JZL Capital Quantitative Institutional Research Series: Jump Trading—Traditional Quantitative Giants Who “Stepped into the Pit” of the Crypto World

1. Introduction and Overview
In 1999, two former Chicago Mercantile Exchange (CME) floor traders, Bill DiSomma and Paul Gurinas, founded Jump Trading, one of the world’s top research-driven quantitative trading firms;
The two founders did not have a background in mathematics, physics or computers, but were successful CME pit traders. They were keenly aware that automated trading was the trend of the future.
"While Jump got its start on the trading floor in the open-outcry environment, we are now fully committed to taking advantage of the opportunities offered by electronic trading" – From Jump Trading Web site.
Information from: Jump Trading LLC Annual Report, FINRA Report, JZL Capital
2. Business and Planning
Information from: JZL Capital
Jump Trading is not just an SEC-registered broker-dealer, it is also increasing its deployment in venture capital, decentralized finance, and on-chain governance:
 1)  Jump Trading 
a) Focusing on quantitative trading, we have a broker-dealer license registered with the SEC and are a registered member of 18 SROs (self-regulatory organizations) including the New York Stock Exchange, Nasdaq, and the Chicago Board Options Exchange;
Data source: FINRA – BrokerCheck Report
b) The business covers trading products including stocks, options, futures, ETFs, fixed income securities, Cryptocurrencies, etc. For example: According to SEC documents, the order flow amount paid by Jump Trading to Robinhood accounted for 17% of Robinhood's annual revenue in 2021 (Citadel Securities accounted for about 30%), and Jump Trading's encryption business has always been the mainstay of Robinhood crypto, providing liquidity for its cryptocurrency transactions;
2)  Jump Capital
a) In 2012, Bill and Paul co-founded Jump Capital, a VC investment institution, with Sach Chitnis and Michael McMahon, focusing on investing in data-driven technology companies in the fields of financial technology, IT and data infrastructure, B2B SaaS and media;
b) According to FINRA disclosure data, Jump Trading describes itself as “Jump Capital, LLC is an exempt reporting adviser and shares common beneficial ownership with Jump Trading, LLC.”;
c) In August 2021, Jump Capital completed the fundraising of its seventh investment fund of US$350 million, of which 40% of the funds will be invested in DeFi, financial applications, blockchain infrastructure and Web 3.0. "A lot of corporate venture funds, their number one goal is not to make money. It is to serve their corporate parent, while we are here to make money. If we did not make money, we failed." – from Peter Johnson, partner and fintech investments lead;
d) According to the fund disclosure data, Jump Trading's two founders and Jump Trading General Counsel have held important positions in the fund management teams of all previous years, and Carey Harrold has also worked at Jump Trading for 17 years, and his position before leaving was Jump Trading's CFO;
Data source: SEC Filing Report
e) In February 2022, Jump Capital partners Sach Chitnis and Michael McMahon published an article introducing investment ideas for 2022 from five directions. Prior to this, Jump Capital had participated in financial information service platform Tradingview, institutional-level digital asset financial service provider Bitgo, and cryptocurrency regulatory technology service provider TRM Labs;
Information from: Jump Capital Insight
3) Jump Crypto
a) In 2021, the rise of DeFi paved the way for Jump Trading to enter the crypto field. In addition, the internship project jointly initiated by Jump Trading and UIUC Research Park in 2015 to explore and cultivate reserve forces for its own quantitative team has matured, and Jump Crypto came into being;
Information from: Jump Crypto official website
b) Jump Crypto has Jump Trading’s 20 years of accumulated trading experience and technical advantages. It focuses on blockchain infrastructure and tools and invests in blockchain ecosystem startups. As shown in the figure below, 2022 is the year of Jump Crypto’s investment explosion. As of the date of publication, it has participated in 40 projects.
Data from: CBInsight
4) Cooperation mode
The internal division of labor is clear and well-defined, and everyone cooperates with each other to fully participate in project-related investment, development, lending, liquidity provision and token market-making businesses.
Information from: JZL Capital
3. Team composition and operation model
People from: Jump brings together data research experts from the world's top universities, experienced technical developers, and members of the International C++ Standards Committee. More than 85% of employees have a background in mathematics/physics/computer science, and more than 50% have a doctorate degree.
Campus cooperation: According to UIUC News, Jump Trading established a cooperative relationship with the Department of Computer Science as early as 2010 and launched the Jump Trading Scholars program to reward outstanding talents with outstanding academic performance and innovative thinking in the emerging field of algorithmic trading. In addition to providing full scholarships for the 4th and 5th years, they also provide internship and exchange opportunities at Jump Trading. Unfortunately, the first two students who received the award did not join Jump Trading;
Data from: scholar.google.com & linkedin
Operational model: Dozens of trading teams are divided internally, each responsible for researching, developing, operating and maintaining its own strategies, and sharing the company's technology platform and hardware infrastructure;
Position arrangement: There are four main positions, namely, Algo Trader, R&D Engineer, Software Engineer and Data Engineer. Among them, Algo Trader is more comprehensive, not only understands the product but also can do data mining/machine learning, can develop strategies, and can write code; R&D Engineer is mainly a system architect, focusing on the research of low-latency systems; Software Engineer is responsible for the development of conventional software systems; Data Engineer is responsible for processing data from different sources for use by the trading team.
Core Staff
Kanav Kariya - From Intern to Head of Jump Crypto
1) Thanks to the internship program between Jump Trading and UIUC Research Park, Kanav Kariya, who has a background in Computer Engineering, joined the Jump Trading team as an intern in 2017. After graduation, he joined Jump Trading as a Quantitative Researcher.
