Prelude to Deconstructing Susquehanna International Group

“Design is not just what it looks like and feels like. Design is how it works.” – Steve Jobs

In the lead up to the publication of our next case study on legendary derivatives trading powerhouse Susquehanna International Group (SIG), I wanted to provide context on how the proverbial sausage is actually made: Maybe it is true of most firms across most industries, but what we have found in the trading business is that companies tend to become more complex as they mature, particularly if they have enjoyed outsized success.

Whether incubated internally or bolted on from the outside, the portfolio of legal entities tends to expand – although not always in linear fashion – as these firms grow and diversify their strategy mix (which in many cases is accompanied with a parallel expansion of legal entities). And, while we expect to discover new levels of complexity when we get to the point of modeling some of the sell-side entities most relevant to the global markets ecosystem – with Goldman Sachs and Morgan Stanley heading that list – this next case study certainly forces us to take our puzzle-solving skills up a notch for the journey ahead.

Ideally, in order to achieve maximum available understanding of our subjects, we need to assemble the maximum amount of available data. For a firm like SIG, founded in 1987, this exercise means detangling and deconstructing the data associated with numerous legal entities. So, in the exhibit below, Alphacution presents the list of 9 affiliated broker-dealer entities for the associated annual reporting periods (for FOCUS reports) beginning 2001 and ending 2018.

In tandem with these broker-dealer entities, Alphacution also presents the list of 16 13F reporting entities over the total available period of 43 quarters beginning Q3 2008 and ending Q1 2019. In this exhibit, the (0) entities are the managers that file the 13F holdings reports and the numbered entities are the sub-manager entities that are contained within those holdings reports:

The bolded italicized entities in both exhibits – Susquehanna Investment Group, Susquehanna Securities, and G1 Execution Services (a unit acquired from E*Trade in late 2013) – represent the entities that report both FOCUS and 13F reports. But, more than that, it is in these 3 entities – actually, one in particular – where a vast majority of the trading opportunities and risks reside (see below):

If you have been paying close attention to our prior research, then you will already understand the significance of the market making operation at Susquehanna Securities to the broader asset management efforts housed within some of the other entities.

Clue? You may recognize this pattern as a nested alpha architecture…

Think on it. We will be back to fill in some blanks – and launch the full case study – very soon.

Watch this space…

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By | 2019-06-12T23:34:25-04:00 June 12th, 2019|Alphacution Feed|

About the Author:

Paul Rowady is the Director of Research for Alphacution Research Conservatory, a research and strategic advisory platform uniquely focused on modeling and benchmarking the impacts of technology on global financial markets and the businesses of trading, asset management and banking. He is a 30-year veteran of the proprietary, quantitative and derivatives trading arenas. Contact:; Follow: @alphacution.