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Options trading Steve Cohen’s Point72 and other hedge funds are sending urgent requests to find a replacement after Robinhood’s data on hot stock trades suddenly went dark


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Options trading Steve Cohen’s Point72 and other hedge funds are sending urgent requests to find a replacement after Robinhood’s data on hot stock trades suddenly went dark

Point72 has reached out to other trading platforms and investing apps in a hunt for new trading signals, according to people with direct knowledge of the outreach.The requests came just hours after the popular trading app Robinhood restricted access to an API that showed which stocks were most popular among its users. The owner of one…

Options trading Steve Cohen’s Point72 and other hedge funds are sending urgent requests to find a replacement after Robinhood’s data on hot stock trades suddenly went dark

Options trading

  • Point72 has reached out to other trading platforms and investing apps in a hunt for new trading signals, according to people with direct knowledge of the outreach.
  • The requests came just hours after the popular trading app Robinhood restricted access to an API that showed which stocks were most popular among its users. 
  • The owner of one website that used the data, robintrack.net, told Bloomberg in June that he’d seen evidence that Point72 and the quant hedge fund D.E. Shaw were trying to scrape his data. 
  • Steve Cohen’s hedge fund is just one of several hedge funds that have been reaching out in the past 24 hours, one of the people said. 
  • Visit Business Insider’s homepage for more stories.

Point72 is among the hedge funds scrambling to find alternative data sources after the day-trading app Robinhood decided to stop providing data on which stocks are most popular on its platform, according to people with direct knowledge of its outreach.

Representatives for Point72’s market intelligence data team, including Zach Cohen and Kerry Van Name, have been reaching out to other trading platforms and investing apps in search of data partnerships over the past day, according to people with direct knowledge of their efforts.

In one email viewed by Business Insider, the Point72 representatives said their interest in a partnership was “an urgent request.” In another conversation recounted by a person who was there, representatives of the $16 billion hedge fund linked their desire for trading data directly to Robinhood’s decision to shut down their feed. 

The market intelligence data team’s job is to find and vet thousands of alternative data providers each year. A Point72 spokesperson declined to comment.

Read more: Credit-card data is broken. Here’s how hedge funds and banks are being forced to rethink one of the earliest alt-data plays.

Point72 isn’t alone among hedge funds reaching out to other data providers, according to one of the people. Within hours yesterday of a Bloomberg story announcing the closing of robintrack.net, a website founded by Casey Primozic to track Robinhood users’ favorite stocks, hedge funds began reaching out, the person said. 

Primozic told Bloomberg in June that he had seen evidence that hedge funds were scraping his data, and he said hedge funds such as Point72 and D.E. Shaw had looked into using his data or getting access to it. Last month, he told Bloomberg Television that hedge funds and other proprietary trading shops were looking to aggregate his data and use it as an input into trading algorithms.

“I’ve gotten plenty of emails from hedge funds, prop firms, other financial institutions who are interested in the data,” Primozic said in the TV interview.

CNBC first reported Robinhood would stop publishing how many clients held a particular stock, citing a Robinhood spokesperson who said the data was often “misconstrued” and “misunderstood.” The spokesperson also told the business-news website that the company would limit access to its application programming interface.

Quantitative hedge funds like Point72 and D.E. Shaw use trading information like which stocks are most popular on Robinhood as inputs into algorithms trained to monitor momentum and volatility strategies.

Read more: Alt data’s Wild West days may be ending as Congress and privacy advocates zero in on the industry. Nearly a dozen insiders tell us how data streams going dark is an ‘unhedgeable’ risk.

Alternative datasets going dark, or becoming less valuable overnight, is a common — albeit frustrating — situation for many hedge funds.

Avast’s Jumpshot was permanently shut down over privacy issues, while Envestnet’s Yodlee dealt with congressional inquiries. 

“It’s a problem, and it’s a largely unhedgeable risk,” Tammer Kamel, the cofounder and CEO of Quandl, told Business Insider in March.

That issue was highlighted recently as the coronavirus pandemic disrupted consumers’ spending habits. As a result, credit-card data, one of the older and most used alternative datasets, was deemed less valuable by some.

Meanwhile, alt-data providers are eager to fill the gap left behind by Robinhood’s decision to no longer disclose data.

At least one provider, Thinknum, which scrapes data from the web, is working on a product that will track sentiment among retail investors following the developments at Robinhood as well as “multiple client requests,” according to a source familiar with the matter.

Another source, whose company offers brokerage APIs, said they received two separate inquiries on Tuesday regarding their product.

Read more: Execs from Man Group, Bridgewater, and Schonfeld explain how they’re trying to blend humans and machines

Options trading Robinhood has become the face of a retail-trading frenzy

A Silicon Valley darling, Robinhood has long been the brokerage of choice for first-time investors thanks to its sleek user interface and commission-free trading, a novelty when it first launched in 2013. The app has become the face of a recent day-trading frenzy as the coronavirus has closed sports- and casino-gambling outlets and left many people at home without their usual entertainment options.

Even as traditional brokerages looked to shed trading commissions in fall 2019, Robinhood has still managed to maintain its hold on young investors. The startup has had incredible growth, adding 3 million new funded accounts from the start of 2020 through April. It raised $600 million in July at an $8.6 billion valuation.

All of this has come despite some setbacks in 2020.

In March, amid some of the most volatile days of trading, Robinhood was plagued with outages that locked users out of their accounts for days at a time. In June, a 20-year-old college student died by suicide after seeing a negative $730,000 balance on his Robinhood account.

Vlad Tenev and Baiju Bhatt, the cofounders and co-CEOs of the startup, acknowledged the death on the startup’s blog and said they were working to improve the customer experience. 

But through it all, Robinhood has managed to continue to grow its platform. On Monday, the startup released daily average revenue trades for June. At 4.31 million, Robinhood beat out the traditional incumbents in the space, topping TD Ameritrade (3.84 million), Interactive Brokers (1.86 million), Charles Schwab (1.8 million), and E-Trade (1.1 million).

Correction: A previous version of this story stated Robinhood had added 3 million new funded accounts in May 2020 alone.

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Betterment wants to understand why Robinhood has such a powerful psychological pull on do-it-yourself investors, and is eyeing ways to help its own users ‘scratch that need for control’

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