https://www.forbes.com/sites/antoin...-horse-racing-bets-into-a-12-billion-fortune/ ================ Apr 6, 2021 Antoine Gara , Forbes Staff, Hedge Funds & Private Equity Billionaire Jeff Yass of Susquehanna International Group. COURTESY OF SUSQUEHANNA INTERNATIONAL GROUP In February, the U.S. House of Representatives summoned a line-up of villains for a public rebuke of the GameStop trading debacle. Among Wall Street’s perps in attendance were Vlad Tenev, CEO of RobinHood, Melvin Capital hedge fund manager Gabe Plotkin and quantitative trading billionaire Ken Griffin of Citadel Securities. Missing from the line-up was a secretive trader from Bala Cynwyd, Pennsylvania named Jeff Yass. Yass is the cofounder and head of a global trading powerhouse named Susquehanna International Group. His firm is the largest trader of listed stock options in America by some measures and like Citadel, Susquehanna’s skilled traders devour the order flow coming from free trading apps like Robinhood. In 2020, Susquehanna’s quants traded some 1.8 billion stock options contracts, 80% more than the prior year, and accounting for nearly a quarter of all options trades in the U.S., according to Alphacution Research. Yass bootstrapped Susquehanna in part with startup capital plucked from racetrack pots and poker tables in the 1970s and early 1980s. He then applied his gambling instincts to options markets during the 1980s bull market, and his skill for handicapping odds and finding an edge set him apart. Yass’s number one trading rule is also the mantra of every poker pro: there is no surer way to win, than to bet against someone who is dumber or less experienced than you, otherwise known as the “mark” at any poker table. On Wall Street, Robinhood is in the business of cultivating and serving up millions of marks daily. “All of sports betting, all of playing poker, and all of options trading is making sure you’re betting against someone you’re smarter than,” Yass told the Bet The Process podcast a year ago. “If you’re not asking yourself, am I the sucker, or am I the [bait], you get arrogant and you get crushed.” Most members of Congress likely have no idea who Jeff Yass is. That’s precisely the way he likes it. A secretive trader and registered Libertarian, Yass sits on the board of the influential Cato Institute. He’s one of America’s biggest donors to political action committees supporting low taxes and free markets, and has dedicated millions of dollars to school choice and charter schools in Philadelphia and New York. At age 63, Yass has built Susquehanna into a global giant without taking a penny of outside capital. Today, Susquehanna commands nearly 10% of the market making volume in exchange traded funds, moving over 130 million shares daily in 50 countries around the world. It’s also regularly among the top-five market makers in U.S. stocks traded by retail brokers. Yass has used Susquehanna’s trading profits to invest in early-stage growth companies around the world, like TikTok parent company ByteDance, the world’s most valuable private company. His firm is now among the 20 largest investors in venture capital-backed companies in the world, according to some estimates, owning tens of billions worth of investments spread across China, Israel and the United States and large stakes in tech companies like Agora Inc. in China, and Credit Karma and Payoneer in the United States. There’s more: Susquehanna is becoming a powerhouse in making markets for sports bets through its Dublin-based trading unit called Nellie Analytics. The operation also stakes bets on elections and won big on Joe Biden’s victory in the 2020 Presidential election. Susquehanna has even become a force in the trading of cryptocurrencies. Forbes spent more than two months digging into his vast holdings, speaking to former Susquehanna insiders, reviewing hundreds of securities filings, regulatory disclosures and court documents. We estimate that his firm and its portfolio of investments are worth well over $30 billion and put his net worth conservatively at $12 billion, landing him at No. 184 on Forbes’ 2021 list of the World’s Richest People. Yass initially did not respond to requests seeking an interview and didn’t comment on our estimates. "Susquehanna is one of the most remarkable stories in the business world that has never been told and is really not well known," says Steven H. Bloom, a cofounder of the firm who left amicably in the mid-1990s to start his own firm. "Jeff is a unique talent. He loves the game. He loves to figure things out, and he loves to win." To understand how Yass got rich, start at the racetrack. In July 1985, Yass was a 27-year-old trader based in Philadelphia, with a knack for quickly calculating the value of options contracts. On this day, however, he was on his way to Sportsman’s Park, a horse racing track built by Al Capone on the outskirts of Chicago, with a few friends and $250,000 in rolled up hundred-dollar bills stuffed into duffel bags. Yass and his team of Pennsylvania-based traders had identified a rarity in the world of horse racing: A bet where the