- Hudson River Trading’s net trading revenue hit nearly $8 billion in 2024, a record high.
- HRT has expanded into new markets and asset classes, doubling head count over the past four years.
- The firm has grown its high-frequency business and longer-duration trades in its Prism unit.
While proprietary trading giants like Jane Street, Citadel Securities, and XTX Markets have dominated headlines in recent years, Hudson River Trading has quietly grown into a global powerhouse in its own right.
HRT’s net trading revenue hit nearly $8 billion in 2024, an all-time high, according to people familiar with the matter, asking to remain anonymous because the information is private.
Like most of its competitors, HRT is private and reports little information publicly, so it’s unclear precisely how those results compare with prior years. But through September, HRT had nearly doubled its earnings compared with 2023, according to a research note from S&P Global. This helped increase the firm’s credit rating one notch and illustrated HRT’s success in diversifying and expanding its business, the ratings agency said.
Larger rivals Jane Street and Citadel Securities were also on pace for record years in 2024, Bloomberg reported.
The bulk of the HRT trading profits — roughly half — still come from the high-frequency trading business at its roots, known internally as its Classic business. But HRT has greatly expanded over the past half-decade, evolving into new markets and asset classes, such as systematic credit. The firm is now earning billions in profits from hedge-fund-style trading strategies that require greater risk and longer holding periods, and a unit dedicated to such strategies called Prism has become a key profit driver, the people said.
A spokesman for HRT declined to comment.
Founded in 2002, HRT is among the cadre of private trading firms that capitalized on the electronic-trading evolution in the late 1990s and 2000s, applying algorithms and state-of-the art technology to markets.
HRT started out trading US cash equities and it now handles 10% of the total stock-trading volume. But it has expanded significantly, trading in more than 200 markets across a broad array of asset classes, including futures, fixed-income, currencies, options, and crypto.
The expansion has doubled the firm’s size over the last four years. HRT now has 14 offices around the world, with locations in traditional global trading hubs but also Austin, Boulder, Shanghai, Mumbai, and Dublin. Employee head count has climbed to 1,110 from 500 in 2021.
HRT’s equity capital base has grown 16-fold since 2018, according to S&P.
In 2021, in a rare external media appearance, HRT revealed plans to build out a wholesale marketmaking business — handle order flow from brokers like Fidelity or Charles Schwab — to capitalize on the explosion of retail stock trading. It has grown that operation into a 4.7% market share as of the end of September, according to S&P, though it is still far behind the likes of Citadel Securities and Virtu Financial.
Behind HRT’s growth
Proprietary trading firms have become dominant forces, wresting billions in market share away from global investment banks in recent years. Many firms experienced a jolt to their businesses in 2020 and 2021 as a result of the COVID-19 pandemic, which saw record market volatility and a substantial increase in retail trading.
Most firms grew, but some have had more success than others. Analysts estimate that in 2024 Jane Street, now the industry Goliath, reaped $20 billion and Citadel Securities around $10 billion, according to financial publication International Financing Review.
They have long lurked under the surface as secretive market players that mint billions of dollars in the shadows. Because they manage their own money, unlike hedge funds that do it on behalf of outside investors, they report little information to the outside world.
While they remain closely guarded, this has started to change in recent years as their size and ambitions have ballooned. To fund their expansion, firms like Jane Street, Citadel Securities, and HRT have tapped debt capital markets, giving creditors and ratings agencies a slight peak under the hood.
HRT issued a $2.1 billion term loan in November, primarily to refinance and extend existing liabilities. In research reports related to the debt offering, both Moody’s and S&P noted HRT had consistently had strong earnings across a more diverse set of strategies since 2022.
“Sturdy and consistent trading profits have led to improvements in HRT’s funding and liquidity, evidenced by consistent growth in trading capital, equity capital, and related improvements in its trading capital/debt,” Moody’s wrote in its report.
Profits by Prism
Prop trading firms have traditionally relied on automated programs and speed to mint their profits — continuously buying and selling securities almost instantaneously and collecting tiny profits that add up to millions of dollars a day.
But there’s a finite pool of money in market making, and it’s fiercely fought over. Prop trading firms have increasingly dipped their toes into strategies more associated with hedge funds, where potentially even greater profits, but also risks, lie.
So-called mid-frequency strategies can happen over minutes, hours, or even days. Profits are won by the strength of predictive signals, developed through onerous statistical research and increasingly aided by artificial intelligence.
At HRT, Prism is the marquee unit focused on such trades, an increasingly profitable operation that generated more than $2 billion last year, according to people familiar with the business. Strategies span across asset classes, including equities, futures, rates, and credit, but ETF arbitrage and index-rebalance have been noteworthy and profitable strategies in recent years, the people said.
Equity statistical arbitrage and quant macro are newer units that have also driven recent growth in head count and profits, the people familiar with the matter said.
While still automated and mathematically driven, longer-duration trades require more capital and come with greater risks. There’s more time for markets and savvier opponents to move against you — winning signals can decay and predictions can go awry.
The reality of such risks reared its head in the second quarter of 2022, according to S&P, one of the rare instances of HRT posting a loss. That August, Moody’s downgraded HRT, citing increased risks that “leave HRT more susceptible to trading losses.”
But since then, HRT has produced “robust, consistent trading profits across a more diverse range of products and strategies,” Moody’s wrote in its November credit opinion, even as market volatility faded and spreads in market-making tightened.
