YouSaid · the spoken record

Brad Katsuyama

lines on the record: 113
first: 2015-03-15
most recent: 2015-03-15
sittings or episodes: 1
sources: podcast

Every line below is reproduced as it was said and linked to the record it came from. Nothing here is summarised or generated. Directory · Search · Corrections

“Yeah, I mean, a lot of people will say, you know, this is the right thing to do for my shareholders, i.e. make as much money as humanly possible from my position in the market. And, you know, I think that's a valid statement.”
2015-03-15 · Masters in Business · IEX Group Brad Katsuyama: Masters of Business (Audio) · IDENTIFIED FROM THE TRANSCRIPT · source
“Yeah, I think you kind of hit the nail on the head where in essence, IX is a free market solution. It's our choice and we're trying to correct inefficiencies. We're trying to patch up the loopholes. And trying to make the system better. In a way, the exchanges could have done what we've done. We've done it all within the regulation. We haven't asked for any rule chains, but they chose to sell technology and sell data. They're part of, in a way, exploiting the loopholes. Right. And it's very hard.”
2015-03-15 · Masters in Business · IEX Group Brad Katsuyama: Masters of Business (Audio) · IDENTIFIED FROM THE TRANSCRIPT · source
“Well, the funny part is that when you read certain things, certain finds that come out, or when you read, if you replace the act of a computer with an actual person, That person would be penalized a lot worse than the computer gets penalized in today's market because some of the stuff is kind of outrageous what happens.”
2015-03-15 · Masters in Business · IEX Group Brad Katsuyama: Masters of Business (Audio) · IDENTIFIED FROM THE TRANSCRIPT · source
“Is that what I'm saying? We feel like in a way we're trying to disrupt Wall Street in a productive way. It's not productive. The relationship Wall Street has with Main Street because Main Street needs Wall Street, whether they like it or not. They just don't like the way Wall Street has behaved over the last few years. And I think that we're huge proponents of what Wall Street does, but we think it could be done in a better way.”
2015-03-15 · Masters in Business · IEX Group Brad Katsuyama: Masters of Business (Audio) · IDENTIFIED FROM THE TRANSCRIPT · source
“It makes it harder to disrupt an industry that's so heavily regulated, which means that in a way the people causing the scandals are the ones that remain in this industry as the walls get higher and higher.”
2015-03-15 · Masters in Business · IEX Group Brad Katsuyama: Masters of Business (Audio) · IDENTIFIED FROM THE TRANSCRIPT · source
“People look to exploit the loopholes and they exploit it so badly that it creates the next scandal, which creates the next set of regulation. And as regulation increases, it raises the barriers to entry for disruption.”
2015-03-15 · Masters in Business · IEX Group Brad Katsuyama: Masters of Business (Audio) · IDENTIFIED FROM THE TRANSCRIPT · source
“If you look back the last century, right? We're caught in this pretty vicious negative cycle. You have a scandal. It's followed by regulation. There's no such thing as a perfect rule. That regulation will create loopholes and inefficiencies.”
2015-03-15 · Masters in Business · IEX Group Brad Katsuyama: Masters of Business (Audio) · IDENTIFIED FROM THE TRANSCRIPT · source
“Absolutely. But they have a very diversified business, but they've been good partners of ours, right? So it's, you know, and it's in Goldman Sachs in 2014 was our largest volume provider. The goal for us really was to build a market that we believe to be fair and fair consistently. I mean, if the stock market is not fair, what does that mean for everything else? That was the goal, and we've done that. And the fact that a wide variety of people have shown up and provided support that gives us a lot of confidence that this is the right model.”
2015-03-15 · Masters in Business · IEX Group Brad Katsuyama: Masters of Business (Audio) · IDENTIFIED FROM THE TRANSCRIPT · source
“So GTS securities is another one. IMC trades, Knight has a variety of businesses. But Knight's a good partner of ours as well, right?”