odds skewed heavily in the gambler’s favor. Back then, Sportsman’s Park offered what’s called a “Super Bet,” a jackpot that could be won if gamblers successfully picked the winning order of three consecutive horse races. Super Bet pots carried over if no winners were found, growing in size like a Mega Millions lottery until someone finally won. Yass had figured out that once the Super Bet pot reached a certain size, gamblers with a large enough bankroll had an edge. With enough money, they could basically buy all the potential winning combinations and reap massive winnings with modest downside. Months earlier, Yass’s gambling syndicate, which he named “RAMJAC” after the fictionalized corporation in Kurt Vonnegut’s novel Jailbird that owned 19% of the United States, brought bags filled with $60,000 in cash to Sportsman’s Park. They placed their bets, hit on the right horses, and walked out with the $600,000. By July, Sportsman’s Park had grown wise to Yass. When his syndicate returned with a quarter million dollars, they were swiftly escorted to the exits and barred from ever stepping foot in Sportsman’s Park again. Yass’s syndicate raided similar jackpots across the country, traveling to Palm Beach to bet on Jai Alai, and to a track in the Boston suburbs to bet on Greyhounds. While Yass’s RAMJAC made hundreds of thousands of dollars in profits annually, he probably wouldn’t have made it too far if he stuck to betting at the track. After all, for someone with his talents, lugging bags of cash around the country was both inefficient and risky when compared to the money he could make trading options in the 1980s bull market. Born in the Bronx and raised in Bayside, Queens, Yass soaked up the world of arbitrage at an early age. The son of an accountant who was the CEO of a small, publicly-traded financial information company called Datatab, Yass and his father Gerald would thumb through the business pages of the New York Post, studying stocks and esoteric securities like warrants. On weekends, Gerald would take his adolescent son to bet the trotters at the Bronx Yonkers Raceway and Roosevelt Raceway in Long Island. By the time Secretariat won the Triple Crown at New York’s Belmont Racetrack in 1973, Yass was a capable handicapper and a skilled poker player. He marvelled at an arbitrage in that legendary race. Demand was so high to bet on Secretariat to win, a gambler could make more money betting the racehorse would simply “place,” which in racing parlance means finish either first or second. If it was possible, Yass would have bet on Secretariat to “place” and bet against the racehorse to win, guaranteeing at least a modest return. This is the basic theory that governs Yass’s startling rise. After graduating Bayside High School in 1975, he matriculated to the State University at Binghamton. He studied mathematics as a major and economics as a minor, hoping to sharpen his skills at gambling and trading. At Binghamton, he roomed with his best friend from Bayside High School, Arthur Dantchik, and made lifelong friends with Eric Brooks, Joel Greenberg, Andrew Frost and Steven H. Bloom, most of whom also came from working class neighborhoods Brooklyn and Queens. On campus, Yass began to study the options contracts that would eventually make him rich. His senior thesis examined whether options, which had begun trading at the Chicago Board of Options Exchange in 1973, added value to society. For an economics class, he wrote a final paper titled, “An Econometric Analysis of Horse Racing,” that he eventually published in Gambling Times magazine. For extracurriculars, Yass and his friends played poker and would drive two hours to bet on horses at the Monticello racetrack. Though he graduated with a mathematics degree, Yass likes to say he was a poker major. After graduation in 1979, Yass and Dantchik moved to Las Vegas to become professional gamblers. At one game, Yass sat at a table with a trader on the Comex who explained how to buy a seat on a commodities exchange and make markets. Yass promptly returned east to trade options at the American Stock Exchange, hoping to buy a seat. There, he met Israel Englander, then a centimillionaire who routinely staked hungry young traders with his own capital and would later found hedge fund Millennium Management. In 1981, he offered Yass an empty seat on the Philadelphia Stock Exchange for $30,000 and a 50/50 revenue share. Gerald Yass fronted his son most of the money to buy into Englander’s proposition. Yass moved to the Philadelphia-area to begin trading. After about a year on Englander’s bankroll, Yass bought his seat outright and called his college buddies to join him at his nascent trading outfit, then called Philadelphia Trading. Like many other successful traders Yass took advantage of the so called Black/Scholes options pricing model named after and invented by three Ph.D.s—Fisher Black, Myron Scholes and Robert Merton— who went on to win the Nobel Prize in economics in 1997. Using the Black/Scholes model against “gut traders” of the day was like shooting fish in a barrel. Eventually the competition