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Speaker 1: Bloomberg Audio Studios, podcasts, radio news. Jim Sposito, thank you

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Speaker 1: for joining us. This is, of course a great conference,

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Speaker 1: or President of Cydel Securities, the conference has been going

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Speaker 1: for a bit of time, but actually you joined from

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Speaker 1: Golden Sachs a year ago. What's it like now being

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Speaker 1: part of a non bank liquidity provider.

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Speaker 2: Okay, thank you for being with us today, Francine at

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Speaker 2: our Future of Global Markets conference. I would say my

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Speaker 2: one year anniversary at Citadel's Securities is noteworthy because what

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Speaker 2: we're doing, I think is in stark contrast to what

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Speaker 2: the big banks do. When you think about Citadel Securities

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Speaker 2: in many ways, I think we're doing for trading what

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Speaker 2: Amazon did for e commerce. And what I mean by

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Speaker 2: that is we're meeting our clients through three distinct channels.

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Speaker 2: In terms of doing transactions with them. On exchange market making,

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Speaker 2: we represent about a third of the volume on the

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Speaker 2: New York Stock Exchange. We're obviously doing a lot in

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Speaker 2: retail markets where we take flow off the books of

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Speaker 2: Robinhood Charles Schwab Interactive Brokers. We're thirty five percent of

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Speaker 2: retail volumes in this country, and more importantly, with this conference,

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Speaker 2: we're directly covering institutions and we're trading their flow both

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Speaker 2: via the electronic and voice channel. I'd point out the

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Speaker 2: big banks are only represented in one of those three

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Speaker 2: channels nowadays. So in many ways, when I talk about Amazon,

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Speaker 2: we're creating a network liquidity effect that our clients are

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Speaker 2: benefiting from.

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Speaker 1: Jim, when you look at asset classes or geographies, is

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Speaker 1: there anything that you're not into that you want to

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Speaker 1: get into or where you want to expand?

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Speaker 2: Yeah, in equities we have a very significant position. We

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Speaker 2: account for close to twenty five percent of daily US

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Speaker 2: equity volumes, so we are a big important player in

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Speaker 2: equity markets. On the other hand, in fixed income we

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Speaker 2: can definitely get a lot bigger. We're just scratching the

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Speaker 2: surface right now. In fixed income markets, we trade US rates,

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Speaker 2: US investment grade credit. We're growing a European rate business,

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Speaker 2: but in many ways we're only scratching the surface in

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Speaker 2: fixed income markets. That's definitely going to be a big

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Speaker 2: part of our strategic build in years to come.

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Speaker 1: How much bigger do you have a target of how

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Speaker 1: much market share you want towards or how quickly you

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Speaker 1: want to grow?

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Speaker 2: Not yet, I would say We're trying to apply our

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Speaker 2: skills and experience that made us so successful in equity

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Speaker 2: markets to the fixed income markets, and we're taking our time.

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Speaker 2: It's a very balanced and measure build at this moment,

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Speaker 2: so there's no definitive plan as to what product will

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Speaker 2: be rolled out next. Will it be high yield bonds,

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Speaker 2: emerging markets, mortgage backed securities. I don't think we're that

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Speaker 2: far along. We want to master the products that we're

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Speaker 2: currently trading and then you'll see grow from there.

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Speaker 1: Because there's quite a lot also ontogonization. Again, if you

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Speaker 1: look at regulation, where do you see the best and

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Speaker 1: biggest opportunity.

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Speaker 2: I think it's helpful. I think we're about to get

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Speaker 2: a much more defined rule set around the trading of

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Speaker 2: digital assets, and that will be important for the market

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Speaker 2: at large, definitely be important for Citadel Securities. So that

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Speaker 2: would be a product expansion that you could expect to

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Speaker 2: see us get more active in, assuming we get a

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Speaker 2: defined rule set. At our conference today, we have the

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Speaker 2: founders of Calshi who are big making a market for

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Speaker 2: event contracts. You can think of that as making positions

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Speaker 2: or trades in terms of the probability of a political

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Speaker 2: outcome or an economic release. We're not yet involved in

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Speaker 2: event contracts, but there's no reason why we couldn't consider

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Speaker 2: that in the future.

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Speaker 1: Jim. When you look at AI and computing, how does

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Speaker 1: it change building out of cell securities but also hiring.

