Throwing in the Towel on US Equities? UBS or Credit Suisse Could Be Next…
“Turning points in human consciousness occur when new energy regimes converge with new communications revolutions, creating new economic eras.” – Jeremy Rifkin Like watching a movie in slow motion, this week Alphacution adds some incremental modeling on UBS and Credit Suisse to its recent analysis on bank-owned broker-dealers. We start with this metaphor to emphasize the caveat that anything observed in slow motion may be prone to some illusion. So, this opening is simply fair warning - and a [...]
Virtu Financial: The Frying Pan and the Fire
"If you are not growing, you are dying." - Tony Robbins On August 8, Virtu reported Q2 earnings and the stock (VIRT) fell 18%. Non-GAAP EPS came in lower than Street estimates. In addition to the costs of integrating the ITG acquisition, disappointing results in the market making segment were blamed on lower volatility and trading volumes. Now, here's what you're never going to hear from the company: The Frying Pan: Both the market making and execution [...]
Goldman, Morgan, Deutsche: Comparing Bank-Owned Broker-Dealers in Equities
"You can’t connect the dots looking forward; you can only connect them looking backwards. So you have to trust that the dots will somehow connect in your future." - Steve Jobs In a Feed post entitled, "Remembering Deutsche Bank: A Market Macro-Structure Canary?," Alphacution hinted that our modeling of Deutsche Bank Securities, Inc. (DBSI) was really a "first step towards quantifying the ongoing battle between and among bank and non-bank broker-dealers (BDs) and market makers..." Well, perhaps this [...]
According to D. E. Shaw: Strategy Reverse-Engineering Risk
"If you can't join them, beat them." - Mort Sahl In accordance with Rule 24b-2 of the Securities Exchange Act of 1934 (the "Act"), D. E. Shaw & Co., L.P., on behalf of D. E. Shaw & Co., Inc. and their affiliates (collectively, the "Firm"), hereby requests confidential treatment of the information contained in the enclosed Form 13F for the quarter ended September 30, 1998 (the "Form 13F"). Such request is made pursuant to Section 13(f)(3) of the [...]
Susquehanna International Group Case Study: Overview and Executive Summary Available for Download
"Research is what I'm doing when I don't know what I'm doing..." - Wernher von Braun Overview The modern capital markets era begins in the mid-1970’s with the emergence and then convergence of three critical factors: derivatives, computers and data feeds. Together, these factors symbolize the birth of the quantitative research revolution and beginnings of trade workflow automation, and therefore, propel the conception of some of the most consequential product developments, trading strategies and trading firms [...]
Ranking Strategy Speed for Top Quants, Market Makers
"When we try to pick out anything by itself, we find it hitched to everything else in the Universe." - John Muir, Mountaineer It's one thing to build models and share insights about specific players in the trading and asset management universe. It's an entirely different thing to perform comparative analysis of that specific modeling to develop various rankings of a community of players. This latter point is precisely where the accumulation of Alphacution's modeling and research is [...]
Looking for Anomalies: Lessons from Jim Simons (Video)
“Efficient market theory is correct in that there are no gross inefficiencies, but we look at anomalies that may be small in size and brief in time.” - Jim Simons, Founder, Renaissance Technologies Somewhere along the serendipitous journey, I had the good fortune to spend a flash of time with Jim Simons and a few key members of his team at Renaissance - see Jim Simons, Godfather of the Quants: Hiding in Plain Sight. He is certainly one [...]
Jane Street’s Twist on Stock Selection
"The real voyage of discovery consists not in seeking new landscapes but in having new eyes." - Marcel Proust Here's a quickie that's likely to raise a few eyebrows, if you're looking through the right lens: One of the greatest dividends that's just now starting to come from Alphacution's expanding library of models is the one that results from comparing a bunch of legendary trading firms with one another. In this case, what we are able to do [...]
The Legend of David E. Shaw: Hiding in Plain Sight
“Generations of human beings were transformed into machines in the relentless pursuit of material wealth: We lived to work.” - Jeremy Rifkin, The Third Industrial Revolution Founded in 1988 by former Columbia University computer science professor, David Shaw, above a bookstore in New York's Union Square, The DE Shaw Group is now reported to manage over $50 billion in assets. LCH Investments ranks it as the fourth-highest grossing hedge fund group of all time; among the ranks of [...]
Remembering Deutsche Bank: A Market Macro-Structure Canary?
"I don't want to sell anything, buy anything, or process anything as a career. I don't want to sell anything bought or processed, or buy anything sold or processed, or process anything sold, bought, or processed, or repair anything sold, bought, or processed." - John Cusack as Lloyd Dobler, "Say Anything" Few others have captured our attention here at Alphacution like Deutsche Bank (DB). This phenomenon comes as a result of the collision of two facts: 1) a bulge bracket bank in an ongoing state of radical transformation which 2) [...]
