Citadel Securities’ Troy Kane discusses the growth of retail trading, Citadel’s wade into Crypto, and its growth in Asian markets

John Lothian

John Lothian

Executive Chairman and CEO

Troy Kane got his start when he was 14 years old working on the trading floors of the Chicago Board of Trade for his mother’s company and clerking for locals. “My first job was to collect the trading cards every 15 minutes and tally up positions,” Kane said. “So if you were wrong, you were usually fired that day, so you better not be wrong. I did that every summer in high school and learned the business from the ground up.”

Kane is now head of global derivatives and FICC development at Citadel Securities, where he manages the firm’s market structure advocacy and business development across futures, options, and FICC products globally. Kane spoke with John Lothian News at the FIA Boca 2022 conference about the innovative work he has been doing in the derivatives industry.

“It’s great to be back at Boca.” Kane said. “It’s been three years and it’s great to see everyone. I was just telling someone it’s like a high school reunion, right? I’m glad to be off virtual conferences.”

Kane is an early developer of electronic trading. He saw that computer technology was encapsulating the markets and that led to his work developing and designing systems for the Board of Trade.

Kane said Citadel Securities was started in 2002 as an option market maker. “We saw that options were becoming more electronified and Ken Griffin took the opportunity to create Citadel Securities to be an option market maker, not just on the trading floors, but also electronic as new venues were starting to emerge.” Citadel Securities is now the largest US options specialist. In the two decades since it was founded, it’s expanded into multiple asset classes trading in 35 countries.

“It’s been amazing to see how much retail has grown in US options” in the last two years, Kane said. In 2021 alone, retail trading grew by 30%, which has not only contributed to more volume, it’s contributed to other durations. “We’ve seen a lot of growth in weekly options as a result of retail entering the market,” he said. “Retail clients are more sophisticated now than they were maybe five or 10 years ago and I think that’s a good testament to the retail brokers’ ability to educate retail clients on how to trade options.”

When a retail client submits an option order to a retail broker, the broker then routes it to an executing broker such as Citadel Securities. Citadel Securities is then required to route that order onto a venue – a trading exchange. Citadel Securities uses the NBBO (national best bid and offer) of all 16 options venues to determine where to route the order. In some cases, Citadel Securities can initiate pricing through an auction that will allow the order to get a small price improvement.

We asked Kane whether Citadel Securities works with cryptocurrency. “We’re a leading global market maker in many asset classes and as the growth of crypto and digital assets continues to be more relevant in the market structure, we are now ready to start to become market makers in crypto,” Kane said. As Citadel Securities works to develop these markets, it’s looking for talent to join the firm. “We’re actively looking for people that have expertise in exposure to digital assets and crypto. And we’re not just looking in the US but we’re looking globally,” Kane said.

Citadel Securities’ largest area of growth these days is Asia, Kane said, as Asian markets become more accessible and open up. “There’s a lot of opportunity for market makers to venture into that space. We’re trading in over 10 jurisdictions in Asia now and we’re looking at some of the new emerging exchanges that are starting to provide market connectivity and products to the marketplace,” Kane said. Citadel Securities has recently expanded operations in Sydney, Japan and Singapore as a result of that growth.

Citadel Securities is also focusing on growing its institutional business. “Two years ago, we launched institutional options, and we’re now making direct liquidity to institutional clients for options that complement our ETFs and our fixed income,” Kane said.

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