David Silber, Head of Institutional Equity Derivatives, Citadel Securities

[00:00:00] The reality is now listed options, the liquidity is so deep, the expirations and strikes are so robust that you can replicate a lot of your objectives by using the lit markets. And the liquidity is fantastic. And to your point, the return policy, to use your words, is very well known and very high degree of confidence that it will be there.

[00:00:24] So I think in general, the average institution is trading options that expire in less than 40 days on average on our desk. And we will trade hundreds of millions of customer contracts in the institutional space.

[00:00:55] It was a pleasure to welcome David Silber, Head of Institutional Equity Derivatives at Citadel Securities, to the Alpha Exchange to discuss the evolution of listed options markets, institutional liquidity, and the technology reshaping modern derivatives trading.

[00:01:15] We begin with David's early career on the floor of the SIBO during the transition to multi-listed options, where market making, open outcry, and physical proximity to order flow define liquidity provision. He reflects on the evolution of the options markets from paper tickets and fractional pricing to today's electronic ecosystem, highlighting how advances in technology have fundamentally changed both price discovery and risk management.

[00:01:42] We then turn to the creation of Citadel Securities' institutional equity derivatives business. David explains how his experience across multiple firms led him to identify opportunities to reduce friction in institutional options execution by combining technology, quant research, and broad access to liquidity.

[00:02:03] He describes how automation, electronic execution, and competitive pricing have transformed the institutional trading experience while expanding access to listed options. The discussion also examines recent growth in listed options markets, including increasing contract volumes, shorter dated expirations, and the expanding use of listed options by institutional investors for hedging, leverage, and portfolio management.

[00:02:30] David shares his perspective on liquidity provision and the importance of maintaining resilient markets during periods of elevated activity. We conclude with a discussion on recruiting talent, developing strategy, and data products for clients in aligning sales, trading, and technology teams around creating a more efficient experience for institutional investors. I hope you enjoy this episode of The Alpha Exchange, my conversation with Dave Silber.

[00:02:59] My guest today on The Alpha Exchange is David Silber. He is the head of institutional derivatives at Citadel Securities and someone with a long career in the equity options market. Dave, it's great to have you on the podcast today. Thanks so much, Dean. It's great to see you. I appreciate being here. Yeah, looking forward to this conversation. A lot of times, I kick it off by asking a guest to reflect on some experience in markets when things have gone haywire.

[00:03:29] The lessons that Elevated Vol Events teach us. We're having this conversation a day after the 10-year anniversary of Brexit. So you and I have seen many of these events before. But as we were talking the last time we got together about some of the things that just stand out to you, you had mentioned an event. I want to say it's around maybe 1999 or so. It's a long time ago. But I want you to walk through this episode of Waiting Outside the Seabo.

[00:03:57] And then we can just talk about the evolution of options markets and technology and how far we've come. Yeah. God, it's amazing thinking back to that. You are right. It was about the summer of 1999. I was a market maker on the floor of the Seabo. And for some of your listeners, you'll be surprised to hear this. But it was the coming of multi-listing.

[00:04:20] So the days of trading a Dell option only in Philadelphia or a Coca-Cola option only in Chicago. Those days were coming to an end. And exchanges were going to start to list options on all other venues. And people literally were flying in from other venues to stand in Chicago crowds so that they can participate as Order of Flow got rerouted to new venues. And you're right, Dean.

[00:04:49] I mean, literally, summer of 99, great day in Chicago. And people are literally lining up as if they're going to a concert or buying tickets to a Cubs game. But they're really just waiting to get in the door of the Chicago Board Options Exchange for the opportunity to hustle so that they could stand in a good spot near a broker who's going to control that order flow. And it's just wild thinking back to a bit of like the front row seat I've had from that point on.

[00:05:18] So many changes across the roles I've had in sales and trading and the equity and the equity derivatives market. You've got this Susquehanna lineage, which is a special lineage, a training ground for probabilistic and relative value thinking in options that sort of invented a lot of this stuff. Take us through that training program experience.

[00:05:40] And then I also just want to get some of your perspectives on just being physically on a floor and watching that order flow. But just take us back to the Susquehanna days for you. So maybe even I'll like zoom out a little bit more of how I even ended up there. I'm super humbled and grateful. In 1998, like I went to a small liberal arts college. I graduated college in 1998. It wasn't like the normal route to a quantitative trading firm of sorts.

[00:06:10] But throughout my summer internships, like everybody, I knew somebody who knew somebody who knew somebody who got me an internship on the floor for Susquehanna in the summer of 1995. And I ended up doing three summer internships there. And truthfully, I was just grateful to be there. So a little bit of elbow grease back then, a little bit of hard work being the first one in, the last one to leave, really perfecting the right cup of coffee and photocopy back then was really important.

