Todd Simkin - Game of Trading at Susquehanna (EP.399)
Aug 5, 2024
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Todd Simkin, Associate Director at Susquehanna International Group and CEO of Susquehanna Re, shares insights from his 27-year journey in trading. He discusses the evolution of trading from poker roots to modern strategies, embracing both the art and science of decision-making. Topics include risk management, navigating growth within large firms, and the fascinating intersection of sports betting and trading strategies. He also reflects on the importance of talent recruitment and meaningful life lessons learned along the way.
Todd Simkin's unconventional path to trading emphasizes the competitive spirit and team-based decision-making akin to sports rather than finance.
Susquehanna International Group's growth mindset cultivates trader development through education, recruiting talent from diverse backgrounds regardless of prior experience.
The firm's strategic diversification into sectors like venture capital and sports trading allows them to leverage quantitative analysis while maintaining a long-term vision.
Deep dives
Todd Simkin's Unique Path to Trading
Todd Simkin's journey to becoming a trader was unconventional. Initially studying deaf culture and American Sign Language, he explored various roles before encountering the trading world through a connection related to the New York Stock Exchange. What attracted Simkin to trading was the competitive spirit it offered, reminiscent of his love for sports, rather than an inherent passion for finance. His conversion to trading was rooted in a desire to engage in a team-based game of decision-making under uncertain conditions.
The Philosophy and Growth of Susquehanna
The founding philosophy of Susquehanna International Group is based on a growth mindset, emphasizing that traders can be developed through education and experience. This perspective aids in recruiting and training smart, curious individuals regardless of their initial background in trading. Over the years, Susquehanna has expanded its operations from options trading on the floors of various exchanges to a comprehensive international presence. Its growth mirrors the evolution of the trading landscape from manual processes to high-frequency electronic trading.
Decision-Making and Risk Management in Trading
Effective decision-making is critical in trading, where analysis and strategy can dictate success. Simkin highlighted the importance of what's known as 'the decision process' as a focal point, emphasizing the psychological aspects of trading, like communication and bias recognition. Simulation exercises and mentorship play fundamental roles in teaching traders how to evaluate and learn from their trades. Encouraging open dialogue among traders aids in refining their decision-making skills, which helps them to improve over time.
Diversification Through Strategic Ventures
Susquehanna has strategically diversified its interests by exploring sectors like venture capital, sports trading, and insurance. This diversification allows the firm to capitalize on new opportunities while leveraging existing expertise in quantitative analysis and risk assessment. The firm's approach to venture capital focuses on investing in companies led by strong management teams, ensuring proper alignment with Susquehanna's overarching risk management principles. Additionally, their involvement in insurance and prediction markets reflects their commitment to capturing value across various risk types.
The Role of Patience and Long-Term Perspective
Patience is a defining characteristic of Susquehanna's approach, allowing them to exploit opportunities that may be overlooked by competitors seeking quick returns. The ability to take calculated risks, such as entering new markets or investing in unexpected ventures, hinges on long-term vision and maintaining a strong financial foundation. By avoiding outside capital, Susquehanna retains flexibility in decision-making, enabling them to navigate downturns effectively without pressure from external stakeholders. This long-term perspective has allowed the firm to achieve sustainable growth through adversity.
Todd Simkin is an Associate Director at Susquehanna International Group, a global quantitative trading firm comprised solely of internal capital that is known for its rigorous analytical approach to decision-making. Todd is also the CEO of Susquehanna Re, his latest role in a 27-year tenure at SIG that has spanned trading, strategic initiatives, and trader education.
Our conversation covers the history of SIG alongside Todd’s roles, trader development, the art and science of trading, risk management, recruiting talent, competitive advantages, luck, and strategic initiatives in venture capital, prediction markets, sports gambling, and reinsurance.
