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Joe Weisenthal
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Jill Wiesenthal
Hello and welcome to another episode of
Joe Weisenthal
the Odd Lots Podcast.
Jill Wiesenthal
I'm Jill Wiesenthal.
Tracy Alloway
And I'm Tracy Alloway.
Jill Wiesenthal
So Tracy, we're still rolling out shows from our live show on May 28 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, right?
Tracy Alloway
And if you're talking about future of markets and trading, we have to talk prediction markets, right?
Jill Wiesenthal
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 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 halftime show is at the super bowl, there probably is A way to bet on it.
Tracy Alloway
Right. And 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 halftime 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.
Jill Wiesenthal
Yeah, but you really said the key thing here, which is we know there's like a ton of liquidity for like the sports betting, etc. Like that's not the problem that needs to be solved.
Joe Weisenthal
It's these other things where in theory
Jill Wiesenthal
these might be useful instruments for hedging some sort of economic risk. Maybe not the Taylor Swift one or the halftime show ones, but some of these other ones. But like in theory, some of these contracts could be useful for hedging. And so the question is, yeah, but will anyone use them? And so on this discussion we really had the pleasure of someone who has done very little media in general and
Joe Weisenthal
who is right in the heart of
Jill Wiesenthal
trying to essentially solve this chicken and egg problem. Listen to our conversation with Jeremy Malletz, the head of prediction markets at Susquehanna International Group.
Joe Weisenthal
All right, why don't you tell us just let's start really simply, what does the prediction markets desk at Susquehanna do?
Tracy Alloway
You.
Jeremy Mallett
So essentially the main function that we do is market making. So we're the main liquidity provider, 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
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 vague idea of what you do, but also not really. What does Susquehanna do?
Jeremy Mallett
Well, my wife asked me the same thing. It's her birthday, by the way, so happy birthday to her. Happy birthday.
Joe Weisenthal
It's incredible that you're here.
Jeremy Mallett
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 just, we have a culture overall that's very much looking for new opportunities and thinking about things in probabilities and kind of, you know, it. It all starts from Jeff Yass, our founder. He loves things like prediction markets. So, you know, we have a lot of random businesses at Susquehanna, all over the place. You would, 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 kind of make a market or bring a market to any asset class we're looking at.
Joe Weisenthal
Let's talk about, okay, there's some contract out there. Who is going to win the Texas primary elect, let's just say why, you know, and so there's an exchange and there's an instrument and it's either going to end at 100 or 0, et cetera. Why does this market need market makers? Why can't it be entirely peer to peer, such that if all of us in the room just wanted to trade, we make a price amongst each other on an exchange. Why is a market maker an important part of the infrastructure for this to work?
Jeremy Mallett
So if you have a market where you have an insane amount of people that are all trying to trade all the time, you might be able to make it work without a market maker. Okay, but what a market maker is really doing is it's helping to bridge the gap between the different people who are trying to trade. So Joe, you might want to trade now and Tracy might want to trade in an hour. Right, but if there's no but, that doesn't help. That doesn't help you if she's not there now. So we're basically saying, hey, we're going to be there when you want to trade and then we're going to wait. And when Tracy wants to trade, we'll take the other side of it. So we're basically a function that matches the buyers to the sellers across time and also across size.
Tracy Alloway
So how big does your balance sheet have to be to be dedicated to this particular business? How sizable are you with an entity
Jeremy Mallett
like Kalshi so it really depends on the way that you do it. There's a lot of small independent groups or just individual people who are able to be out there and they make markets and their goal is to try to balance it and they have to think a lot about capital. We are very fortunate that capital isn't generally a constraint for us. Right. So that's one of the things that it's an advantage for us, but it's also something we can bring to the market. We can provide much, much larger size on things. It's why we're well suited to bootstrap a market and to do institutional type size, because we're not constrained by capital in that way.
Tracy Alloway
And do you generally try to stay like risk neutral?
