Hudson River Trading LLC

The stable outlook indicates our expectation that HRT will maintain supportive operational performance, capitalization, and liquidity as it continues to expand its trading operations and risk. We expect the firm will maintain profitability and a RAC ratio between 9.5% and 10.5%. In the next 12 months, we could lower the ratings if: We see evidence of inadequate risk management or expansion in HRT's risk appetite; We expect the RAC ratio to fall below 7%; or Liquidity deteriorates materially. An upgrade is unlikely over our one-year forecast horizon. Founded in 2002, HRT is a holding company for regulated and nonregulated subsidiaries in the U.S., Europe, and Asia-Pacific. Its business consists of both principal trading and market-making of electronically traded financial products,

...Hudson River Trading LLC (HRT) has a profitable principal trading and market-making franchise, focused on expanding its trading strategies across asset classes and regions. However, its business relies on higher-risk and less stable principal trading revenue that depends on market volume and volatility. Despite significant growth compared with some peers and weaker-than-peers' performance in 2022, HRT's capitalization remains solid. HRT's RAC ratio was sound at 11.3% as of March 31, 2023, indicating its ability and willingness to retain earnings and build equity capital. We expect continued growth in trading operations to increase exposures, but we anticipate the RAC ratio will remain 9.5%-10.5% over the next 12 months. We view funding as a relative weakness, given the firm's reliance on short-term funding. Although HRT has boosted its stable funding through retained earnings and upsizes of its term loans, this has not kept pace with the growth in its on-balance-sheet trading book, leaving...

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