For the longest time, the use of technology gradually removed excess costs and other inefficiencies from financial markets. This evolution wasn't just about speed, although that was a key element. And then advanced quantitative trading techniques, social media techniques, and mobile-first technologies converged. This is Alphacution's view on what's happened since and what that means for the road ahead...
In further preparation for its upcoming case study focused on option market makers, Alphacution identifies a seemingly insignificant shard of evidence that may represent Tower Research Capital's first foray into equity option trading...
Competition for structural alpha is more fierce than anywhere else in the capital markets ecosystem because the potential risk-adjusted returns are so extraordinary. Therefore, we find new "green shoots" of success in this space noteworthy...
Alphacution updates its ongoing analysis of emerging US equity market making powerhouse, XTX Markets, and provides a clue as to where it may be finding its edge...
It's rare to observe such consequential trading units from conception...
In a rare example of public messaging, HFT and dark liquidity specialist, Hudson River Trading, overtly signals its move into the land of PFOF and price improvement. Independently, Tower Research Capital adds a clue that's related to the story. Here's why...
Expanding its footprint in US equities, XTX Markets drops its first 605 report for March 2021. Alphacution uses this event to make some comparisons and offer some interpretations about the evolving US equity market structure...
“Nearly all men can stand adversity, but if you want to test a man's character, give him power.”Abraham Lincoln In Part I of our Lessons in Strategy Geometry concept, we performed a comparative analysis between the shapes of 13F position rankings for HRT Financial, LLC (an affiliate of Hudson River Trading, LLC; the subject of our next deep-dive case study which is in the oven and almost fully baked, I promise), Latour Trading, LLC, and TRC Investments, LLC (both of which are affiliates of Tower Research Capital, LLC). In that introductory Feed post, our goal was mainly to point out what amounts to underlying differences in strategy, particularly given how unique the Tower "shapes" appeared to be relative to others we had modeled. We didn't go into to much detail beyond that with the idea that it would be more useful to work through possible insights step by step... So, here's a next step: Founded in 2015, XTX Markets, Ltd is one of a very short list of up-and-coming proprietary [...]
"Nature uses only the longest threads to weave her patterns, so that each small piece of her fabric reveals the organization of the entire tapestry."Richard Feynman As a brief prelude to our upcoming case study on Hudson River Trading (HRT), I wanted to tease with some unusual findings: Alphacution has occasionally toyed with understanding the "shape" made by a simple ranking of 13F positions by value, particularly for a selection of leading market making and other proprietary trading firms; typically those with high 13F position counts. Because of the preponderance of portfolio hedging or just because of high position value concentration in the top positions, the common "L" shape yielded no obvious insight. (As reference, we demonstrated this finding early on (in 2018) in our Feed post, "Goldman Sachs' Book: Hiding in Plain Sight.") However, shifting to a log scale ranking created a more interesting shape even though our analysis remains incomplete and interpretations remain elusive. To date, we know that the slope at the beginning of the curve often [...]
"The mind is not a vessel to be filled but a fire to be kindled.."Plutarch The comment has been made here before, likely more than once: As we go along the path of our research, our ability to see - to interpret the data, and the shapes that are formed from that data - tends to improve. This is not only true of newer shapes forged from amalgamations of newer data - and additional sources - but of older shapes, as well. Recently, I stumbled over a series of charts first published in July 2019 in the Feed post, "Ranking Strategy Speed for Top Quants, Market Makers," which remains among our more fascinating discoveries. Therein, we compared average stock position sizing for a list of notable trading and hedge fund firms, from Renaissance Technologies (RenTech), D. E. Shaw, and Two Sigma to Jane Street, Hudson River Trading (HRT), and Tower Research Capital (TRC). Citadel Securities and Susquehanna Securities were in the mix, as well. The rankings were roughly delineated between [...]
