Why Susquehanna Is Building a Prediction Markets Business

**Joe Weisenthal** (0:02)
Bloomberg Audio Studios, Podcasts, Radio, News. Hello, and welcome to another episode of the Odd Lots Podcast. I'm Joe Weisenthal.

**Tracy Alloway** (0:22)
And I'm Tracy Alloway.

**Joe Weisenthal** (0:24)
So Tracy, we're still rolling out shows from our live show on May 28th in New York City at City Winery. As we discussed in our last episode from this show, it had a sort of future of markets, future of trading theme to the night's conversation.

**Tracy Alloway** (0:40)
Right, and if you're talking about future of markets and trading, we have to talk prediction markets, right?

**Joe Weisenthal** (0:45)
Yeah, that's right. So in addition to the fact that there is the quote, AI trade unquote, the other big thing going on in markets is the sheer explosion of instruments with which people can trade, right? So it's like you just have stocks and bonds and options, and then the options started getting more exotic, like zero day options, which you love and so forth. But now it's like, if you could think of something that would resolve in some way, whether it is snowfall in New York City, Tesla deliveries, or how long a half-time show is at the Super Bowl, there probably is a way to bet on it.

**Tracy Alloway** (1:20)
Right. So one of the big questions is whether or not these markets are going to take off from an institutional perspective, whether or not you're going to see more professional investors get into the business of betting on not just snowfall in New York, but maybe half-time shows and that sort of thing. But that said, we do have some institutional participation in the market already because you have market makers that are starting to come in to try to make these markets more liquid.

**Joe Weisenthal** (1:46)
Yeah, but you really said the key thing here, which is we know there's a ton of liquidity for the sports betting, et cetera. That's not the problem that needs to be solved. It's these other things where in theory, these might be useful instruments for hedging some economic risk. Maybe not the Taylor Swift one or the half-time show ones, but some of these other ones. But in theory, some of these contracts could be useful for hedging. So the question is, yeah, but will anyone use them? So on this discussion, we really had the pleasure of someone who is on very little media in general and who is right in the heart of trying to essentially solve this chicken and egg problem. Listen to our conversation with Jeremy Maletz, the head of prediction markets at Susquehanna International Group.
All right. Why don't you tell us, just let's start really simply.
What does the prediction markets desk at Susquehanna do?

**Jeremy Maletz** (2:40)
So essentially, the main function that we do is market making. So we're one of the main liquidity providers on quite a lot of platforms.
And that means we're providing liquidity in everything from sports to economics to politics. But I'd say also a big part of what we do is, we were the first institution that got involved in prediction markets in the first place. So we're really trying to have a role of kind of being a shepherd for other institutions as they get involved. So I'd say it's a two-pronged goal, really, of providing the liquidity for the ecosystem to help it to grow, and then bringing others into the ecosystem, which I think has been one of possibly even the more important role of what we've done to this point in time.

**Tracy Alloway** (3:24)
Wait, can I ask an even simpler question, which is I kind of feel like Susquehanna is like the sales force of the finance world, where I have this like vague idea of what you do, but also not really. What does Susquehanna do?

**Jeremy Maletz** (3:39)
Well, my wife asked me the same thing. It's her birthday, by the way, so happy birthday to her.

**Joe Weisenthal** (3:46)
It's incredible that you're here.

**Jeremy Maletz** (3:48)
I know.
I owe her big time.
So we're primarily a market making firm, and our bread and butter has always been options. So we make markets in pretty much every option, equity options. But obviously, we trade a lot of instruments across a lot of things. And we have a culture overall that's very much looking for new opportunities and thinking about things and probabilities. And it all starts from Jeff Yoss, our founder. He loves things like prediction markets. So we have a lot of random businesses at Susquehanna all over the place. You wouldn't believe the number of things that we do randomly. And it all comes back to the same culture we have of thinking in Bayesian probabilities and trying to think of everything in terms of break it down into what the odds are. But the bread and butter remains market making. And we try to use that to make a market or bring a market to any asset class we're looking at.