[00:06:38] But it was more about absorbing what was happening and the fast pace of information and digesting it and understanding, like you said, statistics and probability and Bayes theorem. Through that, I was fortunate enough to get a full time job and I started at Susquehanna right when I graduated. And there I eventually spent some time on the floor, on various floors. And I remember clearly thinking about I wasn't really wed to any city.

[00:07:07] And I remember saying to a mentor of mine, like, where do I go to trade options and to learn after going through the education program? At SIG, you would then get assigned a floor or role. And I remember that person saying, like, if you want to trade options, you go to Chicago. So I moved out to Chicago and I stood on the floor there and was quickly put into a crowd and learned the ropes of what it meant to be a market maker and provide liquidity and manage risk.

[00:07:34] Take us through a specific pit. So each one of these is its own animal. They're different people with different presences. I'll lead in with the trade that I had done a lot of. And I think a lot of people had done a lot of back in, I want to say, 2001. So Paul Allen had done this enormous collar on Microsoft, multi-multi-billion dollar hedge. And he left some just gigantic footprints in the skew. And so we were trading.

[00:08:03] I never forget. It was the Oct 5590 risk reversal. So we want to do the other side, right? There was like 13 vols askew between the 55 put and the 90 call. And so we had done a bunch of this stuff. And, you know, I was working in New York at B of A and I was in Chicago. So I was on the floor and I just wanted to see the process of how this liquidity got absorbed into the market. And we were having trouble putting more on.

[00:08:30] And so I had the guys from, I can't remember which was the floor broker, bring me to the pit to watch this trade. And he presents the trade. And I just remember the guy at the center looking at it and shaking his head like no mas. Like there's just no way we're doing more of this. And it made me very quickly understand some of the limitations in terms of these are limited markets, even for something like Microsoft.

[00:08:54] Okay, credit to you, Dean, and I'm not surprised that not only can you remember the month and the strikes, but it might take a little bit of channel checking or fact checking. There are moments like that in this business that, you know, 28, 29 years in, I could tell you exactly where I was when certain things happened. It's funny to hear that. I stood in a differing crowd, but I didn't have the luxury of being in a name like a Microsoft.

[00:09:16] I did catch GLW Corning, wearing the fiber optic boom when they went from a Tupperware company to being the company that made the fiber optic casings for the cables. And went from a natural log normal distribution of downside puts in demand and the upside kind of funding it to, you know, cost you was the first time I learned that when they announced that they were the casings for all the fiber optic cables. It was an interesting time for sure.

[00:09:44] But to answer your question, I think it's important to remember in that time, first of all, things were trading in fractions. Decimals was another moment in our time that we remember probably. I think 2001, things started moving to nickels and dimes and not until 2007 or 2008 did you really have like the penny pilot program begin where you started to have like penny increments.

[00:10:08] So the level of skew you're talking about, it's not that surprising because there were only so many price points that can be checked while spreads were being quoted because things traded in eighths or sixteenths. And that created just by nature, less price discovery.

[00:10:28] And in addition, there weren't electronic markets and auctions to provide these dynamic initiated backstopped orders that now get filled almost instantaneously with the opportunity for market participants to improve them across 18 different venues.

[00:11:15] But we'll talk more about that. Four rows back. You might not know your allocation as quickly as the person right up front there. So the reality was providing that liquidity was much more of get paid to take the risk and warehouse it and manage the delta.

[00:11:33] Whereas nowadays, with 80 million options on pace to trade as the ADV in the month of June, there's so much liquidity to access, especially as a market maker now. The liquidity provision has become so deep. And this is all part of the evolution of the options market over that 20 to 25 year period.

[00:11:57] But you experienced it where you had reached maximum liquidity that the floor could handle at that point. Because in many cases, there were a lot of individuals down there. There were just starting to be lots of different trading firms down there. It was a very different time in terms of being able to access liquidity to manage that risk. And the more you charged, the more you felt comfortable housing it or warehousing it.

[00:12:25] But at some point, you did reach a point where liquidity, there was not a price for it. And it sounds like credit to you, you were able to reach that point. Well, let's talk about the evolution of your own career. So you launched it at really a pioneer in derivatives. And in your present day, you're at a pioneer in derivatives, Citadel Securities.

