The rise of Hudson River Trading (HRT)

Built by coders, led by coders

In the second quarter of this year, Hudson River Trading (HRT) made more revenue and substantially more profits than the mighty Citadel Securities (according to Bloomberg News). I used to run into HRT a decade ago as a client and a big player on anonymous central limit order books (CLOB), taking on the other secretive giants of the high-frequency trading (HFT) world like Jump Trading. But the HRT of today is very different.

Is HRT the most successful firm on Wall Street that most people don’t know?

That title would have belonged to Jane Street five years ago – before Sam Bankman-Fried, before the tens of billions of dollars of revenues, and before the Indian options scandal. Citadel Securities has always been high profile, given Ken Griffin’s reputation and its domination of US retail trading flows.

Those interested in Jane Street and Citadel Securities should check out my previous pieces on them here on Substack and elsewhere. In the latest one for IFR last week, I highlighted how their business models differed significantly across technology, time horizons, trading strategies, and proprietary bets. https://www.ifre.com/people-and-markets/2308284/trading-titans-diverge-as-jane-streets-prop-push-pays-off

So, who is Hudson River Trading (HRT) and how did they build a business annualizing at around $10 billion in revenues and more than $5 billion in net profits?

The origin story

HRT’s founding partners graduated from Harvard and MIT with degrees in computer science and mathematics. Two of them briefly worked for one of the early pioneers of the high-frequency trading (HFT) revolution, Tower Research. In 2002, the three founders set up HRT, but two of them left more than a decade ago. The only remaining founder is computer scientist Jason Carroll, who is likely the largest shareholder of the firm. HRT doesn’t have a CEO, but the two partners of the firm are Carroll and Prashant Lal. The latter, an MIT graduate, joined HRT in 2010, having spent a decade at Tower Research, including time overlapping with Carroll.

A few months ago, I wrote about the history of the trend-following CTA hedge fund industry and how its US branch had its roots in the pits of the Chicago futures exchanges, and the London branch more in quant research.

Similarly, there are also two different roots to firms in the HFT world - one Chicago trader-driven and the other tech-driven. Of course, the business model of HFTs has an obvious requirement for coding brilliance and huge amounts of investment in this area. But many storied firms actually had their roots in the Chicago exchange floor trading and options community. The earliest of these giants was DRW, founded in 1992 by legendary Don Wilson. In the next 8 years, a series of iconic Chicago HFT firms were born, including Jump Trading. This contrasts with the more technology-focused roots of Citadel Securities (also started in Chicago in 2002, now separate from Ken Griffin’s hedge fund Citadel LLC), New York-based HRT, and London’s recent success story XTX Markets. Tower Research could be argued to have origins in both the trader and techie worlds and is New York-based.

But nowhere in the HFT world will you find a giant that is more technology-first than HRT. Open the HRT website, and the first thing you see is:

“Built by coders, led by coders, At HRT we are mathematicians, computer scientists, statisticians, physicists and engineers. We research and develop automated trading algorithms using advanced mathematical techniques…HRT is first and foremost a math and technology company. We are engineers and researchers working as one team to solve difficult problems, and trading millions of shares a day on the world’s financial markets.”

There is no title called trader or even algorithmic trader at HFT. Everyone can code, and team members rolling out and maintaining trading strategies are known as algo developers.

In its first decade or so, HRT was largely a player on anonymous CLOBs both on exchanges and in OTC (Over-the-counter) markets. The core of the business was US equities, where it traded 5% of market volumes by 2014 with a group headcount of only 100. Given the regulatory pressure the industry faced after Michael Lewis’ book Flash Boys, HRT was always keen to highlight that it was more than just a latency arbitrage firm competing with microwaves on sub-millisecond speeds. A 2014 Wall Street Journal article said, “HRT holds about 25% of its trading capital overnight (unlike most high-frequency trading firms that hold almost nothing overnight), its average holding time is about five minutes as opposed to the sub-second times observed for some high-frequency trading firms.”

There was massive pressure on the profitability of the traditional HFT business model of trading on anonymous CLOBs in the 2009-2019 decade. On one side of the equation, market volatility and trading volumes were lacklustre. On the other side, the level of competition amongst deep-pocketed HFT firms kept increasing, and the speed game became ever more costly. This led to a shakeout in the industry with many firms closing down and others merging. This included market leaders like Getco (now part of Virtu), seeing sharp revenue declines.