Jeremy Mallett
No, I think that is pretty deeply in our culture that obviously, all things equal, we would like to be risk neutral, but we're willing to put ourselves out there and wear a position. And in general, on our options trading, we tend to warehouse a lot of risk for the Street. Sometimes there's just something where everyone needs to hedge risk in one direction and someone needs to be on the other side of that. And that's an important function in prediction markets, especially when you think about use cases such as hedging, where you've got some global risks of the world. Everybody needs to hedge that risk on one side, someone needs to be on the other side, and we're willing to hold ourselves out there to do that. And, you know, there's a lot of pieces that go into being able to do that. Obviously, when you're not neutral on a risk basis, you have to be more confident that you're right. But, you know, that's a lot, a big part of what our team has driven to build.
Joe Weisenthal
So this sort of leads into the next question and it's maybe the, the multibillion dollar question of prediction market, which is, okay, we know that there is a huge amount of the prediction markets business, which is just sports betting under a slightly different form. But you mentioned hedging. And this gets to the core question, which is, in theory, there are a lot of instruments on these prediction market platforms that could be useful. Hedging instruments for corporations, say a market on snowfall in New York City, which might affect an airline or something like that, maybe they want to hedge that. When I look at the platforms currently, I see a price for like snowfall, but I don't see anywhere near the volume level that, say, would really justify, like an airline could, you know, you see $150,000 in volume on whether there'll be between six and eight inches of snow. That's obviously nowhere near deep enough for a serious economic actor to participate in. So where are we on that in terms of the promise of actually useful instruments for hedging?
Jeremy Mallett
Right, so when we first got involved in prediction markets, our real role was to bootstrap the liquidity. There were no institutions yet, and it was largely going to be a retail product. We were bootstrapping for large volume retail liquidity. Now our next challenge is we want to bootstrap institutional liquidity. So, yes, you might look at a market that doesn't seem like it has enough volume for an institution to hedge, you know, tens of millions of dollars of risk. But that's, you know, part of the reason that I'm out here doing a podcast today is we're trying to make sure that people start to understand this is viable. And we're putting ourselves out there that we will be willing to put that kind of risk and we can put out that kind of risk on a contract where far less volume is traded. And that's because what the prediction markets really provide is information. It's a price discovery mechanism. So you have this phenomenal community of super forecasters that exist on a prediction market, and it doesn't take as much volume as you would think to get to a fair price. And that allows us to say, hey, okay, we've got a reasonably fair price on this prediction market. Maybe it's only traded $100,000. But we know that there's been a lot of smart people that have looked at this. We can do our own internal vetting at the same time also. And, and now we're comfortable going out there and saying we're confident enough in this price because of the price discovery mechanism that we'll make tens of millions of dollars of risk to a company that needs to hedge its risk of what, you know, some regulation or straight of hormoose or whatever it is that's happening in the world. So, you know, someone needs to go out and do that. And I think we're kind of uniquely positioned because of our culture of saying, yes, we are willing to take that risk, and yes, we want prediction markets to grow.
Tracy Alloway
What have your conversations been like with institutional players so far? Like, what do they say is their main either constraint or I guess, reluctance to get on some of these markets?
Jeremy Mallett
So the first piece is the exact thing that you just brought up, awareness. They look at the markets and they might say, well, I don't see how we could actually hedge some of these things because there's not enough volume and liquidity to which our response is we will be the liquidity. Then the other question is, okay, well we sort of need our compliance to get, to get comfortable with this. This stuff is so new. What's the legal landscape? What, you know, how do we get this stuff even over our firewall? I think institutions were always going to be the slower moving player relative to retail. And so that's why we really want to sort of hold some of their hands to go through this and figure out a lot of different ways that they can use prediction markets. Some of it might be an institution connects to a prediction market platform, does a block trade on an exchange with us. It could be that a trade goes up often exchange as a swap, but it's licensing the exchange market data. And we're trying to create as many different setups as possible so that people can do these trades. And we're going to basically be, you know, be the facilitator to say, okay, you need a hedge. We're going to figure out how to let that happen.
Joe Weisenthal
So this is really important. So if I look at a contract and I see a number there, like $150,000, it's possible that there has. There was a trade, an off platform trade of much bigger size that was not printed on that, but that was more by swap form and that's. Is that currently happening?
