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November 1, 2002

The Young Masters of Risk: In Bala Cynwyd, a youthful band of traders unwraps a package of market i

By Nina Mehta

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In the cafeteria at the headquarters of Susquehanna International

Group, a short cab ride from Philadelphia's 30th Street Station, there is a reminder of the firm's youthful culture. Employees enjoy a free lunch of fast food. On a recent Friday, the spread included pizza, fried chicken, mozzarella, buffalo wings, onion rings, a few bins of lettuce, some celery sticks. Dozens of boxes of dry cereal occupied a shelf.

The food was of a certain generation: Not the stuff for some oldtimers. Susquehanna likes its specialists and designated primary market makers young. And the food must delight their taste buds.

There is another reminder of the firm's obsession with competition and intelligence: sign-up sheets on the refrigerator for chess classes and an upcoming tournament.

At Susquehanna, based in the endearingly-named Bala Cynwyd, market makers and traders have given a new meaning to the term mental dexterity. They join the same two-year training bootcamp. And all are selected with an eye toward fitting them into Susquehanna's carefully cultivated team approach. Odds are they tend to be more quantitative than not.

The Undergrads

"We hire mostly people with undergraduate degrees," admitted Eric Noll, an associate director and head of strategic planning and business development. "We want them smart and educated but we don't want them to have learned bad habits - or what we'd consider bad habits - from some other source."

On the other hand, Susquehanna's quantitative research department is typical of most sophisticated quant shops. It is stocked with many professionals holding doctorates. The firm sets great store by the way it recruits and develops talent. It considers its recruiting practices proprietary.

Susquehanna, unsurprisingly, says it knows where the market is at any moment and can supply liquidity and market depth to institutional customers. That's because Susquehanna officials claim the firm is a market maker in a broad range of names and because it has trained an army of specialists, traders and market makers. All these professionals are trained by the firm to think and handle risk in the same way.

Susquehanna and its subsidiaries make markets in 2,000 option names and 1,400 Nasdaq stocks. (Susquehanna's series of predecessor companies began in 1981.) The firm runs a large program trading operation, has a New York Stock Exchange specialist unit and floor brokerage, and is the largest equity index trader in the United States. The privately held firm claims it transacts more QQQs, the Nasdaq 100 Tracking Stock, than anyone else and it trades 15 percent of total exchange-traded-fund volume.

Susquehanna also makes markets on exchanges in more than a dozen countries and has a strategic alliance with the Bank of New York. Most important, the firm also has a reputation as a well run, technology-intensive market maker.