Jane Street’s Missed Opportunity?
From a Jane Street perspective, Alphacution asks a different question to showcase the recent acquisition of Morgan Stanley's option market making unit by Citadel Securities...
More Fun With Robinhood: Mea Culpas
Alphacution falls on its sword to admit errors in attribution of equity index option activity to Robinhood - and offers an explanation for why occasional mistakes like these are a necessary evil of our research process...
Morgan Stanley: Swimming Against The Tide
Returning to a provocative thread from late 2022, Alphacution updates some of Morgan Stanley's latest moves in wholesale market making...
Robinhood Drops a Load on Morgan Stanley
Alphacution details anomalous behavior between Robinhood, Morgan Stanley & Co, and other wholesale market makers in recent retail option order flow...
Fork It! UBS Securities Exiting Retail Wholesaling
We've seen it coming for a long time. There were many clues along the way from which to anchor a prediction. Now, the evidence is too dramatic to ignore: UBS Securities is exiting the retail equity wholesale market making business. Alphacution rolls out its case, along with other key findings...
Ranking Robinhood’s Wholesale Market Makers
Alphacution's analysis and modeling of Robinhood's latest financial disclosures leads to a ranking of its wholesale market makers, along with a couple important side bars...
Outlook 2021: The Drunk-on-Impunity Mania Arrives
"You cannot escape the responsibility of tomorrow by avoiding it today."Abraham Lincoln With protestors storming the U.S. Capital - some of which breaching the outer doors and freely strolling the U.S. Senate floor - as surreal and unprecedented backdrop, I sit down to organize a sketch of Alphacution's outlook for the year ahead, starting with a very wide lens: The U.S. economy - much like the rest of the other "developed world" economies - is naturally weaker than the meticulously curated employment and productivity numbers suggest. Technology adoption (from workflow automation to social media distraction), growing debt burdens, ossified resource allocation practices, cross-region labor arbitrage, deteriorating infrastructure, and other factors all converge to deteriorate "life, liberty and the pursuit of happiness" for a growing portion of the population. The COVID pandemic of 2020 - and however long it remains disruptive throughout 2021 as vaccines are being rolled out - acts as an accelerant of many of these factors. Ours is a deteriorating version of capitalism. Symptoms emblematic of the stage [...]
Trick Shot: Robinhood Underwrites MEMX
“Principles for the Development of a Complete Mind: 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 If there ever was a time to see how things are connected to other things, it is now. This is particularly true in places where something that is "free" is interpreted to be "without cost." After all, like "free" drinks at the casino, human nature tends to regress to its most lizard-like tendencies when presented with a frictionless environment... When will we ever learn that "free" is never the best price? Anyway, without becoming distracted by a rant about the true cost of Facebook, et al, let's take a brief look at the impact of "commission-free" trading on the macrostructure of the US market ecosystem over a very short window since October 2019: Thanks, in large part, to the popularity of retail broker, Robinhood Financial, LLC ("Robinhood) - the upstart financial [...]
Virtu’s Optionality? Some Good News…
“That which does not kill us makes us stronger.” - Friedrich Nietzsche “We adore chaos because we love to produce order.” ― M.C. Escher One intangible cost of being the sole US publicly-traded market making firm is the required level of financial and operational transparency - and the investor relations burden - that comes with that status. In this case, that cost may be unusually high because of the relative opacity of the competitors in this sector - what Alphacution typically refers to as the structural alpha zone of its asset management ecosystem map - coupled with the unparalleled use of technology and extraordinary magnitude of wealth generated by that small group of players. To compound this dynamic, recent dramatic shifts in the landscape for retail order flow sparked by the late 2019 moves - en masse - to $zero commissions by retail-oriented brokerage platforms, and the quick follow-on consolidations of TD Ameritrade (by Charles Schwab) and E*Trade (by Morgan Stanley), and given the pandemic-fueled volatility and volumes of [...]
Morgan Stanley: Taking the Trade Out of E*Trade?
"What you do speaks so loudly that I cannot hear what you say." - Ralph Waldo Emerson On Thursday, February 20, Morgan Stanley (MS) announced its acquisition of E*Trade (ETFC) for $13 billion in a brillaint move that simultaneously 1) responds to the recent move to $zero commissions in retail brokerage; 2) responds to Charles Schwab's recent announcement to acquire primary ETFC competitor TD Ameritrade; 3) boosts MS's position in coveted wealth management channels; 4a) takes greater control of coveted retail order flows - and thus, (4b) away from competitive market making firms, like Citadel Securities and Virtu; 5) takes the last of the major independent discount retailed brokerage platforms off the proverbial table - sorry, Goldman; and 6) arguably completes a dramatic arc of industry evolution and consolidation that began with Schwab's acquisition of CyBerCorp in early 2000 and Citi's acquisition of Lava Trading in 2004... As trick shots go, this one is a doozy! Given that, I wanted to extend some thoughts around recent modeling that we [...]