Jeremy Mallett
It is possible. I'm not going to go and say that that's a big thing that's happening yet. We're trying to build out the infrastructure to have as many options as possible because we want institutions to start moving and the more they do it, the more they're going to.
Joe Weisenthal
If an institution, again, let's go to the airline hedging snowfall.
Jeremy Mallett
Sure.
Joe Weisenthal
Would they have a relationship with you? Would they go through a prime broker who then has a relationship with you? Like what is the actual sort of like chain of phone calls or whatever that happens.
Jeremy Mallett
So it can be both. But ultimately when I think of what we're really good at and what we're not really good at, we're not necessarily the best in the sort of know every single airline customer business. So we want to work with a lot of those other intermediaries that could be a broker, it could be a bank, it could be an insurance company. The people who have those relationships and are in the business of constantly advising this is what you should do. We understand we want to work with them and they could have a very important role in helping to be a part of the infrastructure that gets it from the customer with the risk to us being the ones that have the other side of the risk.
Joe Weisenthal
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Tracy Alloway
Joe's chosen a pretty like reasonable contract I would say for his example there. But like are you committed to making markets in all the contracts available on these platforms? Because I'm thinking about, you know, like the return of Jesus Christ or will aliens invade? How would you even go about making
Joe Weisenthal
it a halftime show?
Jeremy Mallett
Yeah, right. Yeah. So we don't make everything. And honestly we're not the best to make absolutely everything. Some of the things that you might say that something perhaps in pop culture we're probably not going to be that good at it relative to others. Right. There are certain things that Are you
Tracy Alloway
trying to build that capacity up?
Jeremy Mallett
Well, we'll see. But you know there is a community of a lot of people that can make a lot of that can make a lot of these types of markets. And what we want to do is we want to scale our sort of capacity with our technology, our quantitative models our sort of very trader driven insights that we have and our capital, that's where we're going to add the most value to an exchange. If something just requires a bunch of people to dig into it, the, the universe of all the different super forecasters, we're probably not as necessary. So you probably don't need us to know something about when Taylor Swift is going to get married. But the fact is that the things that have the most economic value tend to be the things that need us the most. And so that's really where we try to play. And I think it's great that the ecosystem has these complementary forces of the community of all of the superforecasters and then the people like us who both kind of have different skill sets.
Joe Weisenthal
Do you see right now? So again people say yeah, these are just, it's sports betting, et cetera. And then maybe every two years or every four years there's some election activity, maybe there's some trades that are sort of like look like crypto derivatives, et cetera. When you actually look at today's volume of activity, do you see a meaningful shift towards what polite people who wear suits would say, like real things? Is that happening?
Jeremy Mallett
It is, yeah. And so when you look at the volumes, obviously there's a real percentage of the volume more, you know, more than half the volume certainly is, is sports. Yeah, but, and there's a reason for that. Right. Sports has been a big market in the United States for a long time and it's happened in kind of a fractured way across a lot of different states. And there's certain states where you can't do it and it's a different regulatory system everywhere. But there was a big market that existed and then prediction markets basically came around and they provided a better way for sports to trade. So it was natural that there was going to be this massive base from the start. But what we're seeing is it's dragging up all of the other things. So it's brought awareness to prediction markets. And the more we see that, the more we see everything else growing. And by the way, a lot of that other stuff, the, the real market, they're growing at a faster rate than sports, just from a lower starting point. And our goal now is really to boost that with the hedging cases, which that's growing too. But it's not a huge part of the market as of now and we understand it needs to be from an ecosystem perspective. It's essential that those hedging trades become a much larger part of what the market is.
Tracy Alloway
So if you're a market maker for an event contract that something like the Fed is going to raise rates or hold or lower or whatever, like that's pretty similar to something that you might see in traditional markets. But how different can you like explain it to us from a mechanical perspective? How different the market making process would be for a prediction market contract versus like a traditional option?
