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I'm standing by with Jim Esposito, who is now the president of Citadel Securities. He's only six weeks on the job. He's a former head co head of Global Banking and Markets over at Goldman Sachs, now joining what a lot of people consider to be a large rival. And you know when you are here now you knew a little bit about Citadel Securities before, obviously in your prior role, But what now that you're inside. I know, just six weeks on the job, but what is different here than there?
Sure? Thanks Chanelli for being with us at our flagship macro conference here in New York. I'd call out two things early days for me at Cidel's Securities, as you pointed out, that are starkly different than my previous existence. The first would be just the operational scale and efficiency
that Citadel Securities currently operates at. I know when you talk to all of the large banks, they are very desirous of trying to find ways to lever technology, use AI, machine learning computing power in order to reduce their operational expense and complexity. That's very much on the come from the larger banks. I would humbly submit to you, We've
already achieved that objective. Now. The best way I can demonstrate that to you if I look at the number of client tickets and trades that we write each and every day at Citadel Securities, I would put forward it's a greater number than the largest banks. And against that backdrop, Citadel Securities only has seventeen hundred employees, so operating at scale has already happened for us. The second thing that I would have to call out is just the awesome
collection of talent that we have. I've probably met more PhDs and math olympiads in the past six weeks than I have in my entire career. We are a talent magnet. If you excel in mathematics, computer science, statistics, these folks want to come to Citadel Securities. We believe we have some of the most complex financial problems to solve. People are attracted to that and they want to be surrounded by other bright people in their fields.
You know, it's interesting you spend a long time at Goldman. I do want to talk more about talent, because that is pretty fascinating what you just said. But after so long at Goldman How does it feel to compete with your prior employer.
Yeah, now I appreciate when I got hired. It makes for a nice news story that somehow Citadel Securities hired me to directly compete against the largest banks. Again, early days for me at Citadel Securities, I would put forward. At the moment, I'm finding much better opportunities to partner with the largest banks. You think about the challenges that large banks have. They're all looking to reduce single party concentration risks that they have. They're looking to reduce some
of their complex risks. We're in the risk management business, and so partnering on risk transfer with the largest banks is very much on our firm strategic agenda. I've been spending a lot of my time with the largest banks and we're engaging in that activity at the moment, I should also call out I believe there's an enormous opportunity
for US servicing and partnering with mid tier banks. When you think about the large number of mid tier banks that currently operate across global equities and fixed income, they need to service their end user client. We're going to be an awesome partner providing them liquidity providing them access to tight pricing where they can maintain their clients. We're a little bit less interested in covering mid size and
smaller clients. So partnering with banks at the moment is much more interesting than directly competing with them.
You know, it's interesting. I talk to a lot of trading desks in the run up to the interview with you, and when I asked what they would want to know is okay, Well, it's interesting. Citadel Security just to be very very known strictly for its technology, but you've been adding so much talent here recently, particularly from the large banks Bank of America, City Group in Goldman Sachs. Where do humans play and where does technology play? How do you think about talent here at Citadel Securities?
Look, I think we are a talent driven organization. So if you think about the success that we've had on exchange market making, innovating and providing a better experience for the US retail investor, that's a combination of that differentiated human capital combined with levering technology. And so we've built very good risk taking skills, very good risk management skills. Now the question for us is where else in the capital markets can we deploy these skills. We very much
want to be citadel securities in more places. There's ample room for growth Internationally. Our business is a bit skewed to the US at the moment, so growth in Europe and in Asia, and then you've seen there's parts of the capital markets that we're building out. I would call out investment grade trading, global interest rate trading, and so that's very much on our mind at the moment.
You know, it's interesting as well, you mentioned math olympiads PhDs kind of an excessive level if you will, here of technical talent. Is that the future trader? You know, if you think about the trader of the future, is it more and more along the lines of that math Olympiad.
Yeah, So for us, I think it is. I think our model might be different than the big banks, and I think there's places where both can peacefully coexist. We're always going to be driven by that differentiated human capital.
We're going to continue to lever technology, and we believe the more flow that we can capture, the tighter pricing we can provide, we'll have an ability to systematize and monetize those trading flows the exact same way we've done in the equity market, So we want to take a page out of the playbook that we've deployed so well in equities, and now we're going to start to run that same play across different parts of the fixed income markets.
Well, maybe double down on that a little more, because to your point, Citadel Securities had been known to be such a large retail market maker in the equities world. But you're diving more and more into the institutional business, You're competing more in credit. How far does that push go?
Yeah, and you're right. And when you look at our volumes, about a third of the volumes that get traded on the New York Stock Exchange happen through our platform. Close to twenty five percent of all US equity volumes come through Citadel Securities platforms. We have dominant and impressive market shares at the moment, and so now when we look at what we've done, we see the exact same opportunity to do that into the investment grade trading markets. We've
stood up in investment grade trading business. At the moment, we're doing the most basic things. We're trading cash corporate bonds. You'll see us in the coming months, start to do more complex activities in credit. The next thing on our agenda is start to trade in portfolio form our clients
engage in large portfolio rebalances of investment grade credit. We're not doing that activity at the moment, but we see no reason why we shouldn't excel, and so you'll see us filling in different products in our product suite as we play forward.
Jim, you know another thing that's interesting. I spoke to your colleague pun Jaw a little earlier about this, this idea about whether to go public or not. How do you think about that possibility for Citadel Securities? This has been kind of long under the surface for a question for you guys, So I don't.
Want to bury the lead. There is at this moment zero discussion about Citadel Securities going public now when we look around the globe right now, the leadership team's time is just focused on executing on a large number of strategic growth opportunities and initiatives. So that's our focus now, as you're aware. In the past, you know, less than three years ago we did take venture capital investment from Sequoia and Paradigm. They've been terrific partners Sequoia sits on
our board of directors. They're providing us with strategic advice and guidance. You could things change in the future. Are there different things we could do with our capital structure? Possibly, but at the moment, no discussions, no thoughts about going public.
Now a big moment ahead. We have less than thirty days until the US election. I spoke yesterday with Ray Dalio, founder of Bridgewater Associates. He said there could be election uncertainty even well into January, particularly in November when it's kind of unclear here how soon investors and America will get a sense of who the next president is. How are your clients preparing for that uncertainty?
Sure, I think our clients, I wouldn't say are in risk off mode, but I think everyone's operating at the moment with a very balanced risk position. They want to get this election and the election certainty that comes with it behind them, and so until we get to the other side, I think you'll see, you know, somewhat moderate trading activities. Ours is a business that benefits not from
taking directional risk. We benefit from volumes and volatility. I think you could expect that we may see that type of scenario. While we're not rooting on election uncertainty in our business, volumes and volatility tend to be very good for Citadel Securities.
Well, it's interesting, we saw the VIX hit past sixty five earlier this year. It's nowhere near that levels now but still moderately elevated. How volatile can things get?
Look, I think you know, we'll wait and see. There's no expectation we'll go anywhere back to that level of volatility in the VIX, but I think you know, any possible outcome is something we're risk managing, we're thinking about, we're stress testing our own risks, and we're very focused on the reliability and durability of our platform. We know our clients rely upon us in times of stress, in
times of high volatility and volumes. That's when we want our platform to excel and perform, and that's what's really on our mind at this moment.
Jim, we have to leave it there. Thank you for your time. That is Jim Esposido at his first interview as president of Citadel Securities