Market volatility, whether up or down, is a cause for anxiety among investors and traders. How much money are you going to make (or lose) is always the question of the day. For high-frequency trading firms (HFT) such as the Mumbai-based AlphaGrep Securities Pvt Ltd, however, it’s when they hit pay dirt.
Volatile markets and frequent price disruptions are preferred playgrounds for HFTs, which trade through algorithms and strategies. And at no time was the market more volatile than in March-April 2020, when markets fell fell Moneycontrol Over 50% of Nifty, Sensex stocks fall 10-40% in just 2 months; what to do now? Read more nearly 40% in a matter of days.
AlphaGrep, predictably, made a killing. Multiple employees at the firm told The Ken that the first six months of 2020 were the company’s most profitable in its 10-year history.
It was, by all accounts, a turnaround year for a company whose revenues are thought of to be widely divergent. In 2017, AlphaGrep’s Indian entity made Rs 141 crore (US$20 million) in revenue, according to company financials. In 2018, it had come down to only about Rs 44 crore (US$6 million). Recent numbers, though, are unavailable.
AlphaGrep is one of the largest HFT firms trading on Indian bourses. Almost 50-60% of the trades on the National Stock Exchange (NSE) are traded by algorithms. And on any given day, estimate former employees, AlphaGrep can be credited with about 5-7% of the total traded value on the NSE. For some stocks, this number could be as high as 20-30%. Both current and former employees at AlphaGrep that The Ken spoke to preferred to stay anonymous to avoid commenting publicly on the firm.
It trades in stock markets around the world. In addition to the Indian bourses, the company trades in the USA, UK, China, Singapore and even Brazil, and has registered entities in these countries
While official worldwide turnover figures are unavailable, former employees that The Ken spoke to estimated that AlphaGrep’s turnover could be closer to Rs 100 crore (US$14 million). The employees could not specify which year’s figure this was. However, they contended that the actual figures would only be known to the founders and top management.
This isn’t unusual. HFT firms, in general, avoid publicity like the plague. Though profit margins are razor-thin, the volumes they trade in are large. Consequently, actual profits are anything but. For instance, according to data from the NSE, AlphaGrep’s latest purchase—shares of newly listed company Mazagon Dock Shipbuilders—netted it a measly margin of Rs 0.21 per share. But with 1.5 million shares, the firm made almost Rs 3.1 lakh (US$4,200).