Jeremy Mallett
Right. So honestly it, there's not a one size fits all because there's so many different things out there. So if you're thinking about kind of what's the Fed going to do next, there are instruments that capture that reasonably well. And same thing as what's the price of the S&P 500 going to be at the end of today, for example. There are other instruments out there that capture that reasonably well. And really this is just distilling it into a way that might even better capture the idea someone has. There's quirks to the other types of things that you might have that are the proxies. So we can translate what's happening in the, in sort of like, you know, the traditional financial markets to prediction markets for other products. That is sort of. Is this random one off event going to happen in the world? Is the Strait of Hormuz going to be open by the end of August? Is Keir Starmer going to be out as Prime Minister?
Joe Weisenthal
Yeah, we're.
Jeremy Mallett
That stuff requires a lot of independent research. But the good news is that there's so much information contained within the prediction market itself. So one of the core market making principles we have is, you know, it really honestly comes from, you know, kind of a thing we teach with poker of understand what other people know and what other people are doing. We can learn from the market, seeing where they are. This is what all these other superforecasters know. We can combine that with our internal research and then get to a number. So that's, you know, some things kind of have to be. We draw it up and figure it out like that. Some stuff is we can use the information that's in other markets. And some stuff is we're going to build a brand new model to figure this thing out. Because that's kind of in our DNA to say like, all right, here's a random thing, but how are we going. We're going to have to figure out compute, right? Let's figure out how to model compute and we'll build it.
Joe Weisenthal
So one of the concerns or one of the things that people talk about with prediction markets is the possibility of insider Trading and obviously like when I think of like a market making firm or some of these firms that do a lot of flow in volume, you just sort of assume there's a lot of noise and it all sort of washes, washes out. Right. How does it change you? Like you have to think like if there are participants in the market that are like not just forecasters here, like not just people who are good at predicting things, but deeply informed flow where they maybe just know the answer already, are you able to spot that? Are you able to sense that and does that change how you think about risk management within a given market?
Jeremy Mallett
Right. So I guess the insider trading is definitely something that, that comes up and there, you know, there, there's certainly been plenty of articles that are written about it. I think there's a couple, a couple of things to point out there. The first one is that there's actually really two types of prediction markets that it's not always clear to people what the distinction is. But there's the regulated prediction markets such as Kalshi, such as Rothera Exchange that just launched, such as CME has one and Polymarket has a regulated exchange. And then there's the crypto based decentralized finance platforms and those are, they don't have KYC. Right. And they're crypto based, they're DeFi. So I think most of what you've seen, the vast, vast majority where people find something that's insider trading based is on the DEFI platforms because there is KYC on the regulated space. And that's why, you know, we are participating in the regulated space. So that's the first important thing is if you're in the regulated space, you're much more protected. The other thing is, you know, insider trading is something that does exist everywhere and there's a mechanism that works to, to suss it out and that's reporting from the people that are in the market. Generally. One of the things that we're always paying attention to is what are the incentives of the person on the other side of the trade. And when someone's insider trading it's a lot more obvious that okay, well what are the incentives? They don't make sense. The thing then happens and okay, we can make a pretty decent Bayesian update that like this was probably insider trading and report it. And it's actually easier in prediction markets because this stuff is more obvious. There's a million reasons that someone can buy Apple stock, but like there's not that many reasons that someone can buy like is Maduro Going to be, going to be out.
Joe Weisenthal
So if you see a lot of people slamming that, okay, right.
Jeremy Mallett
So it's actually easier to spot this stuff. And by the way, like, one thing we're extremely happy about is the DOJ is now even going after the, you know, the crypto based platforms where, you know, people kind of, I think they kind of knew. People probably thought they were safe. You're not safe in Cryptolan, actually. Everything's on the blockchain. Right. So you'll get caught. So there is an infrastructure, especially in the regulated space, but also now in the unregulated space for catching people that do it. And I think that's why you don't see more like that's what stops insider trading. People don't want to get caught. This is new. People probably thought like, oh, I can do it in crypto and we'll get caught. Now they're like, oh, I am going to get caught.
