Ken Griffin's Quants

After almost 30 years at Goldman Sachs Group Inc., Jim Esposito is now just six weeks in at Ken Griffin’s Citadel Securities. Here is what he observed:

“If I look at the number of client tickets and trades that we write each and every day, I would put forward it’s a greater number than the largest banks,” Esposito, the firm’s president, told Bloomberg Television in his first interview since joining the firm. “Against that backdrop, Citadel Securities only has 1,700 employees.”

And as far as those employees go, “I’ve probably met more PhDs and math Olympiads in the past six weeks than I have in my entire career,” he said. When asked if math Olympiads define the trader of the future, he said it’s the people who excel in statistics, mathematics and computer science. “We believe we have some of the most complex financial problems to solve,” he said.

Wall Street’s largest banks have increasingly kept their eyes on the market-making firm founded by Griffin, which is now a dominant player in the equities market and quickly growing in rates and and fixed income. Bloomberg has previously reported that this year it could bring in record revenue.

There seems to be a new saying there, one that I’ve heard several times — that they want to be Citadel Securities in more places. In interviews privately with rival trading desks, one big fascination has been how Citadel Securities has led with its technology — but has made some big hires from banks including Goldman, Bank of America Corp. and Citigroup Inc. and seems to be relying more on a human touch.

In a separate interview at the firm’s global macro conference in New York this week, CEO Peng Zhao offered another remark about how he thinks about talent and technology. “People forget that we are actually humans,” he said. “When people ask: What is the role humans play? You’re asking a human. It’s always been humans.”

“The truth is: It's more about the humans that are behind the machine,” Zhao said. “We built them, we operated them, but when it comes down to the markets interfacing and interacting with Citadel Securities, they felt like they were interacting with the algorithm or the API.”

But increasingly there’s a desire from clients to have access to the traders and quants to understand how the “black box” technologies can be used to improve investment processes, he said.

It says a lot about how Wall Street might think about the future of hiring as markets continue to be infiltrated by algorithms.

More on Wall Street:

• BlackRock is among suitors exploring acquisition of HPS, one of the hottest private credit firms. It is expected to be valued at about $10 billion in the event of an IPO, so an acquisition would require a premium. HPS’s founders are set to reap billions.
• BlackRock also hit a record $11.5 trillion in assets under management, and is set to become even bigger.
• JPMorgan posted net interest income that came in above analyst estimates, as well as better than expected dealmaking fees and trading results. Wells Fargo also beat expectations for investment banking. Promising signs sent the stocks higher, put the S&P 500 on a course for a new intraday record and fueled a rally in bank stocks.
• And Jamie Dimon for Treasury Secretary? It’s the idea that never fades . Bloomberg’s Hannah Levitt takes a deep dive.
• Dimon, in a conversation at length with Bloomberg’s Lisa Abramowicz, also remarked on challenges in the IPO market.

Next week is another big one with Goldman, Morgan Stanley, Bank of America and Citigroup results. I also have an interview on Tuesday with Marc Rowan, the CEO of Apollo, from the CAIS Alternative Investment Summit in Los Angeles -- then the following day an exclusive sit down with billionaire Stanley Druckenmiller. Send all ideas, tips and opinions to [email protected] . Thank you for reading and watching!