Hudson River Trading Beats Citadel Securities with $3.7 Billion Quarter
- Hudson River Trading generated a record $3.7 billion in Q3 revenue and beat rival Citadel Securities for the second straight quarter.
- The firm is shifting strategy by holding risky positions for days or weeks instead of just executing split-second high-frequency trades.
Speed is usually the only currency that matters in electronic trading. Firms spend billions to shave nanoseconds off execution times. Hudson River Trading (HRT) built its reputation on this high frequency velocity. But the firm has found a new and more profitable edge. It is holding onto stocks for days or even weeks.
This strategy shift has turned the quiet New York firm into a financial juggernaut. HRT generated a record $3.7 billion in revenue during the third quarter alone. That figure beats the $2.64 billion posted by Citadel Securities for the same period. It marks the second consecutive quarter that Hudson River has eclipsed the trading arm of Ken Griffin’s empire.
The "Prism" Strategy Shift The secret sauce driving this growth is a unit called "Prism." This division focuses on mid frequency trading rather than split second arbitrage. Traditional high frequency firms rarely hold positions overnight. They flip stocks instantly to capture tiny price differences. Prism operates more like a hedge fund. It uses the company's massive balance sheet to make longer term wagers on where stock prices are heading.
This approach is paying off. Almost half of the firm's recent windfall came from these slower and riskier trades. The company made just over $9 billion in the first nine months of the year. That already exceeds its total revenue for the entire previous year.
Chasing Jane Street Hudson River is winning battles but the war is far from over. Jane Street remains the undisputed king of the industry. Its traders generated $6.83 billion in the third quarter alone. That is more than HRT and Citadel Securities combined.
The gap exists largely because HRT is falling behind in the options market. Jane Street and Citadel Securities dominate the lucrative world of options wholesaling. They handle massive order flows for retail brokers like Robinhood and Charles Schwab. HRT captures about 15% of all US stock trades but only has a 4% sliver of the options market. Management has identified this as their primary growth target.
The Billion Dollar AI Bet Catching up requires massive investment. HRT is currently spending $1 billion annually on artificial intelligence and hardware. This includes a dedicated research group called "HAIL" (HRT AI Labs). The team recruits talent from top AI heavyweights like Google’s DeepMind rather than just traditional finance graduates.
The goal is to use machine learning to predict price movements over those longer time horizons. The company creates a shared internal code base where everyone contributes to the same system. This collaborative approach differs from the siloed and secretive nature of many competitors.
New Risks and New DNA The pivot to "slower" trading brings new dangers. Holding assets for weeks exposes the firm to market crashes and volatility that high frequency traders usually avoid. It also requires a cultural overhaul. The firm is hiring more client facing staff to build relationships in the debt and options markets. These are roles that require social skills as much as mathematical ones.
Hudson River Trading is betting that it can evolve from a pure speed merchant into a diversified financial powerhouse. The early results suggest the gamble is working. The firm is richer than ever. But it is now playing a game where a market downturn can hurt much more than it used to.