wised up, so Yass then leaned on his well-honed poker skills—how to read the subtleties of markets, adjust based on new information and size bets—to keep his edge. "The business for Jeff to compete in was one where you have to make a decision under intense pressure and stress, and you're going to have incomplete information,” says Susquehanna cofounder Bloom. “Jeff was spectacular at processing that information and deciding how big to bet.” In 1987, Yass and his partners created Susquehanna International Group with no outside money, naming the firm after the Susquehanna River which flows past Binghamton and all the way through Pennsylvania. The firm thrived from the start, making millions on the Black Monday market crash of October 1987. Yass, always careful to protect himself against the risk of ruin, had bought insurance using out of the money put options. When the market cratered, Susquehanna’s puts became very valuable. Overall, the firm made about $30 million that year. 1987: Scene at the Pacific Stock Exchange Oct. 19, the day the Dow lost 509 points. (Photo by Steve Ringman/San Francisco Chronicle via Getty Images) HEARST NEWSPAPERS VIA GETTY IMAGES By 1988, Susquehanna was a giant in program trading, which had grown controversial on Wall Street after the crash. Due to its models, tiny Susquehanna traded as much as 5%-to-10% of the volume of the New York Stock Exchange on any given day, but Yass was uncomfortable with growing criticism over his trading. Through a friend, he cold-called his libertarian idol, Milton Friedman of the University of Chicago, to get his blessing that Susquehanna was doing nothing wrong. Friedman returned Yass’s call and approved of the trades on the principle that they made markets more efficient. So Yass continued to program trade as most Wall Street firms abandoned the strategy, leaving Susquehanna to extract large profits for a few years. In the 1990s, Yass and his partners began to institutionalize the firm. They recruited new hires and trained them to trade based on the self-taught process that had served Yass well. Susquehanna’s training programs involved a mix of tutorials on options pricing theories and poker-playing tournaments to test employees' decision making skills. To ensure they weren’t training future competitors, Susquehanna drafted extraordinarily restrictive employment contracts. Dantchik began to oversee Susquehanna’s training regimen, while Joel Greenberg, a lawyer educated at Columbia University, acted as a chief operating officer. Eric Brooks, a skilled gambler and star trader, led Susquehanna's efforts to build new businesses. Even Yass’s father Gerald had a role, working to build the firm's back office bookkeeping operations. By the late 1990s, Susquehanna was earning billion-dollar profits in some years, according to insiders. In addition to options market making and program trading, Susquehanna was skilled at trading convertible bonds, commodity options and index options. The popularization of the exchange traded fund became an opportunity for Susquehanna to apply its quantitative skills. Using computer models, Susquehanna’s search for value in the relationship between different securities like futures, options and stocks was perfectly suited for the ETFs, where market makers create and redeem new shares and look for mispricings between an index and its constituent stocks. Since 1993, Susquehanna has been one of Wall Street’s leading ETF market makers, playing a behind-the-scenes role in the rise of passive investing. Today ETFs account for no less than $7.7 trillion in assets. Despite its restrictive employment contracts, Susquehanna’s trading floor has spawned other top trading firms. The three co-founders of equally secretive Jane Street trading, for instance, were trained by Yass and Dantchick. The Financial Times recently reported Jane Street made $6.7 billion in the trading bonanza that was 2020. When the 2000s came, ushering in an era of technological creative destruction on Wall Street and in American business, Susquehanna diversified and was adept at staving off obsolescence. Mark Dooley, one of Susquehanna’s original employees, oversaw the firm’s transformation from a floor trading operation into one that relied on technology. Zhang Yiming, founder of Beijing ByteDance Technology Co., poses for a photograph at the company's headquarters in Beijing, China. Photographer: Giulia Marchi/Bloomberg © 2017 BLOOMBERG FINANCE LP Cofounder Andrew Frost opened offices in San Francisco, and began to build a private investment business to redeploy Susuehanna’s trading profits. Eventually, Yass’s outfit built a venture investment team in the U.S. and China, overseen by Dantchik. Its deal scouts in China were the first to back Zhang Yiming, the creator of ByteDance, in 2013. Susquehanna’s investment of a few million dollars in Bytedance is now worth tens of billions of dollars and rising. “Susquehanna is one of the only proprietary trading firms founded in the 1980’s to have successfully navigated decades of technological adoption from floor trading to electronic trading,” says