[thablackbull]

I'm not sure RenTech and Virtu are comparable though (although I'll admit I don't work in the industry, so correct me if I'm wrong), but based on the article from Matt Levine on his Bloomberg column "Why Do High Frequency Traders Never Lose Money?" [1]:

> Imagine how suspicious it would be if, for instance, your local supermarket made money on every carton of milk that it sold. That just seems too good to be true, doesn't it? How can they know the price of milk before you do? Shouldn't they be losing money on half of their milk, and making it on the other half, so that things balance out? Doesn't the fact that they always make money suggest that they're ripping you off? [...] That is, Virtu (like Goldman) is selling a product, and that product is liquidity, and it charges for that product. High-frequency trading firms are in the business of acting as middlemen, providing a valuable service by letting buyers and sellers trade as soon as they want to, rather than waiting for fundamental sellers/buyers to come in on the other side of the market.

As I understand it, RenTech is taking an investment position which is why the returns are remarkable whereas virtu is (as Levine puts it), selling liquidity.

[1] https://www.bloomberg.com/opinion/articles/2014-03-20/why-do...

[mrchicity]

RenTech doesn't publish much so I'm merely conjecturing based on their volumes and other information that's in legal filings. There are a lot of ways to provide liquidity and fair pricing over diverse time horizons. It doesn't really matter how they do it. If your bets are independent and you have a statistically significant edge, you are basically guaranteed to make money with proper bankroll management.

From what Virtu's published, they make two-way markets, and once filled they scalp a tick, arbitrage in another product, or cross if the market becomes weak. Maybe RenTech does something like buy underpriced oil producers whose prices haven't moved up after bellwether stocks in the industry like XOM and CVX have, then sell once the spread between them converges. I'm sure both firms have loads of different tactics. The key thing is that they're mildly better than chance.