Nov 6, 2020 β€’ 54M

Podcast Conversation: Understanding Robinhood, Citadel, and the structure of Market Making with Paul Rowady of Alphacution

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Finance is being pulled apart by the forces of frontier technology. From AI, to blockchain, crypto and DeFi, to mixed reality, chatbots, neobanks, and roboadvisors β€” the industry will never be the same. Here is the blueprint for navigating the shift.

Hi Fintech Futurists,

Welcome back to our podcast series!

In this conversation, we talk with Paul Rowady, who is the Director of Research for Alphacution Research Conservatory. Paul has a deep background in capital markets, derivatives, and the macro structure of the industry. He has been uncovering the transformation of that structure with data driven analyses, making visible the economics of market makers like Citadel and retail order flow aggregators like Robinhood. This is a rich discussion of what trading stocks is really like. And make sure to check out Alphacution.

Long Take: How Robinhood makes $90MM from order flow, and how DeFi is  different

For premium subscribers, an full transcript is provided along with the recording.

Hope you enjoy, and do not hesitate toΒ reach out here!


Because of the volatility caused this year, starting in March by the pandemic and then the ensuing economic reactions to that. In the first half of 2020, Citadel has earned more in net trading revenue than they have at any time in their history. In other words, six months is greater than any full year in the history of Citadel Securities, which goes back about 20 years, it was founded in 2000, or 2001. And that number is four billion in net trading income.

That's pretty incredible.

As automation and technology becomes more refined, there are firms that are squeezing, I call it the digital frontier of this business, is maybe a million dollars ahead. So that you could have a small team of 50 people and generate $50 million a year in top line revenue. It's insane, kind of what I call technical leverage. And it's a story that we don't think of as happening in capital markets, but it's the same thing that you see in other markets where Amazon is becoming dominant. This is the winner take all aspect of technical adoption being played out in global markets.

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