Paul Rowady, veteran quant trader who now heads Alphacution Research. Susquehanna’s sprawling headquarters in the Philadelphia suburb of Bala Cynwyd, Pennsylvania resemble an Ivy League college campus. There’s free food, cooked by chefs daily, no dress code, and a 9,000 square foot gym with personal trainers. Yass has made sure to have the best amenities money can buy for his army of quants. Beneath all of the refinement, however, is a culture that mirrors Yass’s dorm room days at Binghamton. Gambling is everywhere. Susquehanna recruits traders from the math and engineering departments of schools like Columbia and the Massachusetts Institute of Technology by hosting poker tournaments, screening for future traders with acute problem solving abilities and even-keel temperaments. At headquarters, the gaming and poker only increases. Susquehanna’s offices are filled with casino-quality poker tables. The art and skill of the Texas hold-em is given an equal shift to trading models and options math in Susquehanna’s training of new hires. Its famous three month trader training program mixes simulated trading with poker playing; Yass and Dantchik study the hands that new hires play, looking for troubling traits like anchoring bias—the pegging of decisions to a past and irrelevant reference point—or availability bias, otherwise known as the “gambler’s fallacy.” In this fatal flaw, a trader struggles to equally weight all new information appropriately. “In the world of investing, gambling is a wonderful teacher,” says Edward O. Thorp, the legendary trader and blackjack card counter, “It teaches you how to manage your money, place your bets, and keep your cool.” To blow off steam, Yass and his traders look elsewhere for edge and action. They bet sports lines, play even more poker, and look to find a hidden arbitrage in anything. They’ve rigorously tested game theory strategies in board games like Monopoly and The Settlers of Catan. An internal company blog plays mathematical Monday morning quarterback on controversial sports decisions, like the Atlanta Falcons decision to call a passing play late in the 2017 Super Bowl, instead of a run to bleed out the clock. Susquehanna’s verdict? It was a huge blunder, which boosted the New England Patriots odds of winning from 1.73% to 2.41%, an increase of about 40%. Every year, Susquehanna hosts an internal World Series of Poker and three Susquehanna traders have actually won World Series of Poker Bracelets. Cofounder Eric Brooks won the 2008 bracelet in seven-card stud, winning $415,856, which he donated to a non-profit that is pushing a field of thinking called “decision making science.” Brooks married Annie Duke, the champion poker player turned investing guru. There is almost nothing that goes on at Susquehanna that can’t be turned into a gambling event, not even a pleasant evening at the ballpark for interns and new hires. Yass is known to make his traders odds on any bet they want, and is particularly active on football Sundays and the Super Bowl. In the summer of 2019, when Susquehanna took its new hires to a Philadelphia Phillies game against the Mets, it offered $10,000 to the employee who correctly guessed the final score of the game, detailing the probabilities of each team winning based on something called the Pythagenpat formula. Thirty-five out of the firm’s 998-participating employees correctly guessed the Phillies 5-4 winning score, so a tiebreaker on the game’s ending time was used, with the winning employee picking within a minute of the 10:26 p.m. final pitch. In some respects, the coronavirus crisis has been a tremendous boon for Jeff Yass. As society went into lockdown, gambling has flourished. Millennials took to trading apps to bet their stimulus checks on asymmetric options contracts, and hidebound sports enthusiasts placed record amounts of online sports bets. Tax-strapped local governments in the U.S. aren’t complaining because the taxes of sports betting tickets can help fill the gaping budget holes caused by the pandemic. Yass is uniquely qualified to capitalize. A few years ago, he was studying online sports gambling markets in Europe and noticed that Flutter, the parent company of betting exchange Betfair, traded at market capitalization north of $10 billion. On the exchange, savvy handicappers publish bids and offers on sports lines, making markets in the same manner that stocks and options trade. In recent years, Yass has been building a Dublin-based sports trading outpost, which makes markets in everything from football to golf, basketball, hockey, and baseball. Susquehanna’s sports traders focus on in-game betting, when odds change quickly based on new information, and Yass’s two sons work in the unit. Yass is known to sweat games like any old punter, often calling down to his sons to find out which lines Susquehanna has taken. There’s no federal legalization of sports gambling in the United States, but Yass is an optimist. He wants to create the Betfair of the U.S., an opportunity that may be worth multiples of the London-listed sportsbook’s $30 billion market