[00:12:48] You, after a time at Susquehanna and Jefferies as well, you brought a business plan to Citadel. I'm thinking it's 2019, but I could be incorrect. Is that the right? Yeah, that's right. About Labor Day of 2019, just about seven years. And so you had the benefit of several decades in markets. And again, a front row seat to vol events, to change in technology. But why don't we start this conversation by learning a little bit about the business plan

[00:13:17] that you brought to Citadel. And that's going to underpin a conversation about change in markets, specifically around technology, about how someone like yourself is looking to find human capital and develop human capital. Get us started. Talk to us about that 2019 launch of the business plan at Citadel in derivatives. Of course. If you don't mind, I think I'd like to even rewind a little to some of the experiences I had that

[00:13:46] led me to the business plan ultimately. And not so much my experience. I spent about five years at Jeffries, like you said, which was a great learning experience. And quite frankly, I learned a lot about myself there and about my own strengths and weaknesses and developed a lot of different skills there. And then I also spent about five years or so at Citibank, like you said. And again, very different organizations. Lots of good things to say about all of them and the people I worked with.

[00:14:13] But what I really focused on was developing my own skills and my own strengths and sharpening what I thought would be the best path for me. And what ultimately ended up happening was I took a step back and realized there's an opportunity and the markets have demand for change. So if I looked at the equities market, and this is what led to the business plan, Dean.

[00:14:39] If I looked at the equities market, not to go too far back, but so many people in cash trading, you had healthcare traders, you had tech traders, you had energy traders, you had sales traders, you had listed sales traders, you had NASDAQ sales traders. Lots of people were involved in the equities institutional business. And somewhere around 2010, call it, that business became more algorithmic.

[00:15:07] It was the rise of the central risk book, the rise of algos. And what you really saw happening was headcount began to go down. Average print size became smaller. Market impact became defined as the smile. Cost to trade went down quite a bit. Price point actually got a lot tighter. And at first, there was a lot of stress about this.

[00:15:31] And the stress was created mainly by the sell side trader or salesperson who was recognizing that there was going to be less people needed in that business and more technologists and more quantitative researchers and whatnot. And this created a negative impression of it. But what ended up happening really was the customer, the investor, ended up with a much better outcome. They ended up having much more liquidity brought to the market.

[00:16:00] Their impact went down a great deal. The friction to trade was massively reduced. Their cost to trade went down quite a bit. And I saw that happening. Meanwhile, the institutional options business was coming along as was in a few rows away. And I was fortunate to be a part of it. And then I saw the retail options business, something Citadel Securities was a leader in and a pioneer in liquidity provisioning. That business also was changing.

[00:16:29] The days of calling your broker and asking them to buy 10 call options that you really maybe delayed quotes on your PC for. They reflected a quote to you over the telephone if you got them on the phone. And they would charge you a big commission. And they'd send you a letter in the mail the next day with your fill. And then, you know, three days later or so that that would hit your option, you know, your account that you could go on your computer and look at.

[00:16:55] That had turned into as long as you had a phone, you could open an account. You could pay zero commission. You could have dynamic quotes on your phone. You could get filled instantaneously, often at a better price than was reflected to you. And you paid no commission. It really changed the way people traded options. But again, it was the retail options trader. So you had two things happening as an outsider who had been in this business a long time. And I had spent some time in the cash equities business.

[00:17:24] Candidly, I wasn't so great at it. It was a much larger group of people. It just wasn't where my bread and butter was. So I but I learned from the experience that that business had gone through. And I paired it with the client in the retail world of the options business was like, wow, if we can create that experience for an institutional customer and client in options, massive differentiator. The customer will demand this. The customer will have thirst for this. So I put together a business plan, eight or 10 pages.

[00:17:54] I talked to some of my partners and friends and mentors and customers. It was like, there's so much friction when you trade options. How has it evolved over the years? And they're like, oh, it hasn't. I got to call a salesperson. They yell over the desk to a trader. They hem and haw. The salesperson says I need it. It ends up going to a trader on an exchange. The trade sometimes breaks the next day. I got to pay them three bucks and one buck commission.

[00:18:23] And then I call back to roll the next day. And the trader is off the desk and the energy traders filling in for the tech trader. There's all this friction. And there's all this bias about the last trade I did. There's all these priors about I remember this trade. I remember this trader. There's all these feelings that go into it, much like you saw on the floor of the SIBO in 1999. But it's a different market, Dean. There's massive amounts of liquidity.

[00:18:52] There's screen liquidity. There's auction mechanisms. There's a retail channel. And I thought to myself, if I could find a firm that could leverage access to all those liquidity channels and pass that on to the institutional investor and options, this will be a great experience for the customer.

