Wholesale Market Makers: Adding Price Improvement to the PFOF Analysis
"The difficulty lies not so much in developing new ideas as in escaping from old ones." John Maynard Keynes Just because the rule requires “market centers that trade National Market System (NMS) securities to make available standardized, monthly reports containing statistical information about covered order executions that are free and readily accessible to the public" does not mean that that information is lounging around under a bank of Klieg lights in an easily consumable format. Like a [...]
Alphacution Joins First Episode of DTCC’s “Advancing Financial Markets. Together.” Podcast
"My wife says, 'If you've got time to lean, you've got time to clean.' So, if I'm exhibiting any sloth-like behavior, she puts a rake or a broom in my hand pretty fast..." - Tim Lind, Managing Director, DTCC Data Services For the first episode in its podcast series, "Advancing Financial Markets. Together." Alphacution's Director of Research, Paul Rowady joins the Depository Trust & Clearing Corporation's (DTCC) Managing Director, Data Services, Tim Lind and Executive Director, Marketing [...]
Alphacution Press: Wall Street Journal on Susquehanna, ByteDance, TikTok
“No matter the outcome of the struggle between China and the U.S. over video-sharing app TikTok, an unlikely winner will be a secretive trading firm based outside of Philadelphia.” – by Wall Street Journal reporters Rolfe Winkler, Jing Yang and Alexander Osipovich. Alphacution contributes analysis to Wall Street Journal story on legendary option-trading powerhouse, Susquehanna International Group’s ownership interest in ByteDance, the Beijing-based owner of video-sharing social media app, TikTok, “Secretive High-Speed Trading Firm Hits Jackpot With TikTok” (October 1, 2020). [...]
The Fourth Exchange
“Nothing vast enters the life of mortals without a curse.” – Sophocles With a geyser of attention-snatching news as our normal daily backdrop, one could easily be forgiven for missing a signal from a collection of recent market structure clues. Individually, most of these have been on the radar of those that follow capital markets closely. And then there are others that are much deeper down in the weeds. Taken together, however, they paint of picture of increasing levels [...]
Runaway Concentration Risks in US Option Markets
“The future is a choice between utopia and oblivion. Whether it is to be utopia or oblivion will be a touch and go relay race right up to the final moment…” – Buckminster Fuller On September 23rd, the Financial Times reported, “Citigroup halts market making in retail options” in an apparent response to the challenges brought about by the era of zero-commission retail trading; an era that is swiftly nearing its one year anniversary. Among the more notable [...]
SoftBank: Nasdaq Whale Files First 13F Report
“Entrepreneurship, you will only understand it if you experience it for yourself. It’s not something I can explain in words.” – Masayoshi Son On September 4, the Financial Times was first to report that “SoftBank is the ‘Nasdaq Whale’ that has bought billions of dollars’ worth of US equity derivatives in a series of trades that stoked the fevered rally in big tech stocks…” Since then, a consistent drumbeat of other articles and podcasts have been published; some of them tying SoftBank in [...]
Stranded, As Virtu Bids Farewell to Madison Tyler
“We don’t receive wisdom; we must discover it for ourselves after a journey that no one can take for us.” – Marcel Proust With pandemic-era factors being historically and paradoxically hospitable for market volumes and volatility, those players that stand in closest proximity to the sources of listed liquidity have experienced an unexpected windfall so far in 2020. Today, with market making revenue for the past two consecutive quarters at all-time highs and seeming to bend a long-term downward [...]
ETF War Games
“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 Market making in individual stocks has become so competitive that most hyperactive strategies – the ones that reside in Alphacution’s structural alpha zone – have turned to increasingly rely on some form of ETF arbitrage. This competitive dynamic is exacerbated by factors such as liquidity fragmentation, liquidity internalization, payments for order flow (PFOF), and [...]
Alphacution Press: Forbes on Robinhood
“The perfect stock trading app for the videogame generation was supposed to “democratize finance” with zero-commission trades. But the primary plan was to get rich by selling customer trades to the market’s most notorious operators.” – by Forbes Staff Writers Jeff Kauflin, Antoine Gara, and Sergei Klebnikov Alphacution contributes to Forbes development of story on Robinhood, “The Inside Story Of Robinhood’s Billionaire Founders, Option Kid Cowboys And The Wall Street Sharks That Feed On Them” (August 19, 2020). [...]
Alphacution Press: Investor’s Business Daily on Robinhood
“New investors are riding the stock market’s climb during the coronavirus pandemic.” – by Matt Krantz, Personal Finance and Management Editor, IBD Alphacution contributes to Investor’s Business Daily’s development of story on Robinhood, “Beginning Investors Are Charging Into Stocks; What Could Go Wrong?” (August 14, 2020).