capitalization. “In America, there is this primitive notion that you have a bookmaker and the spreads are very, very wide, like what life was like on the New York Stock Exchange in the 1980s before electronic trading squashed the spreads,” says Yass, “We're hoping the same thing happens with sports betting.” As he waits, he’s expanding into cryptocurrency trading and conjuring up new financial products. Susquehanna was recently approved to begin offering futures contracts on U.S. tax rates, a derivative that he thinks can be used to hedge President Biden’s efforts to raise rates on corporations and high-earning individuals. A Libertarian who believes in the primacy of markets and skilled handicapping of odds above all else, Yass expects, perhaps simplistically, that these futures contracts will have a broad social reach. He hopes to offer futures on any Washington policy that comes down the pike. Hypothetically, if a President wanted to start a war, handicappers would show voters just how much it would cost, and at what human toll. With these futures, “You're going to get an objective number made by the market, where there's no BS and there's no politics in it,” he says. “There are other products we want to list that we think could just make the world a more peaceful place. We can have a marketplace that has the respect of everyone, which will become the new harbinger of truth.” All of this, he likes to say, is a “mission from God.” ================
There are some Wall Street firms that avoid the limelight and Susquehanna International Group is one of them. This article takes a look at the options and ETF trading pwerhouse, giving the background on the firm and its founding partners, who parlayed their poker-playing exploits and risk management skills into one of the top market making firms today. Its golden touch has followed it in its private investments, as it was an early investor in TikTok's parent company ByteDance, writes Hide Not Slide, a pseudonym the author uses. In October 2020, the Wall Street Journal published a fascinating piece about the popular social media platform TikTok that caught my attention. At the time TikTok’s global future was uncertain as the US & China sparred over the app’s ownership and data sharing agreements with the Chinese government. Amid a flurry of headlines, the WSJ took time to highlight an unlikely winner of TikTok’s recent exponential growth streak – Susquehanna, a low-key, under the radar trading firm based in Pennsylvania. In 2012, Susquehanna bought a 15% stake in TikTok’s owner ByteDance, and held on to its investment as the app launched & spread in America. As of 2021 that stake is worth north of $30 billion. Questions flooded in as I read and re-read the article. What the heck is a Wall Street trading firm doing with such a big stake in TikTok? Who the heck is Susquehanna? How did they get so rich with so little media coverage? So I did some digging. Bala Cynwyd High Rollers The idea that became Susquehanna was formed in the mid 1970s at SUNY Binghamton, a New York college near the Pennsylvania border. Six classmates – Jeffrey Yass, Steve Bloom, Eric Brooks, Arthur Dantchik, Andrew Frost and Joel Greenberg – became friends through their shared skill & interest in poker and horse racing. The group wouldn’t just skip class to gamble – being mostly science & math majors, they took an obsessive, analytical approach to the game. The six students used advanced game theory & statistics to find a consistent edge, and used that edge to make millions of dollars at the betting table. After college the group spent a year in Las Vegas, winning enough at the casinos to cover their bills and more. It was around this time that Yass gave serious thought to the idea that the group’s success could expand beyond the poker table. A new market was forming on Wall Street with vast potential for gamblers like them – options. In 1973 the CBOE launched the first US exchange-listed options contract, opening up a complex new trading frontier. Markets were still figuring out how to properly value & trade these instruments, and even the industry’s top firms hadn’t mastered them quite yet. Yass saw a direct overlap between options and poker, and for good reason. In its simplest form, both pursuits are about probability & risk management. In poker and in options trading, the player who can quickly form a range of potential future outcomes & accurately value exposure to those outcomes will win. For example, suppose I let you choose between two sets of potential payoffs: A 10% chance to win $1,000,000 A 25% chance to win $500,000 With this level of information you would correctly claim the choice with the better expected value is #2 ($500,000 * 25% = $125,000 is greater than $1,000,000 * 10% = $100,000). Now suppose I put a price on these odds: Pay $50,000 for a 10% chance to win $1,000,000 Pay $130,000 for a 25% chance to win $500,000 Now that I’ve introduced price as a new variable, your choice should change to #1 ($100,000 expected value for only $50,000 is way better than a $125,000 expected value for $130,000). Simple examples