[00:19:12] And what I realized was when talking to private equity firms, other market makers, smaller broker dealers, friends and family about doing it, what I realized was everybody agreed, but nobody really knew how to do it. And then I met with Citadel Securities. And I apologize for taking the long way. But I'll tell you, it was about one conversation. And they were like, we get it. Create the most competitive market possible. Hire the best people.

[00:19:41] Leverage our technology. Leverage our quantitative research. And give that all to the customer. And they will give you their orders. And they will make you a trusted partner because you are giving them the experience they want. And you're giving them time back. And you're giving them leverage on their own workflow. Pencils down. I started, I think, two weeks later in Labor Day of 2019. And shortly after, Jason Roelke joined to run sales.

[00:20:09] And since then, we've built a team of about 20 people all in. And I think by most metrics, we're probably one of the leading listed options houses out there now in the institutional space. I like to say that when you buy something, you should know the return policy. I've done plenty in light exotic OTC derivatives over the course of my career. But the return policy isn't great. You change your mind, you're going to get whacked pretty good.

[00:20:33] And what they show you and what Citadel Securities and others are a part of is, here's the return policy. If you buy this and you want to sell it right back, this is the spread. And I just love that screen-based Christ discovery. We were talking before we got on, and I would love for you to just recite some of the stats that you have at hand around volumes. Because it's pretty frenetic stuff.

[00:20:58] We were talking about Micron, some of the just incredible volumes that are going through. And, you know, these aren't $10 stocks. These are $1,000 stocks. So, in terms of notional and risks that are transferred, these are big numbers. I'd love for you to give us some of the stats that you have on hand on volume, maybe some of the migration in maturity. It does seem like we're in a shorter and shorter time maturity regime.

[00:21:28] That seems like that's been happening for a number of years. But just share some of what you have on hand in terms of option volumes and so forth. Yeah, I mean, if you zoom out and you think of options volume, a year ago, let's just keep it in the recent ones as it's a little bit sharper to me. But about a year ago, where options volumes were already at all-time highs, we were trading about 55 million contracts a day.

[00:21:54] And I think June of this year is on track to be just about 80 million contracts a day. And keep in mind, this is off a base that's 10-ish years ago, pre-COVID, pre-rise of the retail trading. You're truly talking about 10 to 12-ish million contracts a day type numbers. So you're really seeing significant growth. And you're not just seeing significant growth, but you're also seeing more concentration.

[00:22:24] Because to your point, when you think about expirations, this most recent June expiration was the largest expiration in history. And by notional terms, estimates are very much around $8 trillion of option notional expiry this past Thursday, of which about 60-ish percent of it was in the SPX on that morning expiration. Does that include SPY or that's SPX? No, the SPX morning.

[00:22:53] And to me, even more impressive than that is that Micron, a company that has been around forever, but not necessarily really talked about as like of a significant volume. I think Micron expired more notional than the IWM or the Russell. So single stock, and you would always hear Tesla and you would always hear NVIDIA. And there were periods throughout COVID where various names were at the top of the retail list or so.

[00:23:23] But you're really talking about a growth now in products that single stock options are just super active. And to your point about time to expiration, these listing of multiple strikes and multiple expiries, even in the institutional space where clients used to be trying to capture an event, earn a certain amount of income or yield, there were very specific use cases for options.

[00:23:49] And I listened to a lot of your guests and they'll talk about solving complex problems, using various OTC instruments or QIS products. The reality is now listed options. The liquidity is so deep. The expirations and strikes are so robust that you can replicate a lot of your objectives by using the lit markets. And the liquidity is fantastic. And to your point, the return policy, to use your words, is very well known and very

[00:24:19] high degree of confidence that it will be there. So I think in general, the average institution is trading options that expire in less than 40 days on average on our desk. And we are we will trade hundreds of millions of customer contracts in the institutional space. I think that the retail option volume, I would even cut that number in half of it's even shorter dated.

[00:24:43] But I think that you've really seen a new use case for the institutional user of options, which is leverage, which is hedging, which is beta. Just the access to deep liquid markets and also performance is really something special to have in your toolkit if you're an institutional investor.

[00:25:06] We talk we'd run with micron for a second because it's the latest and one of the strongest examples of a stock that is enveloped in a very strong self-reinforcing spot up vol up episode. Absolutely. I mean, the thing is up tenfold in a year. Vol is up 100 or something. These are very unique dynamics. You mentioned the SIBO story from 1999. Of course, the Nasdaq peaks a year later, roughly.

[00:25:36] And that was a spot up vol up event as well, where the queues became much more volatile than the S&P. So we're seeing some of that now. And it's so different than, let's say, the pre-GFC period, which was a low vol period. So the symptom then was low vol. In some ways, the instabilities are very much associated with high vol and they're winning stocks. I guess that's good news for now.

