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"The cryptocurrency world is small, but the financial world is big." As more funds from traditional fields flow into Crypto, the transaction scale and depth of cryptocurrency will further increase, and top market makers such as Citadel Security will need to participate. At the same time, we should give full play to the customer resources that Robinhood and Citadel Security have in the traditional financial field to expand the customer base of cryptocurrency.

Agency presentation

Citadel Securities is a top market-making institution founded by Kenneth C. Griffin, a famous Wall Street investor, in 2002. In addition, Kenneth C. Griffin also owns Citadel LLC, a multi-strategy hedge fund with a management scale of approximately US$50 billion;

As Wall Street's top multi-strategy hedge fund, Citadel LLC formulates investment strategies around five major asset classes: equity, fixed income & macro, commodities, credit and quantitative. Its four major funds all achieved good performance in April 2022 (the SP500 index performed -9.1% in April);

In the past 31 years, Citadel's fund performance has only declined in two years, bringing investors an average annual return of 19%;

As the top market maker on Wall Street and the largest designated market maker on the New York Stock Exchange, Citadel Securities

1) Owning 30% market share in the US stock options market;

2) Provide approximately 47% of retail customer trading volume in the U.S. market;

3) Accounts for 26% of the total volume of on- and off-exchange stock trading in the United States;

4) Provide market-making services for more than 11,000 exchange-traded securities, 16,000 over-the-counter securities, and more than 4,000 options contracts.

History

1990 (Institution establishment): In 1990, with the support of his former boss Frank Meyer, Griffin established Wellington Financial Group (the predecessor of Citadel). In the same year, he established the multi-strategy fund Wellington Fund, which achieved returns of 43% and 40% in the first two years of its establishment. In 1998, Citadel's management scale exceeded US$1 billion;

2002 (Market Making Division Established): In 2002, Citadel established a market making division to capture growth opportunities in automated trading, partly because Griffin was dissatisfied with the high commissions charged by the market makers responsible for his options trading. This was the predecessor of the famous Citadel Securities.

2008 (financial crisis): Citadel is one of the most leveraged hedge funds in the world. In 2008, Citadel used a leverage ratio of 8:1. The market value of its two flagship funds, Wellington Fund and Kensington Fund, fell by nearly 55%, with a loss of $8 billion. It was once forced to freeze investor redemptions for 10 months.

2015 (A-share market manipulation): In 2015, Citadel’s investment entity in China, Sidu Investment, was punished by the China Securities Regulatory Commission for “manipulating market prices and malicious short selling” and eventually paid a $100 million fine to settle;

2021 (Robinhood incident): In 2021, the "GME incident" and the "payment for order flow (PFOF)" model pushed Citadel Securities to the forefront. Although Griffin publicly confirmed that he had no connection with Robinhood, the relationship between the two is extraordinary, judging from the proportion of Citadel Securities' payment for order flow in Robinhood's revenue. And according to data from US regulators, in the second half of 2019, Robinhood sold 39% of the NYSE order flow information on its platform to Citadel, 25% to Wolverine, and 14% to Virtu. Bloomberg data shows that Citadel Securities paid Robinhood $1.1 billion for order flow in the first nine months of 2021.

2022 (Injection of Crypto Gene): In 2022, Citadel Securities completed a $1.15 billion financing round with Sequoia Capital and Paradigm at a valuation of $22 billion. While completing external investment for the first time, it injected crypto genes into the company. In addition, Griffin changed his anti-crypto stance in an interview with Bloomberg Wealth in March and plans to expand crypto market-making business within the year. "It’s fair to assume that over the months to come, you will see us engage in making markets in cryptocurrencies."

Operation model and core team

Citadel's personnel management system can be summarized as "highly performance-oriented, pursuing rapid advancement and feedback, and a high elimination mechanism", and is known as the "Chicago revolving door";

Citadel's front-office business adopts a multi-manager platform system, which means recruiting a large number of PMs. Each PM recruits several researchers to form a small team according to demand. The teams are relatively independent, compete internally, and survive the fittest based on returns. Those with good performance can manage more funds, while those with poor performance will have their funds cut in half or even be fired directly.

The company has more than 100 portfolio managers, and each PM team focuses on one direction only, and investment targets can only be selected in that direction. The stability of the strategy will not be affected by the departure of one or two PMs, and team members have the opportunity to be exposed to the entire investment process, and mature faster;

Core members Ken Griffin and Zhao Peng

Founder of Citedal LLC

The founder of Citedal LLC and Citedal Securities, a well-known Wall Street investor, bought a copy of the U.S. Constitution in 2021 at a sky-high price of US$43.2 million, beating out Constitution Dao.

CEO of Citedal Securities

He holds a bachelor’s degree in applied mathematics from Peking University and a doctorate in statistics from UB Berkeley. After graduation, he joined Citadel Securities and was one of the early architects of Citadel Securities.

In Citadel’s core quantitative research department, more than 80 former mathematics professors from prestigious universities, Olympic medalists and astrophysicists jointly developed mathematical models to provide strategy and development support for traders;

Citadel hired retired Federal Reserve Chairman Ben Bernanke as its monetary policy adviser. In addition to using his influence and political connections, his understanding of macro strategies can help Citadel develop multiple strategies.

Financing History

In January 2022, Citadel Securities completed a $1.15 billion financing from Sequoia Capital and Paradigm at a valuation of $22 billion. This is also the first external financing of Citadel Securities since its establishment in 2002. Sequoia Capital partner Alfred Lin will join the board of directors. Alfred Lin led Sequoia Capital's B and B-1 rounds of investment in FTX in 2021. After the completion of the B-1 round of financing (valued at $25 billion), compliance, innovation, cross-financial services, and full-category asset exchanges have gradually become FTX's new labels;

This financing adopts the enterprise value multiple method (EV/EBITDA) for valuation. According to Citadel Security's 2021 financial report data, Citadel Security's EBITDA in 2021 was almost the same as in 2021, about US$4.2 billion. This valuation was completed at about 5 times EBITDA;

With the participation of many university foundations, sovereign funds, pension funds and globally renowned investment institutions, new listing plans of FTX Exchange and Citadel Security will also surface.

about Us

JZL Capital is a professional institution registered overseas, focusing on blockchain ecosystem research and investment. The founder has extensive work experience and has served as CEO and executive director of many overseas listed companies, and has led and participated in eToro's global investment. 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.