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Picking up where we left off with Fidelity's unprecedented shift in total (13F) position count in late 2018, we turn to another anomaly disclosed by our modeling: In the exhibit below, Alphacution presents its position concentration analysis for the entire 25-year 13F record for Fidelity. Here, we are not only looking at the value of the Top 10 positions as a percentage of all 13F positions, but also the fully-loaded Top 10 positions, which means across all reporting entities. We also look at the largest position as a percentage of total position value and the isolated Google / Alphabet values, since Class A and Class C shares were both in the Top 10 for a while. Anyway, long story short: What does it mean when Fidelity doubles its (13F) positions from roughly 5,500 to 10,100 - which in this case is likely all US stocks positions since there is not likely to be much if any short positions - at the same time that the aggregate value of the Top [...]

"Life's just this game of inches. And, the inches we need are everywhere around us." - Al Pacino If it's any consolation, the original version of this started with a shout-out to Doug with a tribute to Duncan Keith, former defenseman for the 2010 Stanley Cup champion Chicago Blackhawks, who lost 7 puck-stopping chicklets in their series-clinching win of that year's Western Conference run for Lord Stanley's cup. Hockey stud that he was, Duncan returned to finish the game... No, instead, the modeling and charting overpowered even that gem of an opening to give you another timely tribute to our Avengers after last week's ode to Ant-Man and the Wasp... After all, we are committed to hacking your attention with Inception-like layers of metaphors to keep you entertained while serving up the latest morsel of intelligence about the trading and asset management world. Here's the gist for this one: Though it's disclosures about key attributes of  their business are quite good relative to others, Virtu - like any other public [...]

“Learn how to see. Realize that everything connects to everything else.” ― Leonardo da Vinci While it is true that we spend alot of time and energy of late exploring certain deep-in-the-weeds aspects of the trading world, if you think that we are only interested in providing intelligence about that neck of the woods then you may have lost the plot here. What is going on deep in those weeds has impacts on what appears to be the wide open spaces (where many traditional and less automated strategy managers operate). But, it also turns out, the traditional segment of the ecosystem has an impact on the cutting-edged segment, too. It's all a feedback loop - and this teaser is intended to provide a taste of ballast for the players that operate in that different, more traditional, region of our asset management ecosystem map. Fidelity is one of the largest asset managers in the world based on a long track record of success. From the vantage point of their 13F filings - [...]

“I can do this all day.” —Steve Rogers In honor of the big Avengers Endgame opening last week, I thought to pay a little tribute to Ant Man and the Wasp for this one... Like many of the trading firms we have been focusing on recently, Tower Research Capital (TRC) has a market making unit - Latour Trading - and a proprietary trading unit - Tower Research Capital Investments (TRCI), both of which are based on high-performance technologies, quantitative methods and extreme levels of workflow automation. (BTW, if you read the Citadel Securities case study summary then you might already be hip to what we are calling a nested alpha architecture. If not, no worries. We will be highly redundant about it.) Perhaps because we have been focused on some of the biggest market makers, prop firms and hedge funds in and around our structural alpha zone - plus knowing that TRC boasts a global headcount of roughly 900 folks - we were expecting to find something else in their [...]

“The problems are solved, not by giving new information, but by arranging what we have known since long.” - Ludwig Wittgenstein Who are the buy-side's smartest and most powerful players today? Alphacution is working towards a clear answer to this question. Not just a list, but a ranking of the top players in global markets today - starting with the buy-side. Chances are high that the players that earn their way onto such a list - and, rise towards the top - are going to deploy a lot of technology to create a ton of automation (and, speed) to trade a big list of names across product classes, asset classes, regions and complementary strategies. Skipping a more detailed description and justification for now about the qualifications for our "Buy-side Leaderboard," one thing's for sure: The smartest and most powerful players on the buy-side are skilled in derivatives trading. Trading options, in particular, vs. not trading options, is like the difference between 3-dimensional and 2-dimensional chess. Mathematically, it's like the difference [...]