[00:26:00] I'm curious if you were just to reflect on how you think about risk management in an environment like today. We don't have any forthcoming systemic banking crisis coming. You know, knock on wood, never say never. But it doesn't seem like there's a 30x leverage in a major investment bank. That doesn't seem like an issue. But we were talking about leverage ETFs and those amplification properties.

[00:26:29] How does risk management in derivatives look now versus prior periods to you? Big picture. Yeah. So big picture. And I think the bank stress test were just recently passed with flying colors as we're recording this. So your timing is spot on there. I think big picture, Dean, comes back to what we were talking about around volume and liquidity.

[00:26:51] And even if there's new leverage in the market, market makers and liquidity providers have so many channels to provide that liquidity and manage that risk. And this is a complicated problem to solve. It used to be if you sold one call, you went out and bought some stock and maybe you tried to buy another call. Those days have changed just based on the sheer size of the market.

[00:27:18] But what has also changed is this volume that we're talking about and what this volume does. And this has been one of the biggest changes I've seen in my career. It's just the access to different liquidity. And I think this was part of what made it so exciting for me to be able to come to a firm, in this case, Cidel Securities, and create a better experience for the institutional client.

[00:27:41] Because I knew if we could provide them block liquidity in a seamless way, our ability to manage that risk by accessing different channels of order flow on screen, via the retail channel, via risk recycling from other products out of other regions, and the institutional channel itself.

[00:28:01] If you can find a way to participate in all of those markets in the most competitive way, you can then lean into providing liquidity to the institutions themselves. And the day of having to be an expert in the next financial event or PDUFA date in healthcare, Mac Day in Apple, right around the product development cycle, nowadays, the reality is there's events all the time.

[00:28:30] But there's enough liquidity and enough volume trading that as a liquidity provider, your objective is just to make it as seamless as possible for the client to achieve what they want. And that's really what we've been focused on. And I'll tell you, the ability to manage risk is very active because you do have in these large cap names, like you mentioned, a micron, you do have a spot up vol up regime.

[00:28:56] In some cases, you realize vol even outpacing implied vol post events, which are new market regimes. But what you also have are income funds collecting yield by taking advantage of that by selling 25 delta calls. What you also have are retail investors gaining momentum and looking for access to the product on the back of a strong earnings day, buying 30 delta calls.

[00:29:21] And if you can consistently be there for all those market participants in the most competitive market, you're able to provide that liquidity in a way that other people can't. And if you can insert yourself into that and create a frictionless experience, risk management very much becomes a complex problem solved primarily through access to liquidity. And that's something that we really pride ourselves on.

[00:29:48] So zero DTEs are largely considered to be this stomping ground for retail. And I'm sure that's very much correct. However, there are tons of hedge funds using zero DTEs and using them thoughtfully. Thoughtfully, I've had many a meeting with folks that you'd be surprised to learn that macro hedge funds using zero DTEs for, again, stop out purposes, things like that, delta substitution purposes.

[00:30:16] That's a product that Citadel Securities is clearly on the other side of. But it's not like one of your 20 folks is picking up the phone to intermediate that particular trade. Unlikely is my guess. I'm curious just in terms of the business flow that your firm is a part of in terms of the taking the other side of trades electronically versus the old blocking and tackling voice intermediated.

[00:30:44] Give us a sense because you're active in both components of that business. I'd love to learn where one begins and where the other ends. Yeah, it's a great question, Dean. And it's one that we get a lot. And I think I'll answer through a couple of different views. One is the business I look after is the institutional options business. However, Citadel Securities is obviously a leading liquidity provider and destination for the retail options business.

[00:31:10] So we have an on-screen presence where we're providing liquidity to all market participants on screen. And a lot of that retail flow comes through our platform and other platform and ends up trading on screen or in an auction mechanism that we participate.

[00:31:24] And even in our institutional business, both for very short-dated, zero-dated options or longer-dated options, we have an electronic offering that actually allows institutional clients that same low-touch experience, which dominated the cash equities world.

[00:31:41] We have viewed that as a tool that we want to give to our clients as well in the options world to allow them that same liquidity that they're able to get from us and all market participants that are able to respond and choose to respond in these various auction mechanisms and on screens. Because ultimately, it's about the experience and the lack of friction. So where do the lines kind of... They're very clear lines in terms of different businesses. But as a liquidity provider, we interact with both of those channels.

