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At the age of 10, Joel Greenberg, a founding partner of Susquehanna International Group (SIG), learned to play poker at the kitchen table in Bayside, Queens, under the watchful eye of his grandmother. To spice things up, the two played for pennies.
Later, poker was part of college life as Greenberg and several chums raised and folded their way through the undergrad years. Later, when four of those friends went on to become options market makers at the Philadelphia Stock Exchange, they still played on occasion.
Greenberg was out of the game for a while, having gone on to law school, but he hooked up again with his mates 18 years ago to form Susquehanna, an options specialist and market-maker that has grown into an equities and derivatives trading powerhouse. Poker still has its place at Susquehanna. Indeed, trainees at the firm's notoriously rigorous trading classes are required to master the two poker games that figure prominently in big-stakes poker tournaments: hold 'em and stud.
So far, the sharp strategic thinking associated with poker has served Susquehanna well. Despite eroding trading commissions and a shrinking role of specialists on the New York Stock Exchange (its SIG Specialists unit makes markets in more than 150 listings), Susquehanna has managed to thrive, thanks to its eclectic mix of strong proprietary trading systems, scale and brains. The firm has grown to $16 billion in assets and 1,400 employees in six locations in the US, plus Dublin and Sydney. When Wall Street got hit with the research crisis three years ago, Susquehanna jumped into the fray by starting its own institutional brokerage unit-Susquehanna Financial Group (SFG)-complete with research, from scratch, cherry-picking entire teams of sales/traders and analysts in those uncertain times. Like everything else it does, Susquehanna decided to come at research a bit differently, adding insights it gleaned from its options businesses.
But now Susquehanna has reached a critical point in its history. Squeezed by ever-tighter trading commissions, it has decided that it wants to be more than just an equity and derivatives trading behemoth backed by a whopping $2 billion in capital. To that end, in July it launched an investment-banking operation with a middle- market focus.
That path is a singular one, and its challenges...