Tracy Alloway
Okay. Aside from insider trading, one of the other concerns or criticisms of prediction markets is the idea of you could have whales basically in the market. Like people with a lot of money who are willing to spend it to perhaps like influence a particular probability with the hope of, I guess, influencing the ultimate outcome. You must have pretty good visibility into order flow. Like how realistic is that concern from your perspective?
Jeremy Mallett
Honestly, I don't think it's something that's really come up for us to this point in time. Like there are concerns we have around certain things in prediction markets, but realistically there's a lot of people in prediction markets with deep pockets, certainly us, and we're pretty good at, as I said, understanding the incentive of who's involved. And if someone's going out there and trying to, to move a market to like influence and out to influence an outcome, you know, if it's. It, I guess it depends on what the outcome is. If it's an outcome that's easy to influence, we try to avoid those markets in the first place. So we don't trade like mentioned markets. Right. Someone could put a bunch of money on something and then, you know, on this podcast perhaps, and then say, Joe, how.
Joe Weisenthal
Here's a little.
Jeremy Mallett
Right?
Joe Weisenthal
But does everyone is, does everyone know like a mentioned market is like, will Joe, Tracy or Jeremy say the word like dogecoin?
Jeremy Mallett
Exactly.
Joe Weisenthal
And that's like, it's crazy, right? Whatever.
Jeremy Mallett
So we're not gonna, we're not gonna participate in those. If you're worried about something like that, like, you probably shouldn't trade those either. Like they're, they're more on the, on the side of just like, oh, this, you know, if people want to punt around and then, fine, we're not in those. But for more serious markets, I don't have that much concern if there's someone trying to do that, that they're, you know, if it's, if it's not manipulable, particularly it's something that's real and someone's just trying to move the market, the marketplace is probably going to figure it out and take the other side of it. And if they can actually influence the outcome in a meaningful way, then it probably, you probably need to think about what the settlement mechanism is. And, you know, those are the types of markets we try not to get involved in. But I don't think you see a whole lot of that in the market.
Joe Weisenthal
So as you mentioned, you're not, you don't make a market in every market. And some things are more logical. Do you have. When you say, okay, you're market maker for Kelsey, do you have a list of like, this is what we do and don't, or is it like, like, I'm sort of in my mind, the way I think about your role, a little bit like a Lloyd's of London in the sense that it's like, okay, so someone has some risk and then they call you up and they like, can you make us a price for this? So is it a set list or is it like you take it as you see it? Yes. Okay, we can make a market. No, this is not something we're going to participate in on a sort of like per market basis.
Jeremy Mallett
Right. So it's a little of both. There are some markets that we do all the time. We sign up for obligations. We're going to be out there all the time 24 7. And then there's some things that we kind of do on a more ad hoc basis. Like, you know, it comes up. It's important. We think we have, can have a meaningful role in the market and we just figure out how to get involved in it. So a little of both.
Tracy Alloway
I don't know if you read it, but there was a piece in, I think it was the New York Times this week about shooting Sharps in the prediction market. And, you know, he definitely read it. Yeah. People who are making a lot of money. Oh, yeah, that's right. Okay, so you better have read it.
Jeremy Mallett
I have read it.
Tracy Alloway
Okay. But there was someone quoted in there who is like an independent trader in prediction markets. And they said they interviewed at Susquehanna, but the firm Said that like Susquehanna is not allowed to scrape certain data or it has certain data restrictions. And I guess that made the job unappealing to this guy because he doesn't seem to have taken it it. But like, what are your data restrictions? Exactly.
Jeremy Mallett
So we have a large franchise and a large reputation that we need to take care of. So we're not going to violate the terms and conditions of a website. Right. If you're a random person who's doing it, like, you probably can do that and you're probably not going to get in trouble. More likely than not. Although that's certainly not legal advice.
Joe Weisenthal
People putting in URLs that haven't gone live yet. Right. And they have some feel and they test them out.
