On a lazy Thursday afternoon leading up to the US 4th of July holiday weekend, Robinhood unveils its IPO (S-1) document to the world. Here are some early highlights and analysis that can only be found at Alphacution...
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…
Alphacution expands upon an outstanding analysis by BestEx Research on PFOF with additional context on price improvement by leading wholesale market makers.
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…
Stephen Gandel, a contributor to CBS News and Moneywatch, published "Robinhood raked in at least $110 million from 'meme stock' rally" on May 7, 2021, in part based on Alphacution's analysis of Robinhood's Q1 2021 order routing revenue.
Robinhood's Q1 2021 PFOF data was made public over the weekend. Here are a few highlights...
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.
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...
A mini-case study on Virtu Financial, based on updated modeling through year-end 2020, cooked up special for fans of @dougielarge...
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...
