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Keith Ross

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103
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2016-04-08
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2016-04-08
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  1. “Fascinating. Sometimes options and futures and all that kind of stuff, I like to say it's for people who want to get there in a hurry, but they may not know where they're going, right? So it could work out. But it also could build a lot of characters the way I used to talk about my losing trades.”

    2016-04-08 · Masters in Business · Interview With Keith Ross: Masters in Business (Audio) · IDENTIFIED FROM THE TRANSCRIPT · source

  2. “Don't overextend yourself thinking that you've got the answer to where the market's going to go or what's going to happen. Again, Warren Buffett tells a great story. If you had invested $10,000 with him in 67. In 67, it'd be worth whatever it is tens of millions today.”

    2016-04-08 · Masters in Business · Interview With Keith Ross: Masters in Business (Audio) · IDENTIFIED FROM THE TRANSCRIPT · source

  3. “Hear it coming. Well, the markets are also psychologically driven. Witness the internet bubble, which I lived through. Traded through It was fascinating to me at one point in nineteen ninety nine and a ninety nine early two thousand, some of the most brilliant minds were totally confused. So the biggest hedge fund guys one was a chronic short, one was a chronic long. Neither one of them knew what to do with their portfolio because prices were in this new dimension. Well, it turned out there wasn't a new dimension. It was just that we thought there might be. So there are dislocations in the market. There will be times when having a level head. Gives you an opportunity. And the only way to really participate well with that is to not be levered. So it's leverage that has killed us, both in the recent crisis and in the past crises.”

    2016-04-08 · Masters in Business · Interview With Keith Ross: Masters in Business (Audio) · IDENTIFIED FROM THE TRANSCRIPT · source

  4. “Random walk down Wall Street that had been published just a year or two before I took his course. I was a big believer of that coming out of school, looking at 30 or 40 years of the markets. I think he's right, they're efficient around the edges. They're efficient because you can't necessarily pick the ones that are going to win and lose.”

    2016-04-08 · Masters in Business · Interview With Keith Ross: Masters in Business (Audio) · IDENTIFIED FROM THE TRANSCRIPT · source

  5. “That's interesting. Anyway, it's worked out for him, but it is very captivating and seductive to see the opportunity. And when you had those days where you caught a trade and you make $250 without a lot of effort, that was a week of painting houses when I was exactly right.”

    2016-04-08 · Masters in Business · Interview With Keith Ross: Masters in Business (Audio) · IDENTIFIED FROM THE TRANSCRIPT · source

  6. “Other options I tried to, my son happens to be in the business. I actually tried to talk him out of it. He wouldn't listen.”

    2016-04-08 · Masters in Business · Interview With Keith Ross: Masters in Business (Audio) · IDENTIFIED FROM THE TRANSCRIPT · source

  7. “Well, Hopefully you're smart. Hopefully, you're willing to work hard. There will always be capital transactions. There will always be mergers and acquisitions and corporations that need advice around financing and currency exposure and interest rate exposure. Find an area that you really love, understand it as well as you can, probably spend some time with someone who's doing what you think you might want to do. So have an apprenticeship, if you will, get into a training program, get a taste for it, and then decide if it's really for you or if maybe you want to go back to business school and look at Industry or”

    2016-04-08 · Masters in Business · Interview With Keith Ross: Masters in Business (Audio) · IDENTIFIED FROM THE TRANSCRIPT · source

  8. “Big mistake. Surprise. Right. So fully understand that whatever you earn, you're going to have to work very hard for, even though it appears that you can show up and be Mr. Citadel and trade from your dorm and create billions of dollars.”

    2016-04-08 · Masters in Business · Interview With Keith Ross: Masters in Business (Audio) · IDENTIFIED FROM THE TRANSCRIPT · source

  9. “But I know China I happen to be at a conference there a couple summers ago And gave a little presentation on market structure in the big buzzword then was kill switches. It was fascinating to me because they had a person from the Hong Kong Exchange talking about it. And he says, Killswitch, are you kidding me? Who knows what the person that I'm turning off, what resources they have? What other trades they have? What position they have? We're an exchange. We're not the broker dealer. We don't have... Understanding of their financial wherewithal, we may be forcing them to take incredible losses with a kill switch. They were terrified of kill switches. Well, over here, we're talking about everyone should have a kill switch and be able to flip at any time.”