2015-03-15 · Masters in Business · IEX Group Brad Katsuyama: Masters of Business (Audio) · IDENTIFIED FROM THE TRANSCRIPT · source
“It's cheaper to trade now than it was 20 years ago. That's not a defense for the things that we're saying because we're giving you very specific critiques. And there's very generic replies to that. And I think, again, it's part of the argument. But for us, it's more about fairness. And that's why I'll come on here and say a firm like Virtue is a partner of IEX, even though they're, quote, classified a high frequency trader, because they've chosen to play by our rules. We've set the rules. You know, we're experts in the market. We know what we're doing. We have people from exchanges and high-frequency trading firms that work at IEX. We set the ground rules. They've decided to play. I give them a lot of credit for that.”
2015-03-15 · Masters in Business · IEX Group Brad Katsuyama: Masters of Business (Audio) · IDENTIFIED FROM THE TRANSCRIPT · source
“Absolutely. There was no question the way the market was going to go. The challenge is that a lot of people are using technology to make money and scalp off of traditional everyday investors. The markets become at times more volatile intraday. Volumes are inflated. It's just, you know, it's... Since it can go both ways, the people that want to provide cover can use very generic statements about technology driven trading and call it HFT. And then we can come out or Joe and Sal can come out or Michael Lewis can write about HFT and really focus specifically on the parts of it that are bad and the fact that, you know,”
2015-03-15 · Masters in Business · IEX Group Brad Katsuyama: Masters of Business (Audio) · IDENTIFIED FROM THE TRANSCRIPT · source
“New York listed tech on the stock exchange floor, and I also traded over the counter on the NASDAQ terminal. I liked electronic trading a hundred times more.”
2015-03-15 · Masters in Business · IEX Group Brad Katsuyama: Masters of Business (Audio) · IDENTIFIED FROM THE TRANSCRIPT · source
“They're one of the biggest. And I'll say they're a very good partner of ours at IEX. But when we walk through the things that we're not giving them, the thing, the advantages they won't have, that they might have on other markets, they didn't care at all. They said, this is good. This is good for the market. We'll be there day one. We like what you're doing, and we've both been supportive of each other. So it was never really about saying all computerized trading is bad. When I traded...”
2015-03-15 · Masters in Business · IEX Group Brad Katsuyama: Masters of Business (Audio) · IDENTIFIED FROM THE TRANSCRIPT · source
“Absolutely. The toughest part is that not everyone who uses a computer to trade is doing harm to the market and not everyone who's using a computer to trade is doing it for the benefit of society, right? People are doing both. And I feel like, you know, the one part about IX that I'm really proud of is the fact that we never made this about shutting out high-frequency traders per se. We just built a market we felt could not be gamed. And a small segment of high frequency traders still showed up.”
2015-03-15 · Masters in Business · IEX Group Brad Katsuyama: Masters of Business (Audio) · IDENTIFIED FROM THE TRANSCRIPT · source
“A lot of times you could interchange HFT with just technology. Technology has made things cheaper, has allowed spreads to tighten. Decimalization helps spreads Titans as well. But I think a lot of the benefits people bestow on the general category of high frequency trading have more to do with technology than it does to do with anything. The difficult part about the debate around high frequency trading, which is why it's still a debate, five years later, we're still talking about a lot of the same things, is that we...”
2015-03-15 · Masters in Business · IEX Group Brad Katsuyama: Masters of Business (Audio) · IDENTIFIED FROM THE TRANSCRIPT · source
“50 million was kind of, yeah, it was a survival number. And we ended up doing 560,000 our first day. Some people were predicting we'd do 2,500 shares the first day. So nobody had it. The guy with the most experienced launching markets is the guy Matt Trudeau. He runs our products. He's launched seven different markets globally. His prediction the first day was $2,500.”
2015-03-15 · Masters in Business · IEX Group Brad Katsuyama: Masters of Business (Audio) · IDENTIFIED FROM THE TRANSCRIPT · source
“There was this kind of chicken and egg problem. Brokers would say, well, you have no volume, so why would I send you any volume? Meaning liquidity begets liquidity. Right. If everyone takes that approach, you'll never trade a single share because everyone's waiting for someone else to trade a share. So you need someone to go first.”