like this help explain what poker players & option traders do on a daily basis – they take inputs from their respective environments to process the relationship between expected outcomes, risk, reward and price, betting when the odds are in their favor and waiting on the sidelines when they don’t have an advantage. Around the time of CBOE’s launch, another innovation made headlines in the options market. Fischer Black & Myron Scholes, two researchers at the University of Chicago, discovered a mathematical formula to express the risk/reward/price relationship that could be used to price options. At the heart of the Black-Scholes equation was the idea that a basket of securities called the “replicating portfolio” could be created with the same payoffs as an options contract. Using the Black-Scholes formula allowed traders to buy or sell an option, create a replicating portfolio using a combination of stocks, interest rates & time, and arbitrage between the two for profit. Black-Scholes was an utter game changer that gave legitimacy to the options market and allowed sophisticated firms to build trading strategies that nearly guaranteed consistent profits. After his stint in Vegas, Yass went to NYU for business school where he began experimenting with options trading in addition to poker & horse racing. His foray into options proved so successful that Yass wouldn’t end up finishing school. Israel Englander, a successful hedge fund manager & NYU alumnus, sponsored Yass for a seat on the Philadelphia Stock Exchange after seeing his early success as a grad student. Yass honed his options trading experience as a floor trader on PHLX, and slowly brought his old poker friends back to Philly to trade with him. By 1987, the group had officially started a trading firm named after the Susquehanna River in Pennsylvania, and the outfit officially began their decades long takeover of the options market. Susquehanna quickly found a chance to prove their trading prowess. Only a few months after launching their firm, Black Monday hit in the US sending stocks down -20% in a single day. During a year where most professional traders were either licking their wounds or going bust, Susquehanna ended the year up $30 million, rivaling firms more than 100x their size. Their expertise in index options, a new & at the time controversial product thought to be a cause of the crash, helped them thrive. As the options market grew in size & stature with the advent of electronic trading, so too did Susquehanna. By the 2000s, 20% of the entire US options market ran through Susquehanna’s operation, a close second only to Citadel Securities. Think about this for a moment. Everyone knows who Citadel Securities is – and I mean everyone. It’s hard to miss a headline about CEO Ken Griffin buying not one, but several of the most expensive houses in the world. Or a barrage of stories about how Citadel Securities pays Robinhood hundreds of millions for retail order flow, getting Griffin hauled before Congress amid the GameStop blowup. Or news of former SEC, CFTC and other regulatory heads taking jobs with the firm to help its government relationships. Other than the occasional one-off mention in financial circles, do we ever hear about the exploits of Susquehanna or its leadership? Was Jeff Yass hauled before Congress to talk about his firm’s part in today’s chaotic markets? It really is quite impressive how a firm so successful & integral to the financial system stays so far out of the spotlight. A former trader there puts it plainly: “If you have to choose between fame and fortune, choose fortune.” Since the early 2000s, Susquehanna’s unique expertise in options has given it an edge in an even larger & more integral part of the financial system: ETFs. Just like an option, an ETF relies on the idea of a “replicating portfolio” to price itself. An ETF is quite literally a basket of securities that track a benchmark – the price of an ETF should directly match the price of its underlying basket. Susquehanna specializes in trading ETFs that are difficult to price, like illiquid fixed income or international products, particularly in Europe. The firm’s metrics (from its website, www.sig.com) speak for themselves: We quote virtually all 2,300+ U.S.-LISTED ETPs across all asset classes Lead Market Maker, Designated Liquidity Provider, or Specialist in over 500 ETFs in the U.S. since 1993 Leading trader of Europe-listed ETFs, making markets in nearly 3,000 ETFs and UCITS Trading capabilities in 50+ COUNTRIES We trade over 130M ETF SHARES DAILY Our daily trading activity results in the CREATION AND REDEMPTION OF ~$1.8B PER DAY in gross ETF market value Global leader in fixed income portfolio trading, specializing in INVESTMENT GRADE BASKETS Expansive equity portfolio trading capabilities,TRANSACTING OVER $43B IN 2019 With two major money making operations now stood up in options & ETFs, Susquehanna followed other upper echelon trading firms and began diversifying its investments. In 2006 Susquehanna founded its own venture capital firm focused on startups across the US, Israel and