    2016-04-08 · Masters in Business · Interview With Keith Ross: Masters in Business (Audio) · IDENTIFIED FROM THE TRANSCRIPT · source

  10. “London and Hong Kong are obvious options It turns out that our market structure for an independent non-government Firm to get started in a foreign country Is very challenging. And so the beauty of Reg ATS was a couple of guys with an idea Could try to spin up. A better matching process, and if it hunts, we can make a living, hopefully make the market a better place. It's very, very difficult in other countries. Most of the exchanges are run by the government.”

    2016-04-08 · Masters in Business · Interview With Keith Ross: Masters in Business (Audio) · IDENTIFIED FROM THE TRANSCRIPT · source

  11. “The markets are still, even though we think we're global, we're always becoming Those types of intricacies are going to continue to evolve”

    2016-04-08 · Masters in Business · Interview With Keith Ross: Masters in Business (Audio) · IDENTIFIED FROM THE TRANSCRIPT · source

  12. “Yeah. He was the man, right? He was King of the Hill. Of course. Plumbing, but he had 400 servants to make his dinner. Trying to think of others I mean, some of the market structure ideas and so forth, those types of things tend to wander up and down. I mean, some of them are great, some of them are terrible. So, you kind of have to be a little selective there. I'm involved. My wife and I have created a little foundation called the Raven Foundation. It's an education foundation that has a whole. Anthropology behind it, if you will. So, some of my reading is focused in that direction. I remember reading the biography of Peter the Great.”

    2016-04-08 · Masters in Business · Interview With Keith Ross: Masters in Business (Audio) · IDENTIFIED FROM THE TRANSCRIPT · source

  13. “Look at a tournament reasons So Warren Buffett says the normal average person today has a much better life than Rockefeller did 100 years ago. I mean, I would agree with that.”

    2016-04-08 · Masters in Business · Interview With Keith Ross: Masters in Business (Audio) · IDENTIFIED FROM THE TRANSCRIPT · source

  14. “Matt Rid And for folks that are struggling with the world in which we live and think things are not good, his argument is There's never been a better time to be alive.”

    2016-04-08 · Masters in Business · Interview With Keith Ross: Masters in Business (Audio) · IDENTIFIED FROM THE TRANSCRIPT · source

  15. “I also did not know him personally, but followed the career of Bob Rubin Risk Arbitrage from Goldman Sachs and, of course, Secretary Treasury and other things like that. So I enjoy reading about people in the business.”

    2016-04-08 · Masters in Business · Interview With Keith Ross: Masters in Business (Audio) · IDENTIFIED FROM THE TRANSCRIPT · source

  16. “He was at Merrill Lynch, Bear Wagner actually partners with Issy Englander at one point, a man who just had a beautiful different perspective on the world. Was an extraordinary natural trader if there is such a thing back in the day when”

    2016-04-08 · Masters in Business · Interview With Keith Ross: Masters in Business (Audio) · IDENTIFIED FROM THE TRANSCRIPT · source

  17. “I was never offered the opportunity. It turns out I don't know whether what I would have done, but I could dream about it. Wait, you want to sell plywood?”

    2016-04-08 · Masters in Business · Interview With Keith Ross: Masters in Business (Audio) · IDENTIFIED FROM THE TRANSCRIPT · source

  18. “I jumped into it right out of college. When I was in college, I actually had a house painting business that I ran with. Other guys that were working for me. So that was”

    2016-04-08 · Masters in Business · Interview With Keith Ross: Masters in Business (Audio) · IDENTIFIED FROM THE TRANSCRIPT · source

  19. “As we go through the dark, the price gradually goes up. Eventually, we send you to the lip market. Our active traders save about 50% of the take fee from the lit market by coming to PDQ.”

    2016-04-08 · Masters in Business · Interview With Keith Ross: Masters in Business (Audio) · IDENTIFIED FROM THE TRANSCRIPT · source

  20. “Relatively inexpensive, but it might be costing us four or five. We get a little markup for the house because we got to keep the lights on.”