2015-03-15 · Masters in Business · IEX Group Brad Katsuyama: Masters of Business (Audio) · IDENTIFIED FROM THE TRANSCRIPT · source
“350 microseconds is the total. So the shoebox is located in a different data center. That data center is about five miles away, plus the shoebox adds another 38 miles. In total, it's 350 microseconds, millions of a second oneth the blink of an eye. That's amazing. But it's enough time for IX to always ensure that we know the most up-to-date market information so that we can fairly and consistently fairly price trades.”
2015-03-15 · Masters in Business · IEX Group Brad Katsuyama: Masters of Business (Audio) · IDENTIFIED FROM THE TRANSCRIPT · source
“And it goes around the coil. And as it's going around the coil, IEX will get the update. The prices change from 10 to 9. And we will not let that trade take place at 10. That's the whole thing, right? The exchange's job is kind of like the referee in a way. You have to understand what the conditions for a fair trade is. It's both parties having equal relative information. The price is nine. Don't let the stock trade at 10. The issue is that high-speed traders have faster information than the exchanges. Which means that they always know about a price before the exchange actually understands this is the market-wide price. And I think that's the shoebox is about us slowing them down.”
2015-03-15 · Masters in Business · IEX Group Brad Katsuyama: Masters of Business (Audio) · IDENTIFIED FROM THE TRANSCRIPT · source
“Absolutely right. So fast data is one thing, but the notion of co-location. Place your server right next to the exchange matching engine, buy this high speed cable. What that allows is the person that's buying the fast information to trade hundreds and thousands of times before that information makes its way to the last person, right? We inherently see a problem of fairness in that. So what we've done is we take very fast data into IEX. We buy all the direct feeds. We've spent a lot of time and money and effort in getting very fast data to IX, but we realize we'll never be as fast as the fastest high-frequency traders. The shoebox, essentially, that coiled cable is to say that's our head start. So if they get information that the stock has gone from 10 to 9, and they want to come in here and sell stock at 10 against a buyer who doesn't know that the stock has moved lower, right? They send that order to IX and it starts to go around the shoebox.”
2015-03-15 · Masters in Business · IEX Group Brad Katsuyama: Masters of Business (Audio) · IDENTIFIED FROM THE TRANSCRIPT · source
“There's two things exchange is really look to sell. One is they sell very fast data, right? So if you want high speed data, you got to pay for it. There's nothing inherently wrong with someone buying fast data because someone will always get it first and someone will always get it last, right? Someone in New Jersey will get it before someone in London just basically based on the speed of light, right?”
2015-03-15 · Masters in Business · IEX Group Brad Katsuyama: Masters of Business (Audio) · IDENTIFIED FROM THE TRANSCRIPT · source
“To recreate geographical distances, so like in Europe, when you're looking at the difference between different exchanges, it's all done in the same room. There's just different levels of spooling happening. And you can recreate, quote, physical distance in a single room, right? As they're testing strategies. So he came up with the idea. The premise behind the idea was that we never wanted anyone to be able to execute a trade on IX with advanced information.”
2015-03-15 · Masters in Business · IEX Group Brad Katsuyama: Masters of Business (Audio) · IDENTIFIED FROM THE TRANSCRIPT · source
“That come into IES. And it was interesting because the guy who came up with the idea worked at a high frequency trading firm previously before he was working. Absolutely, yeah, and worked at. And what they did is they used these spools.”
2015-03-15 · Masters in Business · IEX Group Brad Katsuyama: Masters of Business (Audio) · IDENTIFIED FROM THE TRANSCRIPT · source
“Absolutely. The way to solve this was to actually be a stock exchange because the stock exchanges have enabled what's really happened. You know, I think that in a way there was a responsibility by the exchanges to prevent some of what's happened and they've kind of enabled it.”
2015-03-15 · Masters in Business · IEX Group Brad Katsuyama: Masters of Business (Audio) · IDENTIFIED FROM THE TRANSCRIPT · source
“So that was kind of the moment when we decided to leave RBC and start IEX because we realized number one, no broker can solve this problem. Even the biggest broker, if I'm Goldman Sachs, 10, 12% of market share, what does that mean?”