[00:32:11] And to your point specifically about institutions and the zero-day options, which is much more my world, I couldn't agree more. When we talk to clients, some of the most sophisticated, largest investors in the world, zero-day options are very much a part of the conversation. And our access to anonymized and delayed detail, we published a piece called the retail detail, for example, around what flows we're seeing.

[00:32:41] It is absolutely positioning as a part of the investment process for these clients. They really do consider how they are set up relative to the broader market position. And they will often use zero-day options to manage that in index products, in sector products, even in single-name products, especially when they have that option to do so. And to your point, they do it to manage delta.

[00:33:10] They do it to work into positions or to accelerate the getting out of a position sometimes. If they're working out of equity, but they want it to have less impact, they might be able to spend some premium on zero DTE to reduce their exposure to that delta while they're working out of it over a longer period of time. I want to get your take on another area of change. We've been talking about change in technology and liquidity provision.

[00:33:38] And you kind of alluded to it a little bit with some of what you're doing in terms of publishing some of the data on flows. Change in the strategy product. So back in the day, you were a hero if you could publish an Excel spreadsheet with implied vol term structure and percentile them, right? Of course, Bloomberg can do that and much more now. And so in a good way, as markets grow and they get bigger, they also get more competitive.

[00:34:04] And so you've got to evolve with markets, find a mousetrap that is more valuable on behalf of the clients. You guys have focused a lot on data and flows. Talk to us about what the strategy product coming off your desk looks like and where you want to take it. I think we should go from here into even just about the type of talent that we look for now relative to the talent that we used to look for in the position we're in. Let's start that conversation around content.

[00:34:34] I actually think that's a really good place. And it's very much been about solving a problem for the client. And those problems have evolved. As you said, it used to be solving a little bit of math and putting together a nice chart and sending it to them in a spreadsheet so they could see an implied earnings move relative to predicting historical earnings events and whatnot.

[00:34:58] Or maybe it was percentage of an ETF that reported by a certain expiry to make sure if they were hedging, they were capturing enough of the weighted products. But as you said, Dean, in the age of technology and vendors and the price of things getting so cheap, a lot of those things have been solved for clients without the need of a sell side platform.

[00:35:21] Many organizations still write lots of research, lots of derivative strategy, put out lots of process. And I really think if I was an investor and I sat on the other side of the phone, how would I go about my day?

[00:35:36] And I can only imagine how stressful it would be to wake up and be the manager of a multibillion dollar hedge fund and see the truly thousands of emails from large organizations telling me what I should be doing. It would be a 24-7 job just to read those mails, many of which would be duplicative, many of them which would not necessarily be relevant. It would be a full-time job to do that.

[00:36:05] So similar to the way that we thought about solving a problem by eliminating friction in the institutional option space, by speed of execution, by consistent pricing, by automated recaps, by operational excellence, through the content lens, we did the same. And we went out and we talked to our clients and said, let us tell you what we have expertise in. Let us tell you what we have access to. You tell us how you might want to use it.

[00:36:32] Throughout the last six years, you've obviously seen a massive growth in short-term positioning, desire to understand where retail is and what they're doing as they are. I think Scott Rubner from our team has written quite a bit about they are not a market participant. They are a meaningful part of the market at this point.

[00:36:51] We do have strong views and access to data there that in an anonymized and delayed fashion, we're able to share with our investors and we publish that and solve a lot of bespoke problems. For them to offer them a specific solution to something they're looking for. We also try to rely upon data scientists to solve problems that are more one-off.

[00:37:13] And like many firms, we've tried to go into the market and hire true thought leaders in the macro environment, in rates. And you've seen us publish the occasional piece that really will offer our view on what's moving markets or how we think the impact of AI will affect stocks or the global economy. These are the types of things we're trying to do on a much more targeted basis. And we're really just listening to our clients.

[00:37:42] And as a result, we're probably building a more meaningful but kind of less scaled product offering. And then on a bespoke basis, it's a very streamlined client coverage here. And the priorities and the resources are set in a very meaningful way of who is the client? What do they need? Can we help them? And then we put together a task force and we quickly deliver what they need.

[00:38:07] And that helps us become more meaningful, not just trader to trader, but trader to analyst, trader to PM, trader to founder. These are the types of things that I think we're able to offer through our network. That's some of our competition is not doing because it's harder to make those changes. And here with a bit more of a clean slate, we're not stuck with the way we've always done things.

