00:00My one-year anniversary at Citadel Securities is noteworthy because what we're doing, I think,
00:06is in stark contrast to what the big banks do. When you think about Citadel Securities,
00:12in many ways, I think we are doing for trading what Amazon did for e-commerce.
00:19And what I mean by that is we're meeting our clients through three distinct channels
00:25in terms of doing transactions with them on exchange market making.
00:31We represent about a third of the volume on the New York Stock Exchange.
00:34We're obviously doing a lot in retail markets where we take flow off the books of Robinhood,
00:40Charles Schwab, Interactive Brokers. We're 35 percent of retail volumes in this country.
00:46And more importantly, with this conference, we're directly covering institutions
00:51and we're trading their flow both via the electronic and voice channel.
00:56I'd point out the big banks are only represented in one of those three channels nowadays.
01:02So in many ways, when I talk about Amazon, we're creating a network liquidity effect
01:08that our clients are benefiting from.
01:10Jim, when you look at asset classes or geographies,
01:12is there anything that you're not into that you want to get into or where you want to expand?
01:17Yeah. In equities, we have a very significant position.
01:21We account for close to 25 percent of daily U.S. equity volumes.
01:26So we are a big, important player in equity markets.
01:29On the other hand, in fixed income, we can definitely get a lot bigger.
01:34We're just scratching the surface right now in fixed income markets.
01:38We trade U.S. rates, U.S. investment grade credit.
01:41We're growing a European rate business.
01:44But in many ways, we're only scratching the surface in fixed income markets.
01:48That's definitely going to be a big part of our strategic build in years to come.
01:53How much bigger?
01:54Do you have a target of how much market share you want or how quickly you want to grow?
02:00Not yet.
02:01I would say we're trying to apply our skills and experience that made us so successful in equity markets to the fixed income markets.
02:11And we're taking our time.
02:13It's a very balanced and measured build at this moment.
02:16So there's no definitive plan as to what product will be rolled out next.
02:20Will it be high-yield bonds, emerging markets, mortgage-backed securities?
02:25I don't think we're that far along.
02:27We want to master the products that we're currently trading, and then you'll see us grow from there.
02:32Because there's quite a lot also on tokenization, again, if you look at regulation, where do you see the best and biggest opportunity?
02:38I think it's helpful.
02:40I think we're about to get a much more defined rule set around the trading of digital assets, and that will be important for the market at large, definitely be important for Citadel Securities.
02:51So that would be a product expansion that you could expect to see us get more active in, assuming we get a defined rule set.
02:58At our conference today, we have the founders of CalSheet, who are big making a market for event contracts.
03:06You can think of that as making positions or trades in terms of the probability of a political outcome or an economic release.
03:17We're not yet involved in event contracts, but there's no reason why we couldn't consider that in the future.
03:23Jim, when you look at AI and computing, how does it change building out of Citadel Securities but also hiring?
03:29Yeah.
03:30I'd say first with our clients, the topic top of mind right now is clearly how can we support our clients to incorporate AI to either make them more operationally efficient or to make them better investors.
03:46And so we're spending a lot of time with our clients around that topic.
03:50In fact, as you saw, a major theme really underpinning this conference today is AI.
03:57We brought a lot of the best from the West Coast here to New York City.
04:02We had Jensen, the CEO of NVIDIA this morning, and I think that opened up the minds of our clients in a very profound way.
04:10And so AI is top of mind for our clients.
04:12It's top of mind for us.
04:15And I'm pleased to report we are making some progress around that front.
04:19What are clients asking today, actually, of Citadel Securities when it comes to AI, or what are they asking you to try and understand where AI goes next?
04:27Yeah.
04:27I think generally, you know, we think a lot about our own content, what differentiates us from the big banks.
04:35And so we don't want to be a me-too bank in terms of the content that we provide to our clients.
04:42So we're doing maybe what you would expect us to do.
04:45We have differentiated skills around quantitative finance, around leveraging technology.
04:51Citadel Securities has been in business for 23 years.
04:54We were built as a technology-driven first organization.
05:00That's core to who we are.
05:02That's what we're leading with in our client conversations.
05:05And so how do they get more efficient?
05:08How do they get smarter and become better investors from leveraging and harnessing the power of AI?
05:14Jim, we also talked about liquidity a little bit at the conference.
05:17I certainly had a conversation with Maria Draghi when we touched on that.
05:21You've in the past talked about, for example, teaming up with some of the smaller banks, right, to help your clients with some of, you know, the orders there.
05:28What conversations have you had recently that point into that direction?
05:32Yeah, this is no longer a strategic idea.
05:35It's actually now playing out.
05:37So we are attempting to provide mid-tier banks liquidity from Citadel Securities so they can better service their clients.
05:48I think there are probably 100 banks around the globe that want to service their end-user client in markets, jurisdictions, in places that we're never going to touch.
06:00What are we great at?
06:01We're great at making markets, providing liquidity.
06:05And so if you're some captive client sitting in Latin America, you might want to get covered by a bank where you have a relationship with.
06:14We're never going to meet or touch that client, but we can provide the mid-tier bank the liquidity to better service their client.
06:22And we're starting to set up a whole mid-tier liquidity ecosystem to service these mid-tier banks.
06:29It's still early days, but we've seen signs where this model can work.
06:34It serves the end-user client well, and it's servicing and allowing those mid-tier banks to be much, much more competitive against larger players.
06:42And how do you think about the markets in this kind of environment?
06:45So given the volatility that we've seen, will it stay like this, or does it die down from here until the end of the year and beyond?
06:52Yeah, look, there's a lot of talk about, you know, is the capital expenditure for AI running too high?
07:00People are starting to speculate.
07:01Are we in some form of a bubble?
07:04I think a lot of the macro discussion in markets sort of correlates to what's going on and what we're talking about at this conference around AI.
07:14I think if we can have modest productivity gains in the real economy by better leveraging AI, market valuations look absolutely attractive.
07:25You don't need a big productivity boost in order to support these valuations.
07:30By the way, there's also a lot of talk about growing stocks of debt in developed countries.
07:35How do these countries service their debt?
07:38They can grow their way out of it with productivity gains.
07:41So I think that's the big bet.
07:43Don't think we're in a bubble right now.
07:45Reasonably confident we will get these productivity gains, but that's where the macro discussion really hinges right now.
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