    2016-04-08 · Masters in Business · Interview With Keith Ross: Masters in Business (Audio) · IDENTIFIED FROM THE TRANSCRIPT · source

  21. “We can actually give them a sliding scale because we're an ATS, we don't have to have one size fits all pricing, which an exchange does. So, if we fill you with PDQ, we can give you a free fill. If we go into the dark, we may have to charge you eight mils. It's costing us”

    2016-04-08 · Masters in Business · Interview With Keith Ross: Masters in Business (Audio) · IDENTIFIED FROM THE TRANSCRIPT · source

  22. “Some sort of grid for them. Even more than that. So once we have a conversation with our client, they're not latency sensitive, they've agreed after PDQ we can route through the dark and end up going to bats, let's say.”

    2016-04-08 · Masters in Business · Interview With Keith Ross: Masters in Business (Audio) · IDENTIFIED FROM THE TRANSCRIPT · source

  23. “Does any of this sound familiar from the old days? Of course. Right. Of course. One thing that I'm very proud of is when our liquidity providers respond, their average size is 1,400 shares. Way above the average trade size. And in terms of larger trades, for the month of February, we received about 35,000 trades of over 5,000 shares from our initiators, from the subscribers looking for liquidity. Our providers responded This is our daily average with over one hundred thirty five thousand blocks of over $5,000. So there is liquidity. A lot of it may not have traded, but it was there and it was available. Sometimes the providers are on the same side of the market as the order. Sometimes they're appending or two away from the market, so they may not cross. They may not match.”

    2016-04-08 · Masters in Business · Interview With Keith Ross: Masters in Business (Audio) · IDENTIFIED FROM THE TRANSCRIPT · source

  24. “Yes Well, that might be a little high, maybe closer to three to six. But a couple of other facets about our auction process after a trade is made, our TCA reports show that we have very little impact on the market. So you're not moving.”

    2016-04-08 · Masters in Business · Interview With Keith Ross: Masters in Business (Audio) · IDENTIFIED FROM THE TRANSCRIPT · source

  25. “Which is pretty substantial. Yeah, no, about anywhere from 60 to 75 are active on a given day. Routing and executing business combines for a little bit close to one and a half percent of the market. So we're doing like 125 to 150 million shares a day. That's combined. The routing actually is the substantial part of the business.”

    2016-04-08 · Masters in Business · Interview With Keith Ross: Masters in Business (Audio) · IDENTIFIED FROM THE TRANSCRIPT · source

  26. “How do you do that time wise? Our current trading clock is 9 30 to 4. We also have a routing business for our clients, so if we don't fill them during the auction, we're happy to send it either through the dark or to a destination that they're interested in. We will route before and after the close so we can take an order anytime, but we don't actually execute it before and after the close at this point.”

    2016-04-08 · Masters in Business · Interview With Keith Ross: Masters in Business (Audio) · IDENTIFIED FROM THE TRANSCRIPT · source

  27. “Is not there. Or you think you're going to trade Microsoft against Oracle and Microsoft Earnings came out and the market's going a little cuckoo. While we're going to wait. But as you find the opportunities where you can make a better market and if you have multiple participants who are all going to have a different flavor of their better market and you can aggregate them together, all of a sudden you're going to start to find a market that will feel like it used to feel.”

    2016-04-08 · Masters in Business · Interview With Keith Ross: Masters in Business (Audio) · IDENTIFIED FROM THE TRANSCRIPT · source

  28. “So warmer than micro Right, exactly. And I also knew that there would be opportunities where the model could provide substantial liquidity given the circumstances at a particular moment. So if you're doing a pairs trade, if you're doing a trade of a stock or an ETF against futures and you have a chance to assess the market, run your model instead of doing 500 shares, you might be able to do 5, 10, 15, 50,000. A given moment under prescribed circumstances. It's very interesting to understand how specific that is and how important it is to be able to respond with size. There may be times when you can't make any market where the futures market”

    2016-04-08 · Masters in Business · Interview With Keith Ross: Masters in Business (Audio) · IDENTIFIED FROM THE TRANSCRIPT · source

  29. “So I got excited about it as a provider because I knew there was time to refresh the algorithm and give my best market under circumstances that were defined over a very short period of time.”