2015-03-15 · Masters in Business · IEX Group Brad Katsuyama: Masters of Business (Audio) · IDENTIFIED FROM THE TRANSCRIPT · source
“Our goal was to have it done under 400 microseconds, and we got it down to about 290 microseconds. But when we did that, our fill rate went to 100%. That product could actually now buy or sell what people saw on their screens. And it was the easiest product to sell because you would just walk into a client's office and mutual fund or hedge fund and say, if you see a million Bank of America on the offer and you try to buy that, what percentage do you get? And they're going to say anything from 20, 30, 40, 50, 60, 70%. I'll get you 100%. They'll say, give me the product. I mean, it was really that it was pretty simple. The challenge was this, is that our revenues took off and then they started to flatline. And one client put it the best when he said to me, Brad, we love what you've done. We love your team. We love RBC. You've only solved 3% of my problem because that's the amount of commissions. That's how much I can trade with RBC. I have to trade with all these other banks.”
2015-03-15 · Masters in Business · IEX Group Brad Katsuyama: Masters of Business (Audio) · IDENTIFIED FROM THE TRANSCRIPT · source
“That was the Thor router at RBC, was really to say, if there is this geographical disparity, meaning our order arrives at the exchange closest to us first, why not stagger when you send out the orders to try to arrive at all places at the same time? And it's a lot harder than it sounds because latency changes throughout the day.”
2015-03-15 · Masters in Business · IEX Group Brad Katsuyama: Masters of Business (Audio) · IDENTIFIED FROM THE TRANSCRIPT · source
“For large orders in dark pools, I do feel like we need more disclosure. We need much more transparency in how dark pools operate. And I think as we get more transparency and disclosure, you're going to see a lot of dark pools shut down. But the ones that are left will serve a purpose because there definitely is a stock exchange can't solve every problem that every investor has because a lot of times their orders are too big for the markets themselves.”
2015-03-15 · Masters in Business · IEX Group Brad Katsuyama: Masters of Business (Audio) · IDENTIFIED FROM THE TRANSCRIPT · source
“Well, I think there are some dark pools, I think, that serve a very good purpose. And there are others that I think have sacrificed quality for trading more volume. And there's a direct correlation between the quality of trades and the frequency of trades. So I think that, again, you look back to the days of Instanet, there was a purpose, if someone has a million shares to buy, you can't just force them to put that all out on the exchange and display it. It's going to have a very adverse impact on the ability to complete that order. So there is a home.”
2015-03-15 · Masters in Business · IEX Group Brad Katsuyama: Masters of Business (Audio) · IDENTIFIED FROM THE TRANSCRIPT · source
“Anybody Right. I think, you know, the interesting thing about dark pools is they were started with good intentions. If a bank has a buyer and a seller, they shouldn't have to go on the exchange and trade that and pay the exchange to do so. They should be able to do that internally. They ended up, I think, the competition was so fierce. Many of them ended up morphing into something that was not intended. And, you know, over the course of the past decade, that's kind of what's happened. And I think we have over 40 dark pools in the United States. That number probably comes down over the next couple years.”
2015-03-15 · Masters in Business · IEX Group Brad Katsuyama: Masters of Business (Audio) · IDENTIFIED FROM THE TRANSCRIPT · source
“So, Dark Pool is kind of the street lingo for alternative trading system. And really what it means is that they're slightly less regulated than exchanges. And what they can't do is they can't publish bids and offers, which means everything that happens in them is essentially dark.”
2015-03-15 · Masters in Business · IEX Group Brad Katsuyama: Masters of Business (Audio) · IDENTIFIED FROM THE TRANSCRIPT · source
“Yes, and I think without that level of accountability, no one would have known who was saying what. It just would have looked like a bunch of crazy people yelling on television. So I think holding people accountable is extremely important. It's the way to make the markets better. Everyone says that they want the markets to improve. Got to start holding people accountable.”