2) In September 2021, Kanav Kariya was appointed as the head of Jump Crypto by Jump Trading, leading Jump Crypto to participate in project investment and market-making activities in the crypto field. In addition to providing data and technical support for the construction of a decentralized ecosystem, he leveraged the power of partners to build a cryptocurrency platform that updates prices at milliseconds.
IV. Institutional Ratings
On March 11, 2022, Moody's updated the rating of Jump Trading's parent company Jump Financial LLC's outstanding debt, Ba1 corporate family rating (CFR) and Ba2 outstanding debt rating, belonging to Non-Investment Grade, with an overall stable outlook. Similar to Jane Street, Jump Financial LLC was once rated "BB-" by S&P at both the issuer and debt levels;
As of now, Jump Financial LLC has one outstanding loan with a total amount of US$500 million, and the borrowers include Bain Capital Credit, Carlyle Global, Credit Suisse, Manulife Financial and other institutions. Compared with Jane Street, which has an outstanding debt of US$3.05 billion, Jump Financial LLC has been relatively restrained in the capital market;
According to Moody's rating disclosure, Jump Financial LLC's loan is used to increase its trading capital and for general corporate purposes.
Moody's concerns about Jump Financial LLC are reflected in:
a) Expansion into new regions and/or asset classes (such as cryptocurrencies), maintaining its high-quality employee base and corporate culture, and potentially facing greater challenges in terms of control and oversight;
b) Expanding more complex and longer-term trading strategies may lead to risks such as increased volatility in returns and reduced overall portfolio liquidity, resulting in potential asset losses for creditors;
Moody's rating adjustment conditions for Jump Financial LLC:
a) Upgrade: Expand low-risk auxiliary businesses, continuously improve their profitability, optimize and enrich cash flow quality, etc.;
b) Downgrade: A significant decline in profitability, major trading losses or risk control failures, reduced asset liquidity or increased leverage, or any adverse changes in corporate culture or management quality.
Rating reference and weight
V. Key Projects
As we all know, Jump is a major contributor to the Terra and Solana ecosystems, and is also one of the biggest victims of the Terra and Wormhole incidents;
1) Major cooperation project – Terra (heavy losses)
a) Jump Crypto, 3AC, Hashed, and Delphi Digital are known as Terra’s “Four Guardians”, investing heavily in Terra’s ecological projects and saving Terra from its death spiral;
b) Jump Crypto and 3AC led LFG’s $1 billion financing to help UST build foreign exchange reserves denominated in BTC. According to the LFG announcement, the LUNA tokens held by Jump Crypto through this round of investment have a 4-year lock-up period;
c) In addition, in the battle to defend UST anchoring, Jump Crypto also used the Terra arbitrage mechanism to convert 640 million UST extracted from Curve into 221 million LUNA to assist in UST anchoring, and distributed 221 million LUNA to 5 validators including Hashed.
2) Major collaborative projects – Pyth
a) Pyth is an oracle project built on Solana, jointly invested by Alameda Research and Jump Capital. GitHub shows that Jump Trading is the main code contributor of the project. At the same time, together with Genesis Global Trading, FTX and other institutions, it provides Pyth with high-fidelity data in the fields of crypto assets and traditional finance as a data provider for Pyth;
i. Jeff Schroeder: Technical Lead of Jump Trading, a top Linux geek, mainly responsible for the core code of Python;
ii. Samir Islam: Technical Lead of Jump Trading, developer of high-frequency trading systems, Master of Computer Science from Oxford University, and involved in Python code development;
iii. Evan Gray: Vice President of Engineering at Jump Trading, involved in Python code development;
iv. Alex Davies: Head of Production Engineering at Jump Trading, one of the first 10 employees of Jump Trading Europe, involved in Python code development;
3) Major cooperation project – Wormhole (heavy losses)
a) In August 2021, Jump Trading acquired Certus One, the development team of the cross-chain protocol Wormhole;
b) In February 2022, the cross-chain protocol Wormhole was hacked and lost 120,000 wETH. Jump Crypto intervened in time to "save the situation" and "paid out of its own pocket to make up for the lost 120,000 ETH for the affected customers. One day later, Wormhole was back online;
c) Regarding this hacking incident, CertiK gives the following suggestions to Wormhole developers:
i. When developers use externally dependent functions, they need to have sufficient understanding of the function;
ii. Keep an eye on important updates to external dependent code libraries and make corresponding adjustments to your own code libraries in a timely manner when there are major version changes;
iii. When the code version is updated, a comprehensive audit must be conducted in a timely manner, and the audited code must be updated to the code that has been deployed on the chain in a timely manner.
6. Position Setting
Taking Jump Crypto’s job setting as an example, it is currently more focused on building a technical development team, including blockchain engineers, blockchain security experts, encryption technology experts and front-end engineers;
The technology stack requirements are more comprehensive, and development languages ​​​​such as Python, C++, Java, JavaScript, Rust, Solidity, and Go are all in demand.
about Us
JZL Capital is a professional institution registered overseas, focusing on blockchain ecosystem research and investment. The founder has extensive work experience, has served as CEO and executive director of many overseas listed companies, and has led and participated in eToro's global investment.
The team members come from top universities such as the University of Chicago, Columbia University, University of Washington, Carnegie Mellon University, University of Illinois at Urbana-Champaign, and Nanyang Technological University, and have served internationally renowned companies such as Morgan Stanley, Barclays Bank, Ernst & Young, KPMG, HNA Group, and Bank of America.