    2016-04-08 · Masters in Business · Interview With Keith Ross: Masters in Business (Audio) · IDENTIFIED FROM THE TRANSCRIPT · source

  30. “Miles ahead of the rest of us It was fun to get to understand his ideas, and of course. The process of collecting the market, aggregating the book, forcing the providers to go first. Was a novel idea But what happens, I believe, is that it benefits all participants. It sounds like it does.”

    2016-04-08 · Masters in Business · Interview With Keith Ross: Masters in Business (Audio) · IDENTIFIED FROM THE TRANSCRIPT · source

  31. “We ended up going in different directions once I went to PDQ, but the market structure idea has actually been around for quite a while. And so some of the folks that think they've discovered new things recently. It's actually, they're just discovering things. Everything old is.”

    2016-04-08 · Masters in Business · Interview With Keith Ross: Masters in Business (Audio) · IDENTIFIED FROM THE TRANSCRIPT · source

  32. “Well, it's doing fine. But we figured at the time we were thinking it might be a source for us to get flow, for us to interact with”

    2016-04-08 · Masters in Business · Interview With Keith Ross: Masters in Business (Audio) · IDENTIFIED FROM THE TRANSCRIPT · source

  33. “Speed of light, and even when I was at get go and we were doing better and better and going faster and faster in the back of my mind, I was thinking, you know, there's going to be some point where speed doesn't win. It turns out that we had a chance to meet him while I was at get-go, and my partners made a small investment in PDQ. Oh, really?”

    2016-04-08 · Masters in Business · Interview With Keith Ross: Masters in Business (Audio) · IDENTIFIED FROM THE TRANSCRIPT · source

  34. “He understood that at some point the race for speed cycle would end, that there would be a physical limit of how fast you could go.”

    2016-04-08 · Masters in Business · Interview With Keith Ross: Masters in Business (Audio) · IDENTIFIED FROM THE TRANSCRIPT · source

  35. “So, the founder of PDQ is a fellow named Christopher Keith. Brilliant, brilliant mind 85 years young now He's the former CTO of the New York Stock Exchange.”

    2016-04-08 · Masters in Business · Interview With Keith Ross: Masters in Business (Audio) · IDENTIFIED FROM THE TRANSCRIPT · source

  36. “So we started 10 years ago, and the team that we started with is principally still with us. So we found folks, our CTO has done the recruiting. We're a very small shop. We just grew from 20 to 28 people in the last year. So our technology staff is about a dozen. We're not actively recruiting because we're not in the, what I might term as suicidal high speed race. We're going to let other people do that. We have really good technology and we want it to be incredibly robust.”

    2016-04-08 · Masters in Business · Interview With Keith Ross: Masters in Business (Audio) · IDENTIFIED FROM THE TRANSCRIPT · source

  37. “So, one of the changes that we made at GetGo was to understand that we were really a technology shop, not That happened to be in the trading space So we shifted our emphasis dramatically to our technology people. Unfortunately, all the traders that were running the models understood how important the technology was. What happened was the brilliance of the technology folk was able to make the systems better and faster. And every time you got better and faster, you made more money.”

    2016-04-08 · Masters in Business · Interview With Keith Ross: Masters in Business (Audio) · IDENTIFIED FROM THE TRANSCRIPT · source

  38. “Would be more competition, and the price protection and other issues would make it more difficult for us to function. We had no idea it was going to be a softball down the middle of the...”

    2016-04-08 · Masters in Business · Interview With Keith Ross: Masters in Business (Audio) · IDENTIFIED FROM THE TRANSCRIPT · source

  39. “It turns out it was very beneficial for high frequency trading. Little inside story back in the get-go days, I was there during that period, we were actually concerned that Reg NMS was going to hurt our business.”

    2016-04-08 · Masters in Business · Interview With Keith Ross: Masters in Business (Audio) · IDENTIFIED FROM THE TRANSCRIPT · source

  40. “This was reg ATS, it was called in 1998. Reag NMS was 2005. Okay. And that was a different market structure Which actually was incredibly effective, achieving the goals that it set out to achieve, which Well, to make the exchanges and orders compete with each other and automate the marketplace.”

    2016-04-08 · Masters in Business · Interview With Keith Ross: Masters in Business (Audio) · IDENTIFIED FROM THE TRANSCRIPT · source

  41. “In 1998, I believe, to promote innovative and alternative ways of trading. So we act like at stock exchange in terms of matching buyers and sellers. We're only a broker dealer and we're technically regulated by FINRA. The exchanges are directly related and regulated to the SEC.”

