TCO/e

Virtu: Q1-2018 Update on Extremes

With volatility spiking in Q1 of 2018 - and the successful porting of KCG's intellectual property (IP) prior to that in late 2017 - VIRT earned a welcomed reprieve from the conditions of recent quarters, as we predicted here (and elsewhere prior to that). In the exhibit below, Alphacution's as-if modeling of the combined entity - Virtu + KCG pre-Q3 2017 - yields a level of net trading income that would not have been seen since Q1-2016. Meanwhile, Alphacution's tracking of adjusted net trading income per employee - a proxy for our common look at revenue per employee (RPE) - starkly illustrates the path through the most recent maneuvers: Persistent declines in top line "productivity" since its most recent peak in early 2015 ultimately led to the acquisition of KCG, which closed in July 2017. Swift transfer of KCG's IP onto Virtu's infrastructure along with elimination of redundant technology and human capital allowed this productivity measure to bounce off its lows in Q3 2017 to finish the year as strongly [...]

By |2020-10-14T21:45:13-04:00May 15th, 2018|For Subscribers|
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Context Machine: Introducing a Techno-Operational Benchmarking Framework for Asset Managers

Executive Summary Riding the wave of the FinTech juggernaut, technology now permeates all aspects of the financial services ecosystem; front-to-back, top-to-bottom and across the entire business segment spectrum. Any lingering gaps between technology strategy and business strategy are closing; making them indistinguishable from one another. And yet, for all the promise of the revolutions in artificial intelligence, cloud and big data, such attempts are met with unforgiving challenges. Most players in this ecosystem are still using dulled intelligence tools to navigate this rapidly changing and increasingly techno-centric landscape. Finding balance between the primary engines of productivity - information technology and human capital - continues to be conducted like a game of Marco Polo. Operational alpha - a kissing cousin of terms like digital transformation and process re-engineering - is a growing theme among the pantheon of new vernacular in this space that seeks to illuminate such challenges. However, despite its descriptive elegance, operational alpha remains an emerging and elusive concept. In the midst of an evolving supply chain, solution providers [...]

By |2020-10-05T21:17:52-04:00October 31st, 2017|Open|
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Broker Tech Spend Speaks Volumes

Broker spending on technology is one of those topics that rises to the top of the headlines from time to time, particularly given how much the market landscape has shifted in the past several years - and how competitive, regulatory, and new market drivers threaten to change that landscape even more along the road ahead. So, during the course of developing research on a related topic, we had occasion to expand our modeling in the area of market makers, broker-dealers, and related specialist execution technologies - and stumbled upon a different lens through which to evaluate "broker" spending patterns. In the following chart, we share a common format for presenting these kinds of figures; a ranking of 5-year average total technology spending by 9 public broker and broker-like companies. Simple output.  Mildly interesting. Ten's or hundred's of millions of dollars spent on technology is notable. But, not particularly illuminating. However, as we benchmarked technology spending using employee headcounts - a technique we use regularly - the picture packs an entirely [...]

By |2020-08-17T07:14:08-04:00October 19th, 2017|For Subscribers|
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JPMorgan’s Massive Collaboration Experiment

Sitting in on the Symphony Innovate 2017 conference last week in New York, the figure that stood out for me was not that Symphony had already achieved 250,000 users so far in 2017 - more than doubling over 2016 - but that J. P. Morgan (JPMC) represents about 60,000 of those users. (Did I hear that right?!) This is roughly 25% of JPMC's current total headcount of over 240,000 - and, upon further analysis, is likely concentrated within their corporate and investment banking division (48,748 employees for Q2-2017), asset management division (21,082 employees for Q2-20170), and to some extent the operations and infrastructure group known as corporate center (32,358 employees for Q2-2017). And while numerous other bulge banks (like Goldman Sachs and Bank of America) and large asset managers (like Blackrock and T Rowe Price, who claimed 6,800 users) are significant partners, backers and/or users of Symphony's communications platform, it occurred to me that with 60,000 seats, JPMC's footprint here just might represent that largest experiment in collaboration along the [...]

By |2020-08-17T07:14:08-04:00October 10th, 2017|For Subscribers|
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