With poker and option theory, Susquehanna International has become a key player in the fast-expanding ETF market.
On city avenue in the Philadelphia suburb of Bala Cynwyd, Pa., across the street from a TGI Fridays and California Pizza Kitchen, sits a bland building that looks like any other corporate office. The only notable feature is in the parking lot: a large oak labeled a “significant tree” because it survived the American Revolution.
And yet within that dull gray-brown edifice, away from the trading hubs of New York and Chicago, sits a crucial engine of the $5 trillion global exchange-traded fund market, one increasingly relied upon by investors ranging from hedge funds to individuals. What’s more, the little-known billionaires behind the operation have groomed a generation of canny market experts.
Like its headquarters, Susquehanna International Group LLP is hidden in plain sight. It keeps a low profile even though its fingerprints are everywhere in financial markets. In addition to ranking among the largest U.S. traders of ETFs, it’s a giant in options trading and has plowed into sports betting, private equity, and even Bitcoin.
Susquehanna, as well as other under-the-radar, closely held competitors created by its alumni, such as Jane Street Group LLC, grease the wheels of the ETF market, keeping the instruments inexpensive and easy to trade. As better-known Wall Street companies such as Goldman Sachs Group Inc. have stepped back from performing this function in recent years, regulators have started asking more questions about the stability of the market, which has become dependent on Susquehanna and its brethren.
Susquehanna built its empire on poker. All six co-founders met in the late 1970s at the State University of New York at Binghamton, where they gathered to play cards before advancing to Las Vegas casinos. One of the six, Jeff Yass, had the insight that card skills could transfer to Wall Street. That bloomed into Susquehanna’s philosophy that poker provides the best training for the type of probability- based decisions in uncertain circumstances that are needed in markets.
Yass proved to be a preternatural trading talent. He was in his 20s when Izzy Englander, now chief executive officer and founder of Millennium Management, one of the world’s largest hedge funds, sponsored him for a seat on the floor of the Philadelphia Stock Exchange.
Yass persuaded his five college buddies to join him in Philadelphia. With Steve Bloom, Eric Brooks, Arthur Dantchik, Andrew Frost, and Joel Greenberg, he founded a firm in May 1987 to deploy their poker skills in the options markets. They named it after the 444-mile river that runs from near their alma mater in upstate New York through Pennsylvania, the home of their new venture.
“My friends and I took poker very seriously,” Yass said in an interview in the book The New Market Wizards: Conversations With America’s Top Traders by Jack Schwager, published in 1992. “We knew that over the long run it wasn’t a game of luck, but rather a game of enormous skill and complexity. We took a mathematical approach.”
Neither Yass nor his co-founders would comment for this story, according to Dave Pollard, Susquehanna’s head of strategic planning and special counsel. The following account is based on interviews with current and former employees and people familiar with the firm.
Five months after Susquehanna was founded, the U.S. stock market crashed, with the Dow Jones Industrial Average suffering its largest ever one-day percentage decline. Susquehanna not only survived, but thrived. By October 1988 the firm had 100 employees, and it had brought in about $30 million in its first year, compared with $43 million earned by PaineWebber & Co., which had about 12,900 employees, according to a Washington Post story at the time.
Continue reading your story on the app
Continue reading your story in the magazine
“I've Had to Think Differently”
IN SEPTEMBER, Jane Fraser shattered the financial industry’s ultimate glass ceiling when she was named the next chief executive officer of Citigroup Inc., one of the world’s three most important banks.
Yoyo Chang turned a hunch born in an English high school cafeteria into a next-generation payments app backed by serious, well-heeled investors
The Fintech Revolution Is Finally Here— And So Are the Regulators
SPEAKING IN OCTOBER to his banking brethren at the world’s biggest payments confab—the annual Sibos conference— Jamie Dimon didn’t mince words.
China’s entry into the WTO upended global manufacturing. Now it’s poised to disrupt the financial system— and the consequences could be just as dramatic and surprising
Global Finance Wants to Protect Its Culture. First, It Should Reform It
EVERYWHERE, the stewards of capitalism are in flux, grappling with the implications of a radically different future that’s set to play out from home offices, living rooms, and kitchen tables around the world.
Tame Inflation Risks With These Hedging Strategies
FOR MANY INVESTORS in the U.S., high inflation may feel like a distant worry—an historical footnote from the 1970s or a problem of poorly run economies in emerging markets. But there are signs indicating that some investors are worried. Bloomberg can help you see how they’re hedging their portfolios and what you can do to prepare for a dramatic change in prices.
The Crisis Fighters
The Crisis Fighters Central bankers used to bail out financial institutions. In a world wracked by Covid-19, they’ve doled out almost $9 trillion, some of it to a motley cast of unlikely beneficiaries. Will it ever end?
Using Growth Factors to Pick Investments in Equities and Bonds
IN LATE MARCH, the U.S. markets started their amazing recovery from the Covid-19 chaos and economic uncertainty.
Looking to Follow the Fed? Here's How to Find Key Data for That
CHAIR JEROME POWELL has repeatedly said the Federal Reserve is committed to using its full range of tools to support economic activity.
China's Growth Story Isn't What It Seems
GROWING UP IN Bulgaria with the Soviet bloc crumbling around me, I knew from experience the communist gift for turning gold into dross.
For Reformed Bankers, The Restaurant Life Beckons
Trading finance for fine dining is a natural swap
Which Broker Is Best For You?
No broker can hit the bull’s-eye for every type of client. Use our results to find the best one for you.
Be Smart About How You Trade
Giving your broker the right order can help you get the best price.
Navigating The Universe Of ETFs
Use the Kiplinger ETF 20 to build a solid core for your portfolio. Our list also includes funds to explore satellite strategies.
How To Dodge Tech Stock Drama
Regulatory and trade risks mean investors must tread carefully.
Buying Is Easy. Selling Is Hard
Investors are so bad at picking stocks to drop that they’re better off doing it at random.
Cannabis, Crypto, And The Psychology Of Gambling
For some, investing isnt about grinding out a rate of return. They crave stories
A Sector Redo Shuffles Stocks
Some of the market’s biggest names are on the move, dealing a new hand to index funds that invest in these corners of the market.
Applying Game Theory To The US-China Trade Kerfuffle
Gaming out how the trade spat between the U.S. and China could end.
Goldman's New Boy Wonder
The CEO is betting that regulation won’t kill off the trading business