According to the Securities Industry and Financial Markets Association, the global equity market capitalization increased 16.6% Y/Y to $124.4 trillion in 2021, as global equity issuance rose to $1.0 trillion, an increase of 25.6% Y/Y, based on a report released in July 2022.
The U.S. equity markets are the largest in the world and continue to be among the deepest, most liquid and most efficient, representing 41.1% of the $107 trillion global equity market cap in 2023, or $44 trillion. This is 3.6x the next largest market, China.
To extract all that capital into profits requires data and a lot of it. Just imagine how much data it is required to process to understand a constantly moving $100 trillion market. Such data cannot be processed by bare human eyes and brains, and that’s where machine learning and artificial intelligence come into play.
We interviewed Paulius Stankevicius who runs Stankevicius Alternative Investment Banking to learn more about computer processed data and the use of it in global financial markets.
Magazine: Tell us a little bit about Stankevicius Alternative Investment Banking, what it is and what do you guys exactly do?
Stankevicius: Stankevicius Alternative Investment Banking is a financial service division of Stankevicius Group. In short we just simply call it SAIB. At SAIB, primarily we trade crypto derivatives such as the BTC/USDT pair and then some alternatives depending on the market situation.
When it comes to traditional markets, we represent large institutional clients with at least $1B AUM and we provide sales consulting to them meaning that we pitch their investment services to clients worldwide. Right now we are working closely with a $3B AUM European wealth management firm with over 25 years of track history with an excellent performance. Their primary solution is arbitrage trading which most of the investment banks are doing including JP Morgan, Jefferies and basically the entire Wall Street.
Nevertheless, we also help private companies raise funds from international investors including institutions and private investors. We have also worked a lot with blockchain companies raising funds. Till this date we helped clients to raise over $700M.
Magazine: Very interesting. As a matter of fact, we heard that you are planning to incorporate an investment bank? There was a recent article on Fast Company where you gave several quotes about a possible merger, is that something to do with Stankevicius Alternative Investment Banking?
Stankevicius: Yes, correct. We want to take banking and investment business a step further, and we want to get involved in a macro business environment. We are thinking of a potential merger between our finance division and a private company to create a separate private bank with commercial banking and investment banking business models. But that is still to be decided but we are already discussing it.
Magazine: Could you tell a little bit more about arbitrage trading? What it means, and how safe it is in the first place as the first concern for investors investing in financial markets is of course safety and risk management.
Stankevicius: Yes, of course safety is very important. I believe nobody wants to lose money in trading, right. The technology solutions have advanced over the years and things have changed quite a lot. A lot of retail investors are not familiar with these new advancements in the industry and still consider the stock market a very risky business which it absolutely is, however, when you connect big data and technology together, you can minimize the risk and make every year profitable returns.
Arbitrage trading is risky but if it’s run with reliable data and technology, it can be the best thing there is. Most investment banks, especially in the US and Asia, primarily rely on machines and computer programs to do the trading. Arbitrage model is very simple, it goes like this: Let’s say a company stock A costs $10 on NYSE and $11 on LSE, so you buy the company stock at $10 and sell at $11, you make $1 profit. Now if you buy 1 million shares at $10M and sell at $11M, you can earn $1M in pure profit in a time period of 10-15 seconds.
Of course, this is all done by the software algorithm. The algo is connected to global exchanges through APIs. The algo is designed to detect stock prices and find reasonable enough differences. Of course, the price moves a lot and changes very frequently, so it’s not like we are trading 10 million shares every second. But in a specific time, the algo can detect a good trade by matching company stock A price between different global exchanges and finding the best match for best ROI. The unique value proposition here is that before buying the stock and entering the trade, the algo already has an exit point and it already has calculated how much profit it will make. So the algo finds the perfect stock price match between exchanges which can take some time for it, but in the end it just executes the trade and the account balance is in profit. This is called arbitrage at its best.
Now, of course, the risks lie within the technology, network speed and data. In arbitrage trading network speed plays a very important role, so there are many technical aspects to it. However, what we do at Stankevicius Alternative Investment Banking is we find the best institutions that run this and we simply represent them and offer their services to clients. We don’t trade arbitrage ourselves but we let the professionals handle it.
Magazine: That sounds very interesting and in fact risk management seems to be pretty solid. What are the estimated returns on arbitrage trading?
Stankevicius: In the industry, I would say the average investment bank or financial institution is making 40-60% a year with the help of algorithmic trading. There are many different automatic trading solutions right now but the best ones are not accessible to the retail audience. There are few but they are not getting the full benefit and those ones available to the public are not very solid to be honest.
The big play is with large institutions, they have the resources to run such programs. Just imagine how much network and computing power one may need to facilitate 1,000,000 retail investor trades at the same time. It is a lot, and this is also very expensive to maintain, and that is why small private companies that aim to provide automatic trading solutions to retail clients usually don’t go too far.
Magazine: What makes your firm, Stankevicius Alternative Investment Banking, more competitive than other brokers in the industry?
Stankevicius: Since the very beginning of our existence, not with SAIB but even before that with Stankevicius Group, the core has always been to give best to clients and not overcharge. One of the reasons why we have clients is that our fees are very low in general. If we are talking about SAIB services, for example arbitrage trading has no fees at all. We have prepared a special plan with our represented institution that we charge no fees for clients and simply provide them annual fixed return. There are no management fees, no exit fees while exit is possible at all times, any time. There are no hidden fees, no setup costs, nothing.
When it comes to other services apart from investing, still the fees are very low or simply performance based. Most companies doing the same are charging higher fees. Of course, the reason for it is because we are good at what we do and we know we make money when clients make money. We can’t take a client’s money if we know the client won’t benefit in the end. We only take money when we know the benefit is unavoidable and is guaranteed. Doing business in a fair strategy has always helped us well.
Stankevicius Alternative Investment Banking is a private financial consulting firm which operates crypto derivative trading in house and represents large financial institutions for advanced trading plans such as arbitrage and portfolio management. To learn more about Stankevicius Alternative Investment Banking or Stankevicius Group visit the following links: stankevicius.com and stankeviciusgroup.com.
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