2015-03-15 · Masters in Business · IEX Group Brad Katsuyama: Masters of Business (Audio) · IDENTIFIED FROM THE TRANSCRIPT · source
“It's hard to say. I think what was important about that is that the Attorney General made him correct his statements. And what you have a lot of times is you have what we were arguing about is completely unknown to the general public. Anyone watching that, very few people I'm sure understood even what we were fighting about. And we were fighting about a very important part of the market, meaning there are multiple ways market data is distributed. And essentially, are you using a slow feed to price trades for all of your participants? Knowing that some people who trade on your exchange have a very fast feed. And that was the argument. And that's what he”
2015-03-15 · Masters in Business · IEX Group Brad Katsuyama: Masters of Business (Audio) · IDENTIFIED FROM THE TRANSCRIPT · source
“It was just so smooth. In the middle of it, I just remember saying to myself, is this actually happening? It was kind of crazy.”
2015-03-15 · Masters in Business · IEX Group Brad Katsuyama: Masters of Business (Audio) · IDENTIFIED FROM THE TRANSCRIPT · source
“But you That was an interesting experience. That was my first time on live television. I'd never actually been on live TV.”
2015-03-15 · Masters in Business · IEX Group Brad Katsuyama: Masters of Business (Audio) · IDENTIFIED FROM THE TRANSCRIPT · source
“There was a huge amount of, it was crazy. Our phone was ringing off the hook. Tens of thousands of people reached out to us in a positive way. The industry was upset. And that was to be expected. But again, for all. Were so many great things that happened as a result of that. It's just we knew that there was going to be a little bit of that. Again, when you talk about things, people don't want you to talk about. That's kind of the fallout.”
2015-03-15 · Masters in Business · IEX Group Brad Katsuyama: Masters of Business (Audio) · IDENTIFIED FROM THE TRANSCRIPT · source
“I mean, I think, you know, again, people were reading the book at that because the book just came out the next day. Right. So it was just.”
2015-03-15 · Masters in Business · IEX Group Brad Katsuyama: Masters of Business (Audio) · IDENTIFIED FROM THE TRANSCRIPT · source
“What was that like? I mean, it's kind of, you know, it was the first time I'd ever been on television. It's kind of amazing to be a part of that. And, you know, it was nerve-wracking because we interviewed for hours and we knew the segment was 12 and a half minutes. So, you know, it could go a variety of different ways. But one funny thing is that we were the first segment of three on 60 minutes. By the end of the hour, I had more LinkedIn requests than I had connections. Oh my gosh. It was pretty amazing. I just said to my wife, turn my wife and I said, holy cow, this is real, right?”
2015-03-15 · Masters in Business · IEX Group Brad Katsuyama: Masters of Business (Audio) · IDENTIFIED FROM THE TRANSCRIPT · source
“Yeah, you know, it's the most interesting part about it was really it was just about giving him background. He didn't ask a ton of questions about what we were doing in particular at IEX, but when he came to New York, he asked to drop by our office and he walked in to meet with Ronan and I. And there was 12, I think 12 or 14, I can't remember how many at the time, maybe 12 or 14 people. We were in a 200 square foot office with no windows. It must have looked ridiculous to him. That's how startups run. Yeah, absolutely. In a closet, absolutely. So we were there, and all of a sudden I could see the wheels turning his head as what are you guys doing here? And then at that point, kind of it went to, I'm going to write an article about IX to maybe I'll take these two articles and make them in a short book. And by the end, he had done a lot of research. He had talked to a lot of people and he came back and said, this is going to be...”
2015-03-15 · Masters in Business · IEX Group Brad Katsuyama: Masters of Business (Audio) · IDENTIFIED FROM THE TRANSCRIPT · source
“So he talked to a couple people, a couple of characters in the big short Who just happened to be clients of mine? And when he asked them, you know, I'm looking to do research on high frequency trading. Who should I talk to? They pointed him to me.”
