More Risk, Less Speed: Hudson River Mints Billions Slowing Down

Finding an edge in the cutthroat world of electronic market makers usually means moving a split-second faster than the competition. Hudson River Trading found another one by slowing down. The high-frequency firm is increasingly holding positions for days and even weeks, embracing more risk as it battles industry rivals including Jane Street and Citadel Securities, the market-making sibling of Ken Griffin’s Citadel hedge fund. It’s also adopting high-touch methods — think humans picking up the phone — to handle more retail brokerage orders and push further into the debt market. The result? The New York-based outfit, which deliberately maintains a low profile, has quietly morphed into a powerhouse among non-bank market makers. Bloomberg News Finance Reporter Katherine Doherty joins Bloomberg Businessweek Daily to discuss. She speaks with Carol Massar and Tim Stenovec.

Having captured around 15% of all US equity trades and 4% of the options market, Hudson River now wants to build on its success. In a rare interview at its downtown Manhattan head office, the firm sketched out a plan to aggressively grow its credit and options businesses, expand its international footprint — and add even more of the mid-frequency trading strategies that will see it take on more risk as it holds assets for longer.

To fulfill those ambitions at such a technology-driven company (Hudson River currently spends $1 billion per year on artificial intelligence) will mean bringing in new skills and becoming more client-facing. And there will be competition on every front, not least in options, where the firm’s lack of a wholesale platform leaves it far adrift of industry leaders. But Prashant Lal, one of two partners who oversee the business, says its track record shows how effectively the market maker can adapt to other assets and time horizons.

“We have had so much success in stepping outside of our comfort zone,” said Lal. “If we just stayed in electronic trading, that would be in the very shallow end of the pool.”

Trade, Build

More than half of Hudson River’s 1,150 employees are based in New York, occupying five floors of a highrise overlooking the Statue of Liberty and the waterway the firm is named after.

The game- and puzzle-loving culture at the heart of the business is on display in the cheesy jokes posted on a whiteboard for arriving employees (“Where do math teachers go on vacation? To Times Square”) and in a dedicated games room, which offers foosball, billiards, a poker table, and Settlers of Catan, the hit board game where players acquire resources to build and expand settlements.

Hudson River’s own expansion is moving fast. Thanks to outstanding debt that requires updates to lenders, its financial performance now regularly leaks out. The latest shows the firm made just over $9 billion in the first nine months of this year, according to people with knowledge of the performance who asked not to be identified sharing non-public information. That already eclipses the $8 billion of net trading revenue it notched in all of 2024.

The growth is partly tied to Hudson River’s embrace of longer holding periods for many trades. High-frequency firms primarily use algorithms to move rapidly in and out of positions, matching buyers and sellers and profiting from tiny differences in price. But rising competition has in recent years driven this cohort toward lengthier, more hedge fund-like holding periods.

Hudson River has two businesses following this playbook. One specialized unit, Prism, focuses on mid-frequency, longer-duration trades that hold positions using the balance sheet in the same way an investment firm would, profiting on bets that go in the right direction. The other is a statistical arbitrage business using quantitative analysis to identify and profit from inefficiencies between related equities.

“We’ve transitioned to a firm that’s grown its risk appetite, willing to take meaningful overnight risk, over a number of days or weeks,” said Adam Nunes, head of risk. Still, that doesn’t mean an end to high-turnover trading, he said.

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