[ActorNightly]

Man from all these responses, so many people are unaware of the finance world, lol. Or just bots posting for HRT

In case you are unaware - very single trading firm makes money on fees, not by outperforming the market. This goes for firms like Vanguard too.

Just think about it for a little bit - if you could reliably outperform the market by any % with an algorithm why even start a company? Just take out loans, invest, make money, repeat and become rich. No expenses to manage a company.

[dumah]

You have no concept of the infrastructure and organization necessary to operate these enterprises.

All your posts here are low-information anti-finance rants.

[Redoubts]

> Because every single trading firm makes money on fees

I really want to know what you think this company does, precisely

[ActorNightly]

I can't tell if people don't understand how financial firms work or are you just being sarcastic.

If a company has customers, and those customers buy a product, the company charges a price for that product.

[atombender]

They're a market market that provides liquidity to clients. They (as far as I know) don't charge fees, but earn their profits by exploiting the ask/bid spread.

A customer might want to offload TSLA and are willing to pay the market rate of $329. This trade might work in HRT's favor if they can sell it for $329.01. It's just 1 cent, but over millions of transactions these small amounts of profit add up.

The value captured by HRT is meaningful in the aggregate, but tiny and irrelevant to the institutional clients, and therefore can't be thought of as a fee. What HRT provides in return for taking clients' trades is liquidity.

[Redoubts]

> If a company has customers

They don't...

[ActorNightly]

a) What do you call this at the bottom of the page https://www.hudsonrivertrading.com/liquidity/

b) If you don't have customers, why have a company?

[ladberg]

I think you're misunderstanding what that page is: it's not an advertisement to invest with the company, it's an advertisement to trade via/with the company in the same way you might otherwise go manually trade from a Bloomberg terminal (or any other method).

There is no way to invest in the company, and the only way of becoming a "customer" is to engage in trading.

[Redoubts]

I don’t really understand question b), how else would you organize a venture involving more than a couple people?

[Smaug123]

I'm not sure how you intend performing the "take out loans" and "invest" stages without a company, once you have more than a few million dollars. Companies permit scaling past one person's worth of uptime and ability.

[82716f12]

HRT is a prop firm, which means they don't have outside investors. They invest their own money like you said, no income from fees. You just proved that you have no idea what you are talking about.

[ActorNightly]

No, they are a liquidity provider. Liquidity providers only make money when there are imbalances in the market. Notionally because markets tend to drive fast towards efficiency, you can't realistically make money just being a market maker.

So then, you have to offer additional services. HRT has the SDP that they provide, and of course charge fees for. But then the question is why would anyone do this, versus just going through any other financial institution.

The answer is basically all up on their website

"As a liquidity provider, HRT develops automated trading algorithms designed to provide the best prices to our clients".

The question that should be asked is as a user, why would I want to sign up with HRT or any similar financial company? The answer for HRT is because you want to have access to more complicated financial derivatives - you don't need to sign up and pay fees to buy basic stock.

So they promise that their algorithms give the user the best price, which is a legal way of saying that you will pay less for a certain asset and make money on it, and you can't say that because you can't guarantee this.

And its well known that nobody ever gets rich of an algorithm in finance unless you are well established large firm intricately tied with the government that can move so much money as to influence trading.

[82716f12]

Being a market maker vs "We have a fancy trading algorithm that statistically is never going to outperform just buying VOO and holding it, but the thing is if you get lucky, it could" are two very different things lol

Moreover, I would be very surprised if the majority of their $8 billion annual profit came from client market making.

[ActorNightly]

Right, exactly what I said. They don't make money by market making. They make money by charging transaction fees, and on an access basis to their "algorithms" which are designed against analyzing the complex futures that they are the market maker for.

The incentive for users to sign up with them is to get access to "better" pricing for whatever commodity they pair the buy/sell orders for - but remember these are futures so its all betting, and so the algorithms don't really mean anything.

[dumah]

They don’t charge fees, because they’re not a brokerage or exchange.

They pay fees to exchanges.

As a market maker, some rebates are given back conditional on their activity.

They have no users.

You’re just constantly obliviously asserting falsehoods that betray an almost comical lack of understanding of the reality of these businesses.

[82716f12]

My understanding of these firms is limited too, but I’ve never heard of market makers charging transaction fees.

Isn’t it actually the opposite? they pay for order flow instead? They should be making money from bid-ask spread, not fees.

[Redoubts]

> Right, exactly what I said. They don't make money by market making

“client market making”. That’s very different from “market making”, you two are not in agreement at all here