Over here at AlphaNu, we believe that what we are creating will redefine the future of trading. We want you in our vision too — so here’s a quick five minute read that tells you exactly what AlphaNu is going to change.
Computer trading dominates modern financial markets. However, majority of computer trading disadvantages retail traders, because they’re just not equipped with the same tools as million dollar trading corporations. Every time you place a trade through your broker as a retail trader, thousands of bots fight at the nanoseconds level to respond to your trade and place you at a disadvantage — be it through front-running, unnatural response times or just through sheer strength of automation.
However, trading in this manner is not likely to disappear any time soon — few regulations are keen to take a stance for or against it, while it is inevitable that computerized trading will always exist. Instead of fighting against the inevitable, we plan to even the playing field for everyone by introducing AlphaNu — a marketplace platform which facilitates subscriptions to powerful trading algorithms created by the top Wall Street developers. Our goal is to bring the same powerful Wall Street algorithm trading methods to the mainstream, allowing even retail traders to challenge Wall Street.
Some people may challenge our assumptions about the market and why there’s a need for our product. Here’s some facts to support our beliefs:
1. There are still plenty of markets which can be opened up to computerized trading differently from the unfair model currently popular in the USA.
In the US, over 85% of trading is done by computer algorithms. This is in comparison to China, where over 95% of trading volume is still executed manually because retail investors are the majority. Remember — China’s commodity futures exchanges are some of the biggest in the world. Markets, such as China, that have yet to adopt significant computerized trading present a huge opportunity to introduce a more equitable format for algorithmic trading.
It is inevitable that developing nations in Asia will catch up to using automated tools in trading. In the process, large companies with financial resources will have a greater advantage as they can control access to these automated trading tools. We have seen this process first hand at THM Capital, our previous hedge fund, where we serviced and advised some of the biggest institutional investors in Asia. Our customers include Cathay Life Insurance, which has over $200 billion USD in assets, and Maike Group, China’s largest aluminum and copper trader with $5 billion USD in annual sales. We believe that it is possible to equip the everyday trader with the right tools to take on automated trading, disintermediating the mutual funds and investment corporations looking to monopolize the computer trading market, and proving that the masses can have fair access to computer trading.
2. Algorithm Developers are not being fairly paid in accordance to the quality work they are creating, thus presenting a strong supply-side opportunity in our marketplace.
Currently, Algorithm developers are being poached by top firms to create the quality algorithms used in trades around the world. However, developers are never incentivised proportionately to the importance of their work, as these corporations distribute the revenue in favour of rewarding their sales teams. This means that even if a fund produces extremely good results, the developers get the same pay as they would even if the fund is mediocre.
If both the incentives and distribution of value is arguably unfair to developers in the current model, there is strong indication that these developers would prefer to offer their services and algorithms to the market at large. Prior to AlphaNu, there has been no solution allowing them to provide this service in a way that protects their intellectual property — developers cannot reveal their source code as it enables “opposing” algorithms to take advantage of it, and they also lose the ability to resell the algorithms to more than one buyer.
Our platform enables investors to connect the algorithms they purchased on our platform directly to their brokerage account for trading. Everyday investors will now be able to use the same tools as the top performing Wall Street fund managers to execute their desired trading strategy, and will no longer have to pay a premium to access these resources or be prevented from doing so.
3. The markets we are targeting are significantly far off from adopting modern algorithm trading on their own, due to lack of resources and expertise.
We are aware that our first target market, China, also has a growing developer scene offering trading algorithms for sale. However, these algorithms are created by Chinese developers from engineering backgrounds rather than Wall Street developers and professionals with years of financial market experience. These algorithms cannot benefit from the years of tried and tested theories, concepts, data and expertise of the Wall Street developers, and is a key reason why growth of algorithmic trading in China is much slower than its volume would suggest. Although this may look like we are unfairly promoting US developers, our developer platform will offer a universal and fair environment for developers of any background to create and prove their algorithm’s success — ensuring a merit-based approach to rewarding developers.
The first market we will be targeting in our Phase I development is China’s futures commodities market. Shortly after launch, we will be expanding and offering trading algorithms for the Chinese equities market. In Phase II, we will expand and offering our marketplace to other Asian countries to continue to capture the growing trend of computer trading in the region.
4. AlphaNu offers access to rare processed historical data of target markets yet to be saturated with algorithmic trading.
In order for algorithm developers to do their magic, they require updated and processed data from the exchanges and markets they are targeting. After years of experience from THM Capital, we have curated a large database of Chinese historical trading data which is extremely rare. We have processed, cleaned, translated, and labeled the raw data into structured data that is easily analyzed by Wall Street developers. Such data is usually offered in the US at a steep price, only accessible by top-paying firms, and kept exclusive rather than provided to the public.
With the opening up of this database within our closed environment, Algorithm developers can now sell direct to traders and receive fair compensation for their work, without intermediaries such as mutual fund companies like Black Rock. Traders will no longer find themselves being front-run by large funds with an unfair advantage and can now contest on an even playing field. And even non-traders such as market observers and investors will be able to benefit from the growth of this market through our unique revenue-sharing contracts that allow anyone to profit from the success of algorithms on our marketplace. Supporting all of this is our easily scalable and powerful backend systems, implementing the latest in fintech and blockchain technologies for the purpose of fair revenue attribution, quantum-level security and fully-featured algorithm development environments.
Our go to market strategy is to partner up with Chinese futures brokerages and jointly target their customers. Brokerages are incentivized to work with us as computer trading algorithms generally results in increased trading and thus higher turnover through brokerage fees. We believe that in time to come, our approach will enable large numbers of retail traders to adopt and see the value in AlphaNu, creating a new movement of traders that are willing and capable of adopting the latest in trading technologies on their own without paying huge premiums to monopolistic companies.