Welcome to Jane Street

“You can’t connect the dots looking forward; you can only connect them looking backwards. So you have to trust that the dots will somehow connect in your future. You have to trust in something – your gut, destiny, life, karma, whatever.” – Steve Jobs (2011)

You’ve got to wonder if the founders of Jane Street Group, which began as a subsidiary of Henry Capital prior to 2001, had any inclination that the “dots” would connect as they have when they were first starting out. Certainly, looking backwards, what now amounts to 64 quarters of track record has produced a “shape” that we can confidently say is worthy of applause…

Behind these scenes, Alphacution has nearly completed its initial modeling of Jane Street and the various legal entities that make up its track record, from a portfolio construction and positioning perspective. And, since we have done several of these modeling exercises so far among a roster of some of the more mythological managers and trading firms on record, it’s natural that one begins to grow an intuition about what is noteworthy. That intuition is often inspired and informed by shapes…

I don’t want to burn a lot of calories on words for this one right now. I just want the shapes to stand on their own without the words and many of the numbers causing distraction. So, with that as prelude, in the chart below, Alphacution presents the 13F gross notional long market value for Jane Street Group for the 63 quarters beginning Q1 2003 and ending Q3 2018:

The reason we are showcasing this one is because it reminds us of only one other shape – given its consistency and trajectory – that we have modeled so far. That other shape belongs to Citadel, which provides a point – or, shape – of reference below:

Note that the 13F data for Citadel does go back to Q2 2002. We just haven’t built that part of the model yet. I just wanted to place some brief emphasis on the parabolic consistency of certain players and then force ourselves to ask the following questions:

  1. How many other players have developed parabolic portfolio growth like this?
  2. From where they are now, how long can this parabolic growth persist? And finally,
  3. How long before the broader ecosystem of trading firms and asset managers notice the disruption that a subset of players like Citadel and Jane Street may be causing?

As for the last question, I’d say it’s noticeable already. But, like controversial topics such as climate change or other issues that embody the “slowly-boiling-frog” syndrome, most firms are not equipped to detect nor respond to the landscape shifting below their feet. (It’s largely by quirks of timing that they end up riding certain alpha waves.)

Alphacution is being developed to help provide intelligence in an arena where few are accustomed to needing it, and fewer are accustomed to asking for it. Based on our modeling and analysis, this dynamic is about to change…

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Alphacution is in the intelligence business.

We are uniquely focused on harvesting, packaging and distributing intelligence about the impacts of technology in financial markets and on the businesses of trading, asset management and banking. Our growing model library is our intelligence asset. Today, this intelligence asset primarily supports written research content, which can be accessed via standardized subscriptions and customized engagements. Occasionally, this core asset also supports video, audio and live presentation content. In time, Alphacution’s intelligence asset will support a broader platform of products and services, like data feeds and software.

For the past year or so, Alphacution has been publishing most of its research content on its Feed for free, and promoting that content via periodic newsletter. The purpose of this strategy has been to assess the interest in and demand for a unique perspective and a new level of intelligence on the financial markets ecosystem.

And, based on the growth in network and activity around that research, it seems that we have struck a cord with many of you – a network of senior executives representing some of the most advanced players in the global financial markets arena and their stakeholders.

The recent trajectory of pageview metrics on our site is symbolic of this claim, as shown below:

Now it’s time to take that level of engagement and direct it towards a more viable long term economic support model that ultimately allows us to scale our team and enhance the quantity and quality of our intelligence.

So, here’s what we are going to do about that:

For those of you who are eager to derive greater value from this work and apply that intelligence to your own business interests, Alphacution is offering individual introductory subscription options priced at $275 per year or $25 per month, cancellable at any time. Both of these options include a rebate on purchases of deeper, more substantive reports and case studies.

In other words, the entire value of an individual subscription paid up to the point of purchasing a single report will be deducted from the purchase of that report. (Rebates not to exceed the maximum value of an annual subscription.)

Examples of upcoming reports – that fall within our 2019 research strategy, outlined in the post Alphacution’s Book: Not Hiding, In Plain Sight – that will be available via the aforementioned subscription rebate mechanism include:

  1. Case Study: Citadel, LLC (~ Q1-2019)
  2. Case Study: All-Time Top 10 Hedge Fund Managers, Ranked by Profits (~ Q2-2019)
  3. Case Study: Top Proprietary Trading Firms (~ Q3-2019)
  4. Case Study: Goldman Sachs Group, Inc. (~ Q4-2019)

Enterprise subscription packages and custom content/service engagement options are available upon request at info@alphacution.com.

Individual Subscription Options

Note: Business credit cards and bank accounts can be used via our PayPal payment portal.

Now, for those of you who don’t expect to take advantage of the offers outlined above but want to continue to enjoy the insights, intelligence and occassional entertainment that remain openly available on the Feed, I want to make this specific plea:

Free doesn’t mean there are no costs. In fact, in this case, there have been extraordinary costs in the accumulation of experience and sight, meticulous curation and assembly of data, and creative visualization of and storytelling around our findings.

So, if you value quality content – here or anywhere else – then you need to find a way to support that content at some level simply because you want it to continue to exist. Our post, In Support of Digital Content – which was adapted from other notable digital era content developers – makes a more expansive case for this perspective.

Bottom line: Your efforts to support via one-time or recurring contributions will help guard against this content needing to move from the currently preferred audience-driven model (for its level of independence) to a sponsorship-driven model (which can be found on most other industry media outlets).

So, if none of the subscription options suit you, one-time and recurring support contributions can be made at any level here:

Of course, as always: If you value this work, please continue to “like it,” share it, comment on it – or discuss amongst your colleagues – and then send us feedback@alphacution.com.

As our “feedback loop” becomes more vibrant – given input from clients and other members of our network, especially around new questions to be answered – the value of this work will accelerate.

Don’t be shy…

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By | 2019-04-03T20:42:52-04:00 February 7th, 2019|Alphacution Feed|

About the Author:

Paul Rowady is the Director of Research for Alphacution Research Conservatory, a research and strategic advisory platform uniquely focused on modeling and benchmarking the impacts of technology on global financial markets and the businesses of trading, asset management and banking. He is a 30-year veteran of the proprietary, quantitative and derivatives trading arenas. Contact: feedback@alphacution.com; Follow: @alphacution.