Hudson River Trading LLC

Moreover, although the company self-clears U.S. equities (at NSCC; National Securities Clearing Corp.) and maintains several prime broker relationships to facilitate trading, funding, and clearing of other asset classes, it remains more dependent on its largest prime broker, than higher rated peers. HRT's tangible equity provides capacity to absorb trading losses if its trading system risk controls fail. The stable outlook indicates our expectation that HRT will maintain its solid operating performance, strong capitalization, and supportive liquidity as it continues to expand its trading operations and risk. We expect the firm will maintain a RAC ratio comfortably and sustainably above 10%. Over the next 12 months, we could lower the ratings if we expect: HRT to suffer significant losses or

...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, less stable principal trading revenue dependent on market volume and volatility. We view capitalization as strong, since we expect the risk-adjusted capital (RAC) ratio to remain above 10% over the next 12 months (it was 14.6% as of Sept. 30, 2024). The capital base has strengthened, owing largely to strong earnings generation and despite an expanding balance sheet. While we expect continued trading growth and any distributions to be in line with the firm's financial policy, the RAC ratio will continue to remain above 11.5% in 2025. This still provides a good cushion against our downside threshold of 10%. We still view funding as a rating weakness given HRT's reliance on short-term funding and on its largest prime broker. Although HRT has boosted its stable funding through...

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