China. Noteworthy portfolio companies today include Credit Karma, eToro and Pyoneer, each worth billions in market value and some undergoing public listings in 2021. In a way, Susquehanna isn’t straying very far from its core strength when it comes to venture capital – like options, startups provide a convex risk/reward opportunity with limited downside but truly massive upside. No company better explains this theory at work than ByteDance, formed in 2012 with Susquehanna as an early backer. A $5 million investment in ByteDance’s founding year bought 15% of the company and a board seat. As TikTok grew in Asia and was launched in the US in 2017, returns started to build. By the end of 2020, TikTok had become the #1 most downloaded app in the US with over 800 million monthly active users – more than Twitter, LinkedIn, Pinterest, Snapchat or Reddit. That 15% investment is now valued at over $30 billion, rivaling the value of Susquehanna itself. To put this incredible ownership stake into perspective, Susquehanna owns about as much of TikTok as Mark Zuckerberg currently owns of Facebook. Talk about an attractive risk reward opportunity for a $5 million lottery ticket. Where are the original Susquehanna Six founders now? Steve Bloom left the firm in 1993 to manage his sizable fortune as a family office. Eric Brooks went on to win the 2008 World Series of Poker in Seven Card Stud, and runs a non-profit focused on decision making education among children. Arthur Dantchik still works at Susquehanna as a Managing Director, serving on the board of ByteDance on Susquehanna’s behalf. Andrew Frost still helps manage Susquehanna’s sprawling venture capital business in Asia. Joel Greenberg is an active political donor, supporting multiple Mayor & Governor campaigns in the past and the founder of a super PAC. Last but certainly not least, Jeff Yass continues to lead Susquehanna to this day with the largest ownership stake in the company & a rumored fortune north of $12 billion. His betting prowess & entrepreneurial spirit has taken him from poker games in his college dorm room to the flashy Vegas casino tables, to the crowded Philadelphia options pits and ultimately the top of Wall Street’s food chain. While not a fixture of Congressional hearings or the spotlight of the news media, Susquehanna is one of the largest and most successful Wall Street trading firms in operation with a massive impact on today’s market infrastructure. Just because they’re good at avoiding press coverage & keep strategies close to the chest doesn’t mean they don’t deserve attention. If you have to choose between fame and fortune, choose fortune. This article,”The Susquehanna Six: The Poker Champions & ETF Billionaires Running Today’s Market,” appeared on the blog Front Month on March 9, 2021.
There’s free food, cooked by chefs daily, no dress code, and a 9,000 square foot gym with personal trainers. Yass has made sure to have the best amenities money can buy for his army of quants. Beneath all of the refinement, however, is a culture that mirrors Yass’s dorm room days at Binghamton. Gambling is everywhere. Susquehanna recruits traders from the math and engineering departments of schools like Columbia and the Massachusetts Institute of Technology by hosting poker tournaments, screening for future traders with acute problem solving abilities and even-keel temperaments. At headquarters, the gaming and poker only increases. Susquehanna’s offices are filled with casino-quality poker tables. The art and skill of the Texas hold-em is given an equal shift to trading models and options math in Susquehanna’s training of new hires. Its famous three month trader training program mixes simulated trading with poker playing; Yass and Dantchik study the hands that new hires play, looking for troubling traits like anchoring bias—the pegging of decisions to a past and irrelevant reference point—or availability bias, otherwise known as the “gambler’s fallacy.” In this fatal flaw, a trader struggles to equally weight all new information appropriately. “In the world of investing, gambling is a wonderful teacher,” says Edward O. Thorp, the legendary trader and blackjack card counter, “It teaches you how to manage your money, place your bets, and keep your cool.” What a cool place to work. I work at this boring tech firm where no one on my team is interested in gambling or trading. Normies, who make me feel like a weirdo.. Jeff Yazz was interviewed in New Market Wizards, i need to go re- read his interview.
These kinds of big fat trading firms have much bigger market impact costs than i do. By comparison, i am a lean mean money printing machine So I know i will always be able to beat them
%% I did not long ago ; he spent a lot of time on ''Lets Make Deal'' but i enjoyed that show also. Gambling a wonder ful teacher; sure is if you like your car brakes tampered with on top of a hill, but mr Thorp survived that so ok by me if he wants risks like that. Both good interviews . Gambling is still illegal some places + i dont consider business bet/ even though the WSJ notes/pretends it is all the time/LOL