[00:38:31] We're much more able to build to suit as opposed to undoing years of the way we've done things. And, you know, I want to say this. When I tried to make those changes, they were learning experiences for me at other firms because it's very hard to make change at a big firm that has done things for a long time. Trying to implement some of those were very humbling moments for me at times that I've tried to grow from

[00:38:59] because you really have to learn how to manage people and how to manage priorities. And it's a complex problem to solve in a large organization. Whereas here, it's a lot more about baritocracy. It's a lot more about values. It's about more about mutuality. These are the types of words that we use in our values that I say them not representing Siddell Securities. I say them as what drew me, David Silber here, because leaning into them are kind of my own strengths.

[00:39:27] And I've seen that now pay off for our clients and my team members. On the recruiting front, we live in this incredibly fast changing world. It almost seems like being very AI fluent is kind of table stakes. What are the attributes if you're looking for someone to join your team in some capacity in the earlier parts of their career? What are those couple of attributes that have you and your business partners interested?

[00:39:56] And how might those attributes today be different than, say, a decade ago? Yeah. So human talent is probably one of the most meaningful parts of my job. And so many senior leaders at Siddell Securities spend their time on this. I'll say this. Culture is just what really makes a difference.

[00:40:17] So finding people of similar values, being collaborative, being a part of a team, quite frankly, wanting to win, wanting to work hard and being just the best at what they do. And really being ambitious, relentlessly ambitious is a culture that people will thrive in at Siddell Security. I love when I tell people I'm coming up on seven years here and they look at me a bit like, wow. I'm like, it's not wow. It's just I'm built for it. I love it.

[00:40:47] We hire. We try to really make sure they're built in that same mindset. So the firm itself hires truly the best of the best. We look for, you know, whether they're a PhD or whether they're a grad. They are truly the most elite mathematicians, computer scientists, engineers, physicists. Like you said about AI being coding, these are these are table stakes. The days of work hard or outwork somebody else. The bar is significantly higher than that.

[00:41:17] And recruiting is also, though, a function of ability to collaborate. So being able to work with others is massively important. And the biggest thing is really just being curious, asking questions, wanting to solve problems.

[00:41:31] If you think about this conversation, so much of it is based on accessing liquidity, predicting what might happen, using models to help manage risk, building technology that gets you to a market faster, gets that quote into the screen faster, gets that risk into your book faster. These are the types of things that require incredibly deep research and really thoughtful questioning.

[00:42:00] And it's really one big brain teaser, one big puzzle that when you put all the pieces together, the mosaic really shows you something in the function of being the world's leading liquidity provider. When I got here, when we began to hire an institutional business and you start to introduce salespeople, many of who are lateral hires to this mindset, the narrative had to change a little bit, as you would imagine.

[00:42:26] It was important that they had many of these skills, but more important were that their values were the same about meritocracy, about winning, about collaboration, about competition. Because those aren't always skills that exist at some of our competitors or just naturally in people. So we love people that excel at things, whether it's sports, whether it's board games, whether it's e-sports, a hobby in the arts.

[00:42:56] People that are able to compete at the highest level are naturally inclined to win and to want to be a part of the best. So when we scoured the street for talent, we looked for people who not only were great salespeople and commercial and able to build relationships, but it was more than that. It was about those other less tangible skills around just really understanding winning in a competitive environment.

[00:43:26] Creating an experience for your customer has a better outcome. Recognizing that friction is a problem for your customer and solving it. Thinking about things like operational excellence and the entire workflow. I could tell you stories of sitting on the whiteboard in the early days with Jason and one of the COOs and literally drawing all the hops that an order went through.

[00:43:49] From customer calling, sales to trading, trading back to sales, sales back to client, all the way through again to the floor, the CMTA, to the recap going out, to the bill going out 30 days later.

[00:44:05] And we literally drilled in so deep to every single one of those to find where we can automate it, where we can make it more operationally sound and where we can then show up at a customer's office and say, we're going to do this better for you. And as a result, we're going to save you X amount of time. And sometimes it might cost you a penny or two more. Sometimes it might cost you a penny or two less.

[00:44:31] But the reality is your portfolio of doing options trading is going to be so much easier that you're going to have so much more time in your day that your portfolio of investing and your time management, your return is going to be infinitely scalable. And that is the real value you're creating.

[00:44:52] If I told somebody, you're going to pay a penny more for every single option, but you're going to get an hour extra a day, I think most institutional clients would be happy. As it turns out, due to our market position and our technology and our investment, we're actually able to do it for a penny less than they were used to trading because of our efficiencies and investments. So it's even more scalable. And telling that story to somebody as part of the recruiting process, Dean, you see it immediately.

[00:45:22] They either want to be on that whiteboard or they don't. And the questions they ask tell you if they really understand what you're saying. And I could go down our entire team and tell you their unique skill. I'm so proud of them. And truly, at this stage, having done this for 30 years, I'm very grateful to be in a position that I am to spend my time ensuring their success and ensuring they have the experience that I've been able to have in my career.