It was a holiday shortened week last week, and a lot of folks were OOO with brain settings dialed to low intensity. So, I thought we would try this one again, keep it short, tight and appropriately entertaining: With the heavy lift of the Citadel Securities case study ink (mostly) dry, we now turn our attention to the next series of puzzles. Generally speaking, the puzzles that captivate in the immediate future include 1) the rankings of market makers, prop traders and quant players (both, buy-side and sell-side, wherever applicable) operating within our structural alpha zone, 2) the ranking of players that are dominant in options trading - the Option Gods, 3) the ranking of players that are dominant in ETF trading, and 4) the subset of these rankings where players are strong across all of these factors. NOTE: If you are not directly involved in or with the market participants and stakeholders in the structural alpha zone, change the channel at your own peril. If you think what is [...]

It's a holiday shortened week and a lot of folks are OOO with brain settings dialed to low intensity. So, we will keep this one short, tight and appropriately entertaining: With the heavy lift of the Citadel Securities case study ink (mostly) dry, we now turn our attention to the next series of puzzles. Generally speaking, the puzzles that captivate in the immediate future include 1) the rankings of market makers, prop traders and quant players (both, buy-side and sell-side, wherever applicable) operating within our structural alpha zone, 2) the ranking of players that are dominant in options trading - the Option Gods, 3) the ranking of players that are dominant in ETF trading, and 4) the subset of these rankings where players are strong across all of these factors. NOTE: If you are not directly involved in or with the market participants and stakeholders in the structural alpha zone, change the channel at your own peril. If you think what is going on here in close proximity to the [...]

"There is no avoiding pain, especially if you’re going after ambitious goals." - Ray Dalio The dominoes started falling years ago. It is only now - last week, on 4 April, to be precise - that we receive a new perspective on the data. Here's the setup: Quantitative methods and automated trade workflows started to shift the consumption of market data from eyeballs to servers way back in the 1990's. As automation of front-office (i.e. - signal generation) and middle-office (i.e. - trade execution) increased, the shift of market data consumption from eyeballs to servers increased as well. When the austerity regimes of the post-GFC period hit in 2010 and after, the convergence with the quantitative migration caused the shift in market data consumption to accelerate. Lower-cost cloud-based offerings for less-intensive use cases only exacerbated this shift. Those market data solution providers that were more heavily weighted to equity markets and revenue concentrations to the sell-side were hit the hardest. We can see these dynamics play out in the Eikon [...]

"Learn how to see. Realize that everything connects to everything else." - Leonardo da Vinci Given our ongoing fascination with 13F reports and the undulating list of 13F securities, which recently gave rise to our post, US Stock Market: Made of These, we have now turned to our old friends - and the data they curate - at the World Federation of Exchanges (WFE) to 1) corroborate some of our findings from the 13F dataset, and perhaps much more importantly, 2) assign a more global perspective to our ongoing analysis. So, with that said, here are a few tasty tidbits to chew one while we bake this research into a more comprehensive meal behind the scenes: In the Exhibit below, Alphacution presents aggregate global stock listings for the full sample of 192 months beginning January 2003 and ending December 2018. Today that figure stands at ~52,000 stock listing among the WFE member exchanges. Meanwhile, the portion of global stock listings in the Americas region - which includes US, Canada, Latam [...]

"Don't let the noise of others' opinions drown out your inner voice." - Steve Jobs "There is no real substitute for common sense - except for good luck, which is a great substitute for everything." - James Harris Simons It was the late 90's, a time when the moniker of "Godfather of the Quants" may have still been open for debate. Edward Thorpe, of Princeton / Newport Partners and among the first mathematicians to study patterns in financial markets, was still active. And, the protagonists for the fascinating tale about beating a Vegas roulette wheel with custom made computers embedded in their shoes (and told in the book, the Eudaemonic Pie), Doyne Farmer and Norman Packard, were still active at the Prediction Company, a unit of UBS O'Connor (which, BTW, was later sold to Millennium in 2013 and ultimately shut down in 2018 with a 27-year stat arb strategy track record including only one down year). And yet, today, the legacy that seems to remain the strongest is that of [...]