    2016-04-08 · Masters in Business · Interview With Keith Ross: Masters in Business (Audio) · IDENTIFIED FROM THE TRANSCRIPT · source

  42. “We're just stocks at this point. So there are technical reasons why, but yes, it's only stocks. At the point in the point in the po”

    2016-04-08 · Masters in Business · Interview With Keith Ross: Masters in Business (Audio) · IDENTIFIED FROM THE TRANSCRIPT · source

  43. “We have some IP protection and some patent protection. Some of the venues, so Chicago Stock Exchange has introduced the Snap auction. New York Stock Exchange is talking about a midday auction for lightly traded stocks. The London Stock Exchange is also now, I believe, executing a midday auction.”

    2016-04-08 · Masters in Business · Interview With Keith Ross: Masters in Business (Audio) · IDENTIFIED FROM THE TRANSCRIPT · source

  44. “So we make that flow come to you if you're a natural buyer or seller. The question is where is the market? We gather the responses and it's committed flow to you and they have to commit first. So it's not like they get a chance to peek and then run around. Right. So let me phrase it in a slightly different way.”

    2016-04-08 · Masters in Business · Interview With Keith Ross: Masters in Business (Audio) · IDENTIFIED FROM THE TRANSCRIPT · source

  45. “So they can't run away, they can't front run, they can't spoof because they don't know what it is. They can't penny. They're competing with each other, so their price may be a penny better than somebody else. They want to give their best price.”

    2016-04-08 · Masters in Business · Interview With Keith Ross: Masters in Business (Audio) · IDENTIFIED FROM THE TRANSCRIPT · source

  46. “Or if I sell it on the way up, I'm selling it at a premium and there's all kinds of things you can do with that. Yes, we do have. I still believe the structure We have to chase the liquidity rather than making it come to the order. And that's where PDQ is dramatically different. And it's hard for me to emphasize the paradigm shift. So I've got the order. I'm holding it here. You can't see it on the radio, but I've got it in my hand. I want to trade 10,000 Apple. I'll tell you the size. What's your market? Still don't know whether I'm a buyer or seller. Give me your market. All the participants commit to the auction.”

    2016-04-08 · Masters in Business · Interview With Keith Ross: Masters in Business (Audio) · IDENTIFIED FROM THE TRANSCRIPT · source

  47. “It is going to make sense to some people to say, you know what, I'm going to bid down a half a dollar, down a dollar, down a dollar and a half and down $2 the way the book used to be much more layered and stay out there until they get what they need.”

    2016-04-08 · Masters in Business · Interview With Keith Ross: Masters in Business (Audio) · IDENTIFIED FROM THE TRANSCRIPT · source

  48. “Fixed income had its own flash crash type of What I've always thought is that there'll be people like you used to trade in the 90s that'll put some bids in below the market because they do want to own it and at a better price they'll be happy even in the bond market. And so one of the issues at the moment is we have what some of the academics call knife point liquidity. So everyone's around the market, a tick or two away because they understand that's where the market is now and that's where the supply and demand are. But if the market moves or a point, if it doesn't kind of gradually, that's okay because they can all adjust along the way. But if it happens quickly, they assume that there's some news out that they don't understand or the model doesn't understand. So they back away. And that creates the vacuum.”

    2016-04-08 · Masters in Business · Interview With Keith Ross: Masters in Business (Audio) · IDENTIFIED FROM THE TRANSCRIPT · source

  49. “Right. Now, if you don't do it, you're not part of the world in which we live. Right, exactly. So all those things have changed.”

    2016-04-08 · Masters in Business · Interview With Keith Ross: Masters in Business (Audio) · IDENTIFIED FROM THE TRANSCRIPT · source

  50. “The markets have put in some more rules and regulations, so we expect it to behave better, and I think it has. People are becoming more comfortable. So five, six, seven, eight years ago, people wouldn't even go online to do banking because they were anxious about security. Sure. People were afraid.”

    2016-04-08 · Masters in Business · Interview With Keith Ross: Masters in Business (Audio) · IDENTIFIED FROM THE TRANSCRIPT · source