investor demographics and, more interestingly, partly due to broker influence. Furthermore, when we broaden our perspective to consider that retail brokers are now compensated for trade flows largely by their wholesaler counterparts, we see a clearer picture of how desired outcomes could be manufactured…

By |May 14, 2021|Premium|

Payment For Order Flow 2020, Part I: Rate Heatmaps

2020 will be remembered for many reasons. In the context of Alphacution’s ongoing research focus, we want to remember 2020 as the first full year of enhanced transparency into the mechanics and impacts of the long-held practice of payment for order flow (PFOF). It turns out, enhanced use of PFOF as the linchpin in a new zero-commission brokerage framework for retail investors (pioneered by Robinhood) sets a series of dominoes in motion that ultimately influence, to some degree, all stakeholders and all products in US listed markets. The question now is: To what end? In this 23-page, 20-exhibit deck, Alphacution presents PART I of its upcoming comprehensive case study, The Robinhood Effect, with a focus on order routing rate heatmaps.

By |April 27, 2021|Premium|

Rise of Hudson River Trading – Executive Summary

In this 91-page, 102-exhibit case study, “The Rise of Hudson River Trading,” Alphacution adds another leading proprietary trading firm – and recent entrant to the $1 billion+ trading revenue club (2020e) – to its library focused on the most secretive and consequential players in the global markets ecosystem. Notable highlights include the history of Sun Trading and the impacts of its acquisition by Hudson River Trading (HRT) in Q1 2018, and explorations into the firm’s European trading operations, US equity and equity option strategies, comparative analysis with select competitors, and revenue estimation, among many other details. An executive summary is available for review and download by open subscribers (w/ free registration). The complete case study is available to premium subscribers or via individual report purchase.

By |January 23, 2021|Open|

Rise of Hudson River Trading

In this 91-page, 102-exhibit case study, “The Rise of Hudson River Trading,” Alphacution adds another leading proprietary trading firm – and recent entrant to the $1 billion+ trading revenue club (2020e) – to its library focused on the most secretive and consequential players in the global markets ecosystem. Notable highlights include the history of Sun Trading and the impacts of its acquisition by Hudson River Trading (HRT) in Q1 2018, and explorations into the firm’s European trading operations, US equity and equity option strategies, comparative analysis with select competitors, and revenue estimation, among many other details. An executive summary is available for review and download by open subscribers (w/ free registration). The complete case study is available to premium subscribers or via individual report purchase.

By |January 23, 2021|Premium|

2020 IEX ARC.IO Presentation: Hiding in Plain Sight

This is the presentation given at the 2020 IEX ARC.IO virtual conference on November 19, 2020. It outlines the research vision and mission for Alphacution’s research, lists core data sources (to date), provides an overview of our asset management ecosystem thesis (including capacity of alpha), and draws specifically from notable exhibits in our comprehensive cases studies on the likes of Citadel Securities, Susquehanna International Group (SIG), Two Sigma Investments (including certain comparisons to D. E. Shaw), and Jane Street Group.

Full Title – Hiding in Plain Sight: Business and Trading Strategy Intelligence from Slow Data

By |November 19, 2020|Open|

History of Jane Street – Executive Summary

In this 125-page, 149-exhibit, 26,000-word case study, “History of Jane Street,” Alphacution sets a new bar for the scope of a case study focused one of the leading proprietary trading and market making firms in the world, with notable expansions relative to prior cases studies into regional, US option strategy, revenue estimation, and comparative analysis details (including Citadel Securities, Susquehanna International Group (SIG) and affiliates, and Two Sigma Investments and affiliates). The complete case study is available to premium subscribers or via individual report purchase.

By |May 28, 2020|Open|

History of Jane Street

In this 125-page, 149-exhibit, 26,000-word case study, “History of Jane Street,” Alphacution sets a new bar for the scope of a case study focused one of the leading proprietary trading and market making firms in the world, with notable expansions relative to prior cases studies into regional, US option strategy, revenue estimation, and comparative analysis details (including Citadel Securities, Susquehanna International Group (SIG) and affiliates, and Two Sigma Investments and affiliates). The complete case study is available to premium subscribers or via individual report purchase.

By |May 27, 2020|Premium|

Two Sigma Investments, LP and Affiliates – Executive Summary

In this 51-page, 61-exhibit case study on one of the most successful quantitative trading firms launched since the dawn of the 21st century  – Two Sigma Investments, LP – Alphacution presents the next in its series of unprecedented reports based on its modeling of many of the most mythological players and impactful themes operating within the current global asset management ecosystem. Of particular note, this report includes a groundbreaking comparative analysis of key strategy parameters between Two Sigma and D. E. Shaw, with additional analytical comparisons that include Millennium Management and Renaissance Technologies; together a grouping of the most revolutionary asset managers in the large-scale quantitative domain. The complete case study is available to premium subscribers or via individual report purchase.

By |November 24, 2019|Open|

Two Sigma Investments, LP and Affiliates

In this 51-page, 61-exhibit case study on one of the most successful quantitative trading firms launched since the dawn of the 21st century – Two Sigma Investments, LP – Alphacution presents the next in its series of unprecedented reports based on its modeling of many of the most mythological players and impactful themes operating within the current global asset management ecosystem. Of particular note, this report includes a groundbreaking comparative analysis of key strategy parameters between Two Sigma and D. E. Shaw, with additional analytical comparisons that include Millennium Management and Renaissance Technologies; together a grouping of the most revolutionary asset managers in the large-scale quantitative domain. The complete case study is available to premium subscribers or via individual report purchase.

