For Subscribers

No doubt, options are the rage. Have been for a few years, thanks to an increasingly emboldened, crowd-sourced army of retail warriors - and timely new product developments by a consortium of exchanges, influential market makers, and other notable players in US equity options... The competition to play this game as a market maker is fierce. The cost of complexity makes this game difficult for smaller players - some of them highly experienced and long-time players - to afford to play successfully anymore. Some of these smaller players have voluntarily exited - or outright failed... Hudson River Trading, one of the speed demons originally confined largely to order flows on public exchanges (prior to its acquisition of Sun Trading in Jan 2018), appears - finally - to be defying those odds in options... In this Feed post, Alphacution paints a detailed picture by taking the "scenic route" through the roster of leading prop firms and hedge funds that enjoy significant share and wield significant influence in US equity options as context for HRT's latest achievements, competitive positioning, and challenges ahead...

Prediction markets - like Kalshi and Polymarket - are enjoying a beautiful day in the sun with all the new deal flow and attention from NYSE, CME, Robinhood and others. Now, the National Hockey League (NHL) is eagerly stepping up to be the first major US sports rights holder to drape itself in logo-embossed gambling. Alphacution shows the mechanics and real objectives of this sudden flurry of activity...

In this Feed post, Alphacution connects some very unusual dots to frame the recent announcements by ICE/NYSE, CME Group, and others to become aligned with betting and event contract markets. Sound business? Or, something else?

Alphacution presents evidence for how dominant prop firms are starving smaller competitors out of business - a sign that we may be approaching some kind of peak. One of the highlights of this post is a rare, long-term chart of the rise of the top proprietary traders - including Citadel Securities, Jane Street Group, and Susquehanna International Group (SIG) - and the decline of banks in the US equity option market...

In this 118-page, 145-exhibit case study – “US Equity Market Macrostructure Evolution: The Temple of Financial Fantasy” – Alphacution presents its case for how the adoption of technology by a subset of leading proprietary trading firms have leveraged the regulatory framework over the past 20 years to permanently alter and distort the US equity market to the point of a farcical rivalry between two separate and distinct “stock markets” that are animated by two competing realities. The first reality is represented by a mob of self-directed retail traders with a lot of time and very few assets, and the second reality is represented by an increasingly complacent institutional asset management industry with nearly all the assets. Today, institutional asset managers are trapped by their own complacency – and the clock is ticking… To tell this incredible story, Alphacution will present its updated framework, new modeling, and never-seen-before measurements for the evolving symbiosis between risk managers, risk strategies, and asset flows within the US equity market ecosystem over a span of the past 12 years, beginning late 2013…

In Alphacution's upcoming case study, "US Equity Market Macrostructure Evolution: The Temple of Financial Fantasies," we expose patterns discovered by modeling the entire 13F dataset over a period of nearly 12 years. It turns out that there are significant concentrations of reporting managers at the intersection of certain metrics that we've mined from that dataset. This suggests that there are significant concentrations of similar strategies. Alphacution presents a teaser for its findings...