In US cash equities, HFT revenues declined by 85% from the peak in 2008 through to 2017. But this was not just a trend specific to cash equities. Other smaller markets, like CLOBs in US Treasuries and spot foreign exchange (FX), saw trading volumes collapse over the decade as disclosed liquidity and internalization took hold (earlier and more dramatically in FX and much later and to a lesser extent in US Treasuries), and CLOBs gained a reputation for excessive toxic flow from HFTs. As a result, HFT profitability suffered in these markets as well. HRT, through its subsidiaries such as Rigel Cove, was a major player in these markets.

The diversification story

In 2018, HRT acquired 120-person Sun Trading, one of many firms that had struggled in HFT’s lost decade. Jason Carroll said in a statement at the time: "This acquisition combines HRT's expertise in on-exchange trading with Sun's expertise in off-exchange trading creating a stronger, more diverse firm." Having launched at the same time as HRT, Sun Trading’s focus had drifted by the time of the deal from US equities CLOBs to dark pools, a single dealer platform in US equities and exchange-traded funds (ETFs), and a systematic internaliser in Europe. (Today, HRT is one of the 4 main European equities systematic internalisers with XTX Markets, Citadel Securities. and Tower Research.)

As volatility returned in 2020, HRT revenues rose to the $1-1.5 billion range with circa 50% margins and more than $3 billion of trading capital. But it was still less than half the size of Citadel Securities and also much smaller than Virtu. When the Gamestop mania took hold in early 2021, HRT’s 8% market share in US stocks positioned it well. The firm saw its Q1 2021 revenues increase 150% to $1.2 billion and its profits almost triple. (source Bloomberg News) HRT’s headcount was around 400-500 through this period, and trading capital had grown to around $5 billion in 2021.

The following year, HRT expanded into US retail equity wholesaling, a market dominated by Citadel Securities and Virtu at the time. HRT is the only new successful entrant in this market in recent years. In June 2025, HRT had around a 10% market share of this segment, in line with its recent market share in overall US stock trading. This puts it on a par with Jane Street on both metrics.

At the same time, HRT also expanded across other asset classes, including fixed income and crypto. In US Treasuries, where the firm had a long history of anonymous CLOBs, it is also now streaming prices on a disclosed basis through interbank platforms.

The move to longer time horizons

Several leading HFTs are trying to leverage their computing and quant infrastructure to expand into more mid-frequency trading strategies that have typically been the domain of hedge funds. Tower Research is planning to launch a fund with external investors as part of its expansion plans here. Tower Research outside investors

The most advanced of the HFTs in mid-frequency trading is HRT. Earlier this year, Business Insider said that HRT had generated a record of almost $8 billion in revenues in 2024, with an increasing portion coming from hedge fund-style trading involving taking greater risk and longer holding periods. Business Insider HRT

Business Insider wrote: “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 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.”

Although, as a technology-first and largely equities market maker and HFT firm, HRT is much more similar to Citadel Securities (than Jane Street), this move into mid-frequency trading goes beyond what Citadel Securities is doing. The nature of market making in OTC products is that they are less liquid, need financing and prime brokerage relationships, and Citadel Securities takes more risk in OTC markets than in exchange-traded equities and options, in the form of longer time horizons and large block sizes. But strategies like ETF arbitrage and index rebalance are more the bread-and-butter of a firm like Jane Street. HRT’s efforts in macro trading are largely mid-frequency, and it has also expanded significantly in systematic credit as that market is looking more and more like equities with the growth of ETFs and portfolio trading. Unlike Jane Street, the HRT model is 100% technology-driven and systematic, and doesn’t involve any human traders.

How big and profitable are they?

HRT’s expansion is in line with the consolidation trend across the industry of the big getting bigger through acquisitions, new product lines, and expansions into new asset classes. The chart illustrates how its headcount today compares with the peer group.

But the increase in headcount of more than tenfold over the last decade for HRT is particularly stark relative to its peers. It was a small niche but highly profitable player a decade ago that wasn’t seen as a peer for the top firms in the industry, given its lack of breadth and depth. That has changed over the last few years. If anyone doubted that this year’s financial results, when it was almost as profitable as Citadel Securities in the first quarter and generated 70% more profits in the second quarter, are a testament to this. (source Bloomberg News)

HRT has grown its headcount faster than others, but is also doing more with it. HRT’s first half revenues of $5.3 billion, even adjusting for some seasonality in the second half, would imply an eye-popping revenue per employee of $8-10 million. This is within a whisker of the mighty Jane Street and around 40% above Citadel Securities. It would also be well above the $3.5 million per employee of Virtu or circa $2 million per employee of the Dutch electronic market makers (Optiver and IMC).

To give some comparisons across different types of businesses: Blackstone generates a revenue per employee of just over $2.5 million, Alphabet just over $ 2 million, and Goldman Sachs just over $1 million.

HRT is today a goliath of the trading world on a par with the largest hedge funds and market-making firms.