The Dawn of Operational Alpha
They say, it is always darkest before the dawn. They don't say, however, that no one is up and working their asses off before the first light of a new day... By many accounts, the concept of operational alpha has been around for years. I first heard this term in the context of Citadel's launch of its eponymous, mid- and back-office technology externalization effort, Citadel Solutions - later known as Omnium. Citadel even went so far as to [...]
Deconstructing Hewlett Packard: More Clues to Indigenous Productivity
Remember the game show, Name That Tune? (Look it up...) What if I told you that the basic rubric from that game show - naming a song in fewer notes than your opponent - was useful for predicting all kinds facts about trading and other financial businesses. Tell me your trading strategy and AUM, I can tell you how many employees you have. You are an investment bank with 30,000 employees, I can guess your total technology budget. The list of [...]
Nasdaq: Under Virtu Market Data Axe
A quick math assignment: @Nasdaq earned $540 million in information services (aka - #marketdata) revenue in 2016, up 5.5% over 2015 (and, not to put to fine a point on it, but this growth is slowing as 2015 v. 2014 was +8.2%). @KCGHQ spent $148 million on communications and data processing in 2016. @VirtuFinancial is on its way to acquiring KCG - and is on record with a strategy to ultimately consolidate both operations onto a single, unified trading platform. [...]
The Source of #AI Hype
Apple doesn't mention it... Amazon doesn't mention it... Alphabet (aka - Google) does mention it - but doesn't link it specifically to financial performance... IBM? You betcha. More than 155 times... In case you have been living under a rock - which, now that I think of it, has some increasing allure - artificial intelligence (and its slightly less sexy twin, machine learning) has succeeded 2016's marketing darling, blockchain, to become the blinking-neon-sign-outside-your-hotel-room term for 2017. Sorry, folks. The budgets [...]
Done Deal: Virtu Financial + KCG Holdings
We've moved a major step towards a done deal here. Good news is that this remains far from a done story. Easy access to financial and operational data about the outer extremes of technical leverage in the global financial services sector provides great fodder for a story that will continue to inform and fascinate. Along those lines, and in addition to the updated deal news, both parties disclosed results from the most recent quarter today. With that, I thought it would [...]
Trojan Horse or Savior? IT Services Continue to Infiltrate Banking Operations
How far can it go? The relationship between large banks, financial services firms, and insurance companies - sometimes simply known by the acronym BFSI - and large IT services and outsourcing firms, like Tata Consultancy Services (TCS), Infosys, or Cognizant Technology Solutions (among several others), has become increasingly and consistently cozy and pervasive over the past decade or so. In the rearview mirror, this development makes total sense. We all now live in a perpetual "more for less" environment. And, [...]
Unmet Need: Benchmarking Returns on FinTech Investments (w/ Webinar Playback)
Having a hunch is one thing. Quantifying that hunch is another thing entirely. Since its launch, Alphacution's primary hunch - and a factor that drives its mission - has been that measuring the impact of information technology investments within the financial services ecosystem is 1) super important, and 2) not something that firms currently do very often. Of course, we are nearly 2 years into an ambitious modeling and framework development exercise based on far more than hunches. There has been a [...]
Virtu and KCG: A Tale of Technical Leverage?
Here's an update from the initial post on March 15, 2017... The first wave of commentary is in, and the consensus seems to be that the unsolicited bid by Virtu for KCG is all "about the little guy." In other words, this deal is all about the position of a wholesaler relative to retail order flow. Maybe so. There is also some suggestion that these firms are not competitors; that, in fact, they may be complementary. Ok, I guess. But, widen your interpretation [...]
@VirtuFinancial Pulls the Trigger on @KCG: Here’s Why…
@VirtuFinancial bid for KCG Holdings (@KCGHQ) today. Here's why: In the chart below, average daily adjusted net trading revenue for Q4-2016 returns to levels not seen since late 2013 / early 2014. Chances are quite high that persistent low volatility during Q1-2017 - which has only a dozen trading days left in it - has caused these figure to fall back to pre-2013 levels. A situation like that needs a good distraction; something that can change the narrative and [...]
Financial Technology Impacts: YOU are in Darkness – And, THIS is a Flashlight.
Disclaimer: Opinions and a grain or two of salty language contained herein are solely those of the author. Save your time. Just, pick up the flashlight now. Ok. Here's some bait: Chances are quite high that you are searching for answers in the darkness (amidst the chaos). And the tools that you have at your disposal - typically in the form of 5,000 or 10,000 word salads with few pictures and fewer numbers from a "pedigreed" purveyor of guidance - actually do not emit much [...]
