Paul Jiganti joined TD Ameritrade in Chicago in July as a managing director, responsible for market structure and routing strategy. He replaced Chris Nagy, who left the broker in May. Jiganti oversees the routing of TD Ameritrade’s millions of stock and options orders to wholesalers and exchanges. He spent most of his career working for Susquehanna International Group in Chicago, joining them in 1992, shortly after college. He left Susquehanna and the industry temporarily in 2008, after running the firm’s Chicago office for five years. Jiganti took some time out from his busy schedule to chat with Traders Magazine about his time at Susquehanna and his current position.
Traders: How did you get your start in trading?
Jiganti: I started out after college as a clerk for an independent trader on the floor of the CBOE. I was bright enough to know that I could not compete against the likes of Susquehanna. So I decided it was better to join them than fight them. When I joined in 1992, I was the 125th employee. When I left there were 1,600.
Traders: What was your experience running the Chicago office?
Jiganti: When I took over the Chicago office in 2004, there were 185 employees. When I left we had 60. It was brutal. The market had become much more electronic, so you didn’t need to be on site anymore. We sent many people back to Philadelphia. I left because I didn’t want to stick around for any more cutting. So I took some time off to have fun with my family.
Traders: Besides the cutting, what were your responsibilities at Susquehanna?
Jiganti: During that time, I traded everything. I traded at the Board of Trade for about a year. But most of the time it was at CBOE. I ran our desk, the trading operation. I ran the specialist posts. We called them DPMs back then. I traded every day and did all the rest of the stuff on the side. I also sat on the CBOE board for a couple of years.
Traders: You ran the block desk.
Jiganti: Yes. I took over the desk in 2001. We would get the off-floor shows from the big brokers at the exchanges looking for stuff they couldn’t get on the floor.
Traders: You also got Susquehanna into the routing business.
Jiganti: Yes. I set up the payment-for-order-flow program. At the time, Susquehanna wanted to get into that game and had no idea how to do it. So I did it. I quickly realized that you had to have a real person who was good at it, instead of someone doing it off the side of their desk. So I hired Joe Selitto. That’s my claim to fame. It’s the one thing I did that sticks out. Everybody in the industry knows Joe.
Traders: When did Susquehanna get into the PFOF business?
Jiganti: I want to say about 2003. It had to be after 2000 because that was when options became dually listed (on multiple exchanges) and that was when PFOF came into options.
Traders: You were involved in the transition to electronic markets at CBOE.
Jiganti: I chaired the screen-based trading committee at CBOE for a couple of years in the late 1990s. That didn’t really end up going anyplace. What really took hold was CBOE’s hybrid platform. And I was part of the committee that did that too. It’s funny. The leader of the whole charge is now CEO of CBOE-Ed Tilly. He was truly the brains behind it.
Traders: Upon your return to the industry in 2010, you got involved in Nasdaq’s attempt at creating an index option.
Jiganti: Yes, the alpha index product. They were looking for someone who could do the math behind the product and talk to the broker-dealers and try to convince them that it was greatest thing since sliced bread. It is a great product, but hasn’t caught on for various reasons. I was there as a consultant, but I knew then that it was not a full-time forever job.
Traders: The product let people bet on the relative value of two securities?
Jiganti: Yes, such as the relative value between the S&P 500 Index and Apple, for instance. You could trade options on the outperformance or underperformance of the stock. It was really clever-a really well-done index. It was developed by Bob Whaley, the same guy who created the VIX.
Traders: At TD Ameritrade you monitor execution quality.
Jiganti: Absolutely we monitor our execution quality. We have talented people doing great execution-quality dives every day to make sure everything looks good.
Traders: You run the show?
Jiganti: I am part of a team. There is a broader team to make consensus decisions on routing. It’s not a single point of contact anymore. It’s a committee. It’s fair and balanced.
Traders: How big is the team?
Jiganti:It’s comprised of several people from many locations throughout the country.
Traders: Please describe the process.
Jiganti: We look at and examine our executions daily and adjust as needed. Periodically, if something warrants an adjustment-a broker-dealer goes down or an exchange has a problem-clearly, we make that decision in four seconds. But with normal things we meet as needed.
Traders: You have sent the single largest amount of your flow to Citadel Securities for a number of years. What’s so special about Citadel?
Jiganti: We don’t discuss these matters outside of the building, but we look at many different metrics to make sure we have chosen the right partners. Our Rule 606 reports say it all.
Traders: Industrywide, weeklies have really taken off. How about at TD Ameritrade?
Jiganti: We’re seeing a lot of flow in weeklies. They’re good for our clients. The markets in them for the most part have been deep and liquid, particularly for the SPDR-type option. I don’t have statistics, but from our side, they’ve been extremely successful.
Traders: Why are they popular with retail investors?
Jiganti: If you’re an overwriter, you collect most of your time decay in that last week. So, with weeklies, you get to have that last week 52 times a year, instead of only 12. Your return on that strategy is fantastic.
Traders: I gather TD Ameritrade will be coming out with a service that will automatically roll over an investor’s weekly buy-write position?
Jiganti: Right. It exists now for monthlies only. It should be out for weeklies by the end of the first quarter. It’s a strategy roller where you can roll that strategy automatically. You set your limits and your times, etc.
It’s an incredible tool. It is a groundbreaking tool. So you could have it roll itself every week. You could be on the beach and you’d be taken care of and continue your strategy of collecting that last week of decay.
Traders: What’s wrong with the exchanges’ “Options Regulatory Fees”?
Jiganti: Not enough checks and balances. At least nothing that I’ve seen. It seems the exchanges have the ability to raise them at will. It’s gone from being an innocuous fee at one exchange-the CBOE-to all the exchanges. So we’re hit with it from every place. It’s a cost that seems out of balance.
Traders: With the new Miami Options Exchange, there are now eleven exchanges. Some people maintain that’s too many. Where do you stand on the issue?
Jiganti:At some point the market has to pay for the new ones. You get concerned that there are too many, that they all cost too much money. You’d like some sort of healthy competition between them to make sure the pricing schemes interact correctly so we will find the most economical way to have our orders executed-at the right price for the customer and for us. But given all that…is eight better than 12? Or worse? It’s hard to tell. How many ways can you slice it? Twelve is certainly better than two.
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