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Speaker 2: Yeah, I'd say first with our clients, the topic top

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Speaker 2: of mind right now is clearly how can we support

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Speaker 2: our clients to incorporate AI to either make them more

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Speaker 2: operationally efficient or to make them better investors. And so

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Speaker 2: we're spending a lot of time with our clients around

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Speaker 2: that topic. In fact, as you saw, a major theme

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Speaker 2: really underpinning this conference today is AI. We brought a

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Speaker 2: lot of the best from the West Coast here to

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Speaker 2: New York City. We had Jensen, the CEO of Navidia

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Speaker 2: this morning, and I think that opened up the minds

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Speaker 2: of our clients in a very profound way. And so

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Speaker 2: AI is top of mind for our clients, it's top

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Speaker 2: of mind for us, and I'm pleased to report we

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Speaker 2: are making some progress around that front.

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Speaker 1: What are clients asking today actually have said dell securities

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Speaker 1: when it comes to AI, or what are they asking

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Speaker 1: you to try and understand where AI goes next? Yeah?

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Speaker 2: I think generally, we think a lot about our our

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Speaker 2: own content, what differentiates us from the big banks, and

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Speaker 2: so we don't want to be a me too bank

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Speaker 2: in terms of the content that we provide to our clients.

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Speaker 2: So we're doing maybe what you would expect us to do.

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Speaker 2: We have differentiated skills around quantitative finance, around leveraging technology.

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Speaker 2: Citadel Securities has been in business for twenty three years.

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Speaker 2: We were built as a technology driven first organization. That's

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Speaker 2: core to who we are. That's what we're leading with

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Speaker 2: in our client conversations, and so how do they get

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Speaker 2: more efficient? How do they get smarter and become better

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Speaker 2: investors from leveraging and harnessing the power of ai Jim.

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Speaker 1: We also talked about liquidity a little bit at the conference.

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Speaker 1: I certainly had a conversation with Maria Droghi when we

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Speaker 1: touched on that. You've in the past talked about, for example,

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Speaker 1: teaming up some of the smaller banks right to help

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Speaker 1: youild clients with some of the orders there. What conversations

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Speaker 1: have you had recently that point into that direction.

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Speaker 2: Yeah, this is no longer a strategic idea, it's actually

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Speaker 2: now playing out. So we are attempting to provide mid

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Speaker 2: tier banks liquidity from Citadel Securities so they can better

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Speaker 2: service their clients. I think there are probably one hundred

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Speaker 2: banks around the globe that want to service their end

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Speaker 2: user client in markets, jurisdictions, in places that we're never

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Speaker 2: going to touch. What are we great at. We're great

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Speaker 2: at making markets providing liquidity. And so if you're some

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Speaker 2: captive client sitting in Latin America, you might want to

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Speaker 2: get covered by a bank where you have a relationship

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Speaker 2: with We're never going to meet or touch that client,

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Speaker 2: but we can provide the mid tier bank the liquidity

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Speaker 2: to better service their client. And we're starting to set

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Speaker 2: up a whole mid tier liquidity ecosystem to service these

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Speaker 2: mid tier banks. It's still early days, but we've seen

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Speaker 2: signs where this model can work. It serves the end

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Speaker 2: user client well, and it's servicing and allowing those mid

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Speaker 2: tier banks to be much much more competitive against larger players.

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Speaker 1: And how do you think about the markets and this

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Speaker 1: kind of environment. So, given the volatility that we've seen,

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Speaker 1: will it stay like this or does it die down

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Speaker 1: from here until the end of the year and beyond.

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Speaker 2: Yeah, Look, there's a lot of talk about is the

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Speaker 2: capital expenditure for AI running too high. People are starting

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Speaker 2: to speculate are we in some form of a bubble.

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Speaker 2: I think a lot of the macro discussion in markets

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Speaker 2: sort of correlates to what's going on and what we're

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Speaker 2: talking about at this conference around AI. I think if

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Speaker 2: we can have modest productivity gains in the real economy

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Speaker 2: by better leveraging AI, market valuations look absolutely attractive. You

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Speaker 2: don't need a big productivity boost in order to support

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Speaker 2: these valuations. By the way, there's also a lot of

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Speaker 2: tough talk about growing stocks of debt and developed countries.

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Speaker 2: How do these countries service their debt? They can grow

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Speaker 2: their way out of it with productivity gains, So I

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Speaker 2: think that's the big bet. Don't think we're in a

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Speaker 2: bubble right now. Reasonably confident we will get these productivity gains.

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Speaker 2: But that's where the macro discussion really hinges right now.

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Speaker 1: Jim, thank you so much for your time today. Those

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Speaker 1: is Jim as Posito. There are the president's securities