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I actually think that exchange rebates reinforce my point. I've seen algos that would dump trading profit to get their trade levels into particular rebate leve

I actually think that exchange rebates reinforce my point. I've seen algos that would dump trading profit to get their trade levels into particular rebate levels for instance. Those algos would look bad under the metric of "never lost money trading" but look good under the metric of "holistic profitability". I just am annoyed when people site the former when talking about Virtu, both using it pejoratively or in praise of the firm, because I don't think its a terribly useful thing to say. We can judge Virtu the same way we judge every other firm on the planet, by actual profits, there is no need to come up with a new metric for them.

dsacco 9y ago
In fairness, while I agree with your second paragraph, Virtu's example is a very neat case study for the limited dialectic purpose of demonstrating trading consistency, not necessarily profits. I have found that using profits for this particular debate isn't convincing for others, even if it shows a fuller picture; the actual win rate for trades is a simple and quantifiable point to refute comparisons to e.g. coin flipping because it shows that they are capable of doing something over and over in a market that is claimed to be resistant to such a thing.
- kasey_junk 9y ago
  But when people are talking about coin flipping, they are talking about real profit, not trade PnL. If your overhead to get into a trade is more expensive than the PnL on that trade, your consistent ability to make that trade is not a good thing, and that negative should be counted against your win rate wrt things like the efficient market hypothesis. Again, I actually don't have strong opinions about coin flipping and trading being equivalent (and I think Virtu is likely a bad place to have that conversation vs a hedge fund because its not really an investment firm its an execution one) but I think claiming trading PnL refutes it is wrong.

dsacco 9y ago

In fairness, while I agree with your second paragraph, Virtu's example is a very neat case study for the limited dialectic purpose of demonstrating trading consistency, not necessarily profits. I have found that using profits for this particular debate isn't convincing for others, even if it shows a fuller picture; the actual win rate for trades is a simple and quantifiable point to refute comparisons to e.g. coin flipping because it shows that they are capable of doing something over and over in a market that is claimed to be resistant to such a thing.

kasey_junk 9y ago
But when people are talking about coin flipping, they are talking about real profit, not trade PnL. If your overhead to get into a trade is more expensive than the PnL on that trade, your consistent ability to make that trade is not a good thing, and that negative should be counted against your win rate wrt things like the efficient market hypothesis. Again, I actually don't have strong opinions about coin flipping and trading being equivalent (and I think Virtu is likely a bad place to have that conversation vs a hedge fund because its not really an investment firm its an execution one) but I think claiming trading PnL refutes it is wrong.