2015-03-15 · Masters in Business · IEX Group Brad Katsuyama: Masters of Business (Audio) · IDENTIFIED FROM THE TRANSCRIPT · source
“Well, no, because not one exchange typically can satisfy your entire order. So when I pulled up my screen and I saw 100,000 shares of Intel offered, it was typically spread across multiple exchanges, 10, right? If I only went to one, I'd probably get, you know, 5,000 or whatever was offered at that one. But you wanted to get what you saw. And the interesting part was in 2006, you could actually buy or sell what you saw on your screens. In 2007, that wasn't the case.”
2015-03-15 · Masters in Business · IEX Group Brad Katsuyama: Masters of Business (Audio) · IDENTIFIED FROM THE TRANSCRIPT · source
“The fill rate started to drop, but you were always getting 100% at bats. You were completely missing stock in other exchanges.”
2015-03-15 · Masters in Business · IEX Group Brad Katsuyama: Masters of Business (Audio) · IDENTIFIED FROM THE TRANSCRIPT · source
“No, it's always at the same price. It is. But if you pull up an offer in Intel, you'll see it at multiple different places. Or if you pull up an offer in Ford stock, you'll see it multiple places. But we say, okay, we'll just pick one exchange, one amount. We'd always get 100%. But as you started to add exchanges, two exchanges, three, four, five at the same time.”
2015-03-15 · Masters in Business · IEX Group Brad Katsuyama: Masters of Business (Audio) · IDENTIFIED FROM THE TRANSCRIPT · source
“Yeah, so the very first sequence of experiments was going to each exchange in isolation and what you would find is you would always get 100% of what was offered if you only went to one exchange.”
2015-03-15 · Masters in Business · IEX Group Brad Katsuyama: Masters of Business (Audio) · IDENTIFIED FROM THE TRANSCRIPT · source
“100%. But if we would ride an order, let's say to Bats in New York stock exchange, concurrently, we'd get filled on bats and we would miss it on New York.”
2015-03-15 · Masters in Business · IEX Group Brad Katsuyama: Masters of Business (Audio) · IDENTIFIED FROM THE TRANSCRIPT · source
“Yeah, Ronan did not know a thing about trading. Nothing, which was amazing, right? Because he came at this with a huge amount of knowledge, but he didn't understand the value of that knowledge. He does that.”
2015-03-15 · Masters in Business · IEX Group Brad Katsuyama: Masters of Business (Audio) · IDENTIFIED FROM THE TRANSCRIPT · source
“And Milliseconds, yes. And actually, we were looking at the world in milliseconds, and Ronan was looking at the world in microseconds. And it just happened that Ronan could get an order from bats to various other exchanges in about 476 microseconds at the time is what he drew out and said, here's the inter-exchange latency between these buildings. And RBCs was about four or five times greater than that, which meant that he could pick up a signal at bats and racist. Now he didn't know that we had 100,000 shares to buy, but what he would know is that the entire offering at Bats just disappeared, which gives me a very high statistical probability that this big buyer is going to try to buy stock in other exchanges. So you're out there running to cancel stock or you're already out there to buy stock to turn around and sell to me at higher prices.”
2015-03-15 · Masters in Business · IEX Group Brad Katsuyama: Masters of Business (Audio) · IDENTIFIED FROM THE TRANSCRIPT · source
“That's right. It was physically the closest to RBC, and hence we would always arrive there first. And the interesting thing about bats, mean”
2015-03-15 · Masters in Business · IEX Group Brad Katsuyama: Masters of Business (Audio) · IDENTIFIED FROM THE TRANSCRIPT · source
“And now at IX, we have three people that have won that same championship in different years, but it seems to be a good recruiting ground for people. We found some very bright, talented people from that competition.”
2015-03-15 · Masters in Business · IEX Group Brad Katsuyama: Masters of Business (Audio) · IDENTIFIED FROM THE TRANSCRIPT · source
“Who That's right. It was a team event, and we hired Puzz, and his nickname is because he won that championship. Puzz for Puzz.”
2015-03-15 · Masters in Business · IEX Group Brad Katsuyama: Masters of Business (Audio) · IDENTIFIED FROM THE TRANSCRIPT · source