[00:45:51] So that when we look back about this business that we are all building together, it's incredibly rewarding. And people either are in on that or they're not. And you can tell by the questions they ask. You tell by the energy in their voice. And then, like you said, the table stakes are just high acumen, strong desire to win, collaboration, commercial, trusted advisors. These are people that are just A plus at Sidel Securities.

[00:46:18] So I wanted to finish this conversation with a little discussion on alignment, internal alignment. I'll start with a statement that you can't eat a sales credit. So a trader can flash all the EV he or she wants to at you. But if it's not retained, you can't get anyone paid at the end of the year. And I want to make a second statement, which is when the grocery store sells you a box of cereal, they really know exactly what they paid for.

[00:46:45] When a Wall Street firm sells a put option, you don't exactly know what the cost of goods sold are until the end. So we traffic in products that can really be funky and can have different path dependencies. So that's how I wanted to lay it out. And of course, that leads sometimes to, I don't know if it's frictions, but you want to optimize.

[00:47:08] And your role is to optimize the alignment, let's say, between your sales team, which you need to be out there engaging with clients. And then the trading side, which is there to risk manage the positions and provide as much liquidity as they can at price that still works. I'd love for you just to reflect on that, which is a natural tension. Nothing's ever perfect. But I'd love for you to share some of your thoughts on how you think about that.

[00:47:36] Dean, it's one of my favorite topics and I love wrapping up on it. And I'm going to answer it in a couple of different ways. And it was a massive part of the story and ask when I was trying to solve for where this business would be successful. And the first thing I would say is that, you know, Jason Rolke, who runs Deriv Sales here in the institutional options business, this is our third time working together with him running Deriv Sales alongside of me. And that's pretty rare on Wall Street.

[00:48:06] And like every business, you know, we have our ups and downs. But at the end of the day, we are very clear on our incentive structure, which is to improve the institutional options business for the customer and to net achieve as much P&L as we can while also affording the best experience possible for the customer. And our alignment is where the whole narrative starts.

[00:48:31] When you think of sales and trading, Dean, it's really hard at a big organization for them to be aligned because at the end of the day, they're exactly that. There are sales, which roll up to a sales manager, which rolls up to a head of sales, which rolls up to a global head of sales. And you have trading, which rolls up to a head of trading, you know, single stock trading, and it goes on and on. And never does it really get together at the top in a uniform way. It's so far away.

[00:49:01] So in many ways at a large organization, people are competing with each other. They're competing with each other, like you said, for EV, for trading P&L, and quite frankly, for bonus pool dollars. And what I have found here at Cidel Securities and what we spent a lot of time on was creating a meaningful incentive structure to focus on the client.

[00:49:24] If the client had a good experience and the client called often, that would be a sign of a good business. Because as the most competitive firm that thrives in an environment where we are trying to provide liquidity, we really remain committed to finding a way to provide that service to customers and to solve our problem of risk management using our capabilities and our time.

[00:49:51] In the most competitive environment, our traders, our technologists, our quantitative researchers, our salespeople, they all work together to go across function. And this is what I try to spend my time on to make sure that everybody has the maximum tools to create the best client experience and to do a giant portfolio of trades such that never does that penny or $2,500 lot really matter that much.

[00:50:21] Such that the business will feel impact to it. If our clients are behaving fairly and properly, our goal is to lean into them and provide them liquidity. And our sales team, our trading team, our technology team, and our researchers are all incentivized by that same goal to be successful. And it's the most simple case of a true meritocracy paying off. So all people incentivize the same way. And I'm just super grateful for it.

[00:50:50] And the firm, to their credit, when I told this story and I explained the last thing I wanted to do, and I wasn't going to, quite frankly, was go to another bank. I had no disrespect to these great organizations, but I was not going to go to another bank and show up at my client's desk and say, hey, here I am again. This time it's going to be different. And no, it really wasn't.

[00:51:12] And that was what led me to put together a business plan and try to find a great home where I can confidently say to candidates, to peers, to leadership, and most importantly, to my clients, this time it's different. And I think the growth of our business has absolutely reflected the truth in that statement.

[00:51:33] Well, Dave, we spent an hour talking about change in technology, in client appetite for different products, in how you think about recruiting, in the strategy product that is more relevant these days. It's been a pleasure to host the conversation with you. I'm a big fan, not just personally, but the professional work you do, we're grateful for. And I just want to say thanks again. A real honor being here today.

[00:52:20] Thanks again and catch you next time.