Jeremy Mallett
It's like, oh yeah, it's not even necessarily. I mean, that's a thing that can happen, but it could just be like you have a website that has terms and conditions that says like, you're not permitted to scrape this data. Right. And so. And like, you know, plenty of people scrape the data, right? And we're not going to scrape that data. Like, we're not going to violate the terms and conditions of a website. So we hold ourselves to a more conservative standard when it comes to those types of things. So I think that, I think that person was probably just referring to, hey, you get restrained. Restrained in some ways. If you want to work for us,
Tracy Alloway
the usual, like institutional things, like, we're
Jeremy Mallett
going to be very careful when it comes to things around our reputation. But, you know, but I think that like that's, you know, there's a lot of advantages to working here as well.
Joe Weisenthal
I know this isn't a prediction market question per se, but like, do GPU markets that we talked about the first half of the show, do they have the sort of contours of what to you look like could be something, a very actively financialized market.
Jeremy Mallett
Absolutely. I mean, it's something that the prediction markets are looking at. And really when I think about what's made prediction markets so different, like what actually changed, it's the speed to market.
Joe Weisenthal
So say more about this.
Jeremy Mallett
So, you know, it's funny, when we first started wanting to get involved with prediction markets, I have like a little bit of an origin story where I have a friend who is a CFO of a musical instrument company during the first China trade war. He was worried that their company might go out of business because they imported instruments from China. And we. I was like, well, I'm a macro trader. I could hedge this. It's what I do all the time. We actually tried to list a product and it took about a year and it was just too slow. And then, you know.
Joe Weisenthal
Where did you try to list it?
Jeremy Mallett
We tried to list it with my ex. And, you know, just. That was the process for listing a future. And now we got. Now we, you know, prediction markets came around and that process went to a day or even inside of a day. So I think really that's the real valuable thing that happened with prediction markets. And I think that with compute, you see this ability of prediction markets to potentially move very quickly so they can launch a product. There are products on prediction markets that have compute and these other things that kind of look like compute, you might say dram prices. People worry about that all the time, right? The shipping costs, these things that are kind of like a commodity, but they don't really have a commodity. Prediction markets can be speed to market and the system works in that way. So I absolutely think it's something we're thinking about and I think they can totally have a role in that ecosystem.
Tracy Alloway
So just going back to the very beginning of this conversation, your head of macro trading at Susque. Sorry, I can't say head of macro without cracking up. Nowadays, your head of macro trading, but also prediction markets at Susquehanna, which is like kind of an unusual combined role. Like, what is the idea there? Is there some synergy between those two markets that you're trying to capture?
Jeremy Mallett
You know, honestly, it all just comes down to the election. You know, as head of macro, I had sort of a niche for trading the election, and I kind of got exposed to prediction markets because they were trading in Europe on Betfair and we would be. We had, you know, European entity and we were involved with it there and I saw the value of it. And I think 2016 election was like a place that it was really valuable because people had these massive risks they wanted to hedge. People would do it with these proxy products. Banks would put out baskets of, like, do all these, put put together all of these names. And the broad market consensus in 2016 was that the market was going to be down 5 to 7% if Trump won. And it turned out the market was.
Joe Weisenthal
It was for like five minutes.
Jeremy Mallett
It was for like five minutes. But, yeah, the next. By the end of the next day, it was up. Right. And so the hedge didn't work, but we saw the prediction market worked. If you actually just hedge this in a prediction market, it would work really well. And so honestly, it doesn't seem like there's that much synergy it's more just it evolved out of that of saying like, hey, we're involved in this space and we see how valuable prediction markets can be and we really want to make it happen. And so I think that it's really just kind of an, an evolution as opposed to this is how we would draw it up from scratch.
Joe Weisenthal
Every once in a while I get get sent one of those like basket trades where it's like, trade this basket. We could do $100 million this, you know, dram winners, dram losers basket. Anyway, Jeremy Mallets, head of prediction markets at Susquehanna, thank you so much for
Jeremy Mallett
thank you so much for having me.
Tracy Alloway
That was our conversation with Jeremy Malletts of Susquehanna, recorded live at our New York show. I'm Tracy Alloway. You can follow me at Tracy Alloway.
Jill Wiesenthal
And I'm Joe Weisenthal