The Retail Flow Factor: Hiding in Plain Sight

In this introduction to the 17-page, 21-exhibit presentation – Part III of Alphacution’s case study on payment for order flow (PFOF) – we present our preliminary development of the “retail flow factor” for 2020 based largely on a reconciliation of 606 data (from 10 retail brokers / 11 entities) and 605 data (from 7 wholesale market makers). The results include estimated monthly penetration of retail order flow relative to the full U.S. cash equities market for 2020 – including estimated breakdowns of odd lots and round lots – as well as some hints on where we will need to look next to further refine this factor in preparation for extending this analysis throughout 2021 and beyond…

By |2021-06-03T01:03:27-04:00June 3rd, 2021|For Subscribers|

Alphacution Publishes Payment For Order Flow 2020 – Part II: Broker Personas

In Part I of Alphacution’s case study on payment for order flow (PFOF), we focused mainly on the rates paid by wholesale market makers to retail brokers under a full range of securities categories and order type scenarios. In this 22-page, 20-exhibit deck, Alphacution presents PART II of its upcoming comprehensive case study, The Robinhood Effect, with a focus on a concept called broker personas. Alphacution’s working hypothesis on this topic is that each retail broker – in fact, all order flow intermediaries – have a unique persona. This persona – a unique pattern formed by order type distributions – is a distillation of client trading behaviors. In this presentation, Alphacution demonstrates that broker personas are partly due to investor demographics and, more interestingly, partly due to broker influence. Furthermore, when we broaden our perspective to consider that retail brokers are now compensated for trade flows largely by their wholesaler counterparts, we see a clearer picture of how desired outcomes could be manufactured…

By |2021-05-14T22:20:44-04:00May 14th, 2021|Open|

Alphacution Publishes Payment For Order Flow 2020, Part I: Rate Heatmaps

2020 will be remembered for many reasons. In the context of Alphacution’s ongoing research focus, we want to remember 2020 as the first full year of enhanced transparency into the mechanics and impacts of the long-held practice of payment for order flow (PFOF). In this 23-page, 20-exhibit deck, Alphacution presents PART I of its upcoming comprehensive case study, Payment For Order Flow 2020, with a focus on order routing rate heatmaps.

By |2021-05-14T22:13:11-04:00April 27th, 2021|Open|

The Mother of All 2020 PFOF Charts

Assembling 4 quarterly reports comprised of 12 monthly sets of figures segmented by 3 securities categories and 4 order types across 12 retail brokerage entities and a subset of some 14 wholesale market makers - each number within which, by the way, painstakingly entered by hand - in order to slice and dice an entire annualized data set from any angle and still have everything add up exactly the same was both a pain in the ass and a labor of love...

By |2021-04-27T21:46:14-04:00April 27th, 2021|For Subscribers|

Note to The Market Structure Club on Comparative Order Routing Rates

Following an impromptu gaggle of market structure nerds on the new social media app, Clubhouse, featuring Larry Tabb (Head of Market Structure Research, Bloomberg Intelligence) and Alex Gerko (CEO, XTX Markets), Alphacution offers a comparative ranking of 2020 retail order routing rates...

By |2021-05-14T22:56:19-04:00March 17th, 2021|For Subscribers|