Inside the Enigmatic Firm That Rules Wall Street

SPEAKER_1 (0:02)

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Max Abelson (0:08)

The fact that a company anywhere in the world made more money trading than JPMorgan, than Goldman Sachs, than Citadel, I mean, it's just, it's Bank of America, Citigroup, I can just say honestly, it blew my mind. This is a relatively new firm, and they made more money than the companies that make more money than God, and that made me want to know who they are.

David Gura (0:39)

I'm David Gura, and this is the Big Take from Bloomberg News. Today on the show, Bloomberg Finance reporters, Max Abelson and Katherine Doherty pull back the curtain on Jane Street, one of the world's biggest and most secretive trading firms.

Katherine Doherty (0:56)

So for those that don't know Jane Street, they are today one of the largest trading firms in all of the world, and especially in New York, where they are based.

David Gura (1:09)

What kind of trading does Jane Street do? What function do they serve in the market broadly?

Katherine Doherty (1:14)

They serve three functions. The first function is stepping in as the middleman. If you're placing a trade, it could be buying a stock, selling an ETF. There's going to be someone on the other side, and that could be Jane Street. And you're not doing this out of the goodness of your heart. You are profiting. You are taking a fee for every trade that you are executing, and you're in many ways doing this very fast, within milliseconds. So the more trades you do, the more money you make, that's just typical bread and butter market making. The second version of market making is extending your time horizon. You are holding on to positions not for milliseconds, but for minutes, hours, days, weeks, because this is a longer time horizon.

It sometimes means big risk, but also big reward. And then you have the third version, which is investing in private companies.

And that is not typical of a market making firm, but it has become typical for Jane Street.

David Gura (2:23)

Max, this is a proudly secretive firm. There's a lot of mystery surrounding it. Why is it that we know so little about how it operates and who's running it?

Max Abelson (2:33)

I don't think I have ever in my journalistic career confronted a journalistic subject that was genuinely secretive the way Jane Street was. You know, I think, I can't remember if I ever explicitly ask Katherine, like, okay, so who's their chief executive or like who's their chairman or like tell me about their like top executives. But it would have been a stupid question to ask because they don't have one. If you're a peer, if you're, you know, at a big bank or a big trading house and you call up and you say, you know, like, can you put me in touch with my counterpart? They'll they'll say no. And if you're an insider and you're like, can I see like a partner's list? They'll say no.

And if you're a journalist and you want a sense of like who's who inside of Jane Street, you kind of had a problem, which is, was an opportunity for, for Katherine and I to, to report this piece.

David Gura (3:24)

Max, I would think that like LinkedIn would be your, your friend here. You could go onto that social network.

Surely there's a Jane Street site within it. It would list a lot of these people.

Max Abelson (3:34)

David Gura, you simple, simple man. How naive. You go, you go onto LinkedIn for these very, very important people. And sometimes they'll have a dot like a period, you know, in their job. In lieu of a name. No, they'll have their name. Sometimes their last name, sometimes just an initial, but you know, for their, for their job, they'll have a period or they'll just really, it'll be really understated.

I would say by and large without revealing, I have journalistic methods too much. I feel comfortable saying, say that the true friend, true friend that we had were regulatory records.

David Gura (4:08)

All right, so they don't have a CEO, but you did find a management committee, several other key players. What did you guys learn about these people in aggregate?

Max Abelson (4:16)

Jane Street has on the one hand, very well-connected Republican donors, and very important Democratic donors. Now that you could say the same of big established firms, but it's interesting to me that at a kind of new wave and idiosyncratic intellectual group, you still have the kind of political connections we're used to seeing on Wall Street. Speaking of idiosyncrasy, you have people here who have pet pot-bellied pigs.