By |November 23, 2019|Premium|

Susquehanna International Group, LLP – Executive Summary

In this 55-page, 64-exhibit case study on one of the most legendary proprietary option trading firms of all time – Susquehanna International Group, LLP – Alphacution publishes the next installment in its unprecedented Hiding in Plain Sight series that leverages an assembly of publicly-available data and a growing library of models based on some of the most impactful market participants in the global asset management ecosystem today. The complete case study is available to premium subscribers or via individual report purchase.

By |July 31, 2019|Open|

Susquehanna International Group, LLP

In this 55-page, 64-exhibit case study on one of the most legendary proprietary option trading firms of all time – Susquehanna International Group, LLP – Alphacution publishes the next installment in its unprecedented Hiding in Plain Sight series that leverages an assembly of publicly-available data and a growing library of models based on some of the most impactful market participants in the global asset management ecosystem today. The complete case study is available to premium subscribers or via individual report purchase.

By |July 30, 2019|Premium|

Deconstructing Citadel Securities – Executive Summary

In this 55-page, 45-exhibit case study on market making powerhouse, Citadel Securities, Alphacution continues to expand its unprecedented Hiding in Plain Sight series to explore the unique trading engines and business strategies of the most successful, noteworthy – and mythological – asset managers in the world by presenting its latest storyboard based an assembly of data that lies open to the public. The complete case study is available to premium subscribers or via individual report purchase.

By |March 24, 2019|Open|

Deconstructing Citadel Securities

In this 55-page, 45-exhibit case study on market making powerhouse, Citadel Securities, Alphacution continues to expand its unprecedented Hiding in Plain Sight series to explore the unique trading engines and business strategies of the most successful, noteworthy – and mythological – asset managers in the world by presenting its latest storyboard based an assembly of data that lies open to the public. The complete case study is available to premium subscribers or via individual report purchase.

By |March 23, 2019|Premium|

The Complete Case Study on Spot Trading

In this 32-page, 38-exhibit case study on the proprietary option trading firm, Spot Trading, that closed in late 2017, Alphacution showcases the information and insights that can be harvested from a cache of data that is hiding in plain sight. This report is also intended to educate clients and our broader network about the mechanics and drivers of macro-market structure, as well as to provide a template that will begin to set expectations for the nature of premium content that is being made available as part of Alphacution’s emerging research subscription service. The full report is available to registered users for download here:

By |March 7, 2019|Open|

The Context Machine: Estimating Asset Manager Technology Spending – Executive Summary

In this 48-page, 35-exhibit study, Alphacution goes to new lengths to apply the axiom that effective management requires effective measurement – and begins the process of supporting its hypothesis that there are persistent – and ultimately, predictable – relationships between trading and operational factors for asset managers. With most asset managers being private, support for this hypothesis also means that technology spending – a rarely observable data item in this universe – can be estimated with more readily observable and contextual data about AUM and employee headcount. Moreover, it turns out that by understanding the relative positioning of technology capital (via spending patterns) with that of human capital, we achieve an unprecedented and quantitative level of understanding about the underlying scope of automation embedded in that firm’s strategy selections. These findings ultimately give birth to Alphacution’s Asset Manager Ecosystem Map, and the deeper exploration into its structural alpha, active management, and passive management zones. The complete case study is available to premium and silver subscribers or via individual report purchase.

By |April 19, 2018|Open|

Context Machine: Estimating Asset Manager Technology Spending

In this 48-page, 35-exhibit study, Alphacution goes to new lengths to apply the axiom that effective management requires effective measurement – and begins the process of supporting its hypothesis that there are persistent – and ultimately, predictable – relationships between trading and operational factors for asset managers. With most asset managers being private, support for this hypothesis also means that technology spending – a rarely observable data item in this universe – can be estimated with more readily observable and contextual data about AUM and employee headcount. Moreover, it turns out that by understanding the relative positioning of technology capital (via spending patterns) with that of human capital, we achieve an unprecedented and quantitative level of understanding about the underlying scope of automation embedded in that firm’s strategy selections. These findings ultimately give birth to Alphacution’s Asset Manager Ecosystem Map, and the deeper exploration into its structural alpha, active management, and passive management zones. The complete case study is available to premium and silver subscribers or via individual report purchase.

By |April 18, 2018|Silver|

IT Services and Strategic Impacts for Global Banks: The Force Multiplier

This 33-page, 29-exhibit report – distributed under our alliance with Aite Group – applies Alphacution’s modeling methodologies to the global IT services sector and leverages that output to showcase the evolving role that IT services plays for global banks:  Today, outsourced IT services are firmly embedded in all industries and most large corporations. Alphacution’s message to financial sector clients and other buyers of IT services is both blessing and curse: The global IT services sector continues to be dominated by lowest-cost, predominantly India-based human capital, and the motivation to engage with these services continues to be, as it seems to have been all along, about labor arbitrage, or the savings harvested from the reduction of high-cost, U.S.- or U.K.-based in-house human capital in favor of lowest-cost, leased human capital. Although the expectation to improve performance—via higher-quality output, more efficient output, or some other cocktail of innovation—is rarely made explicit, we believe that the potential for enhanced process efficiencies adds value to the equation. This is the blessing part. The potential curse is more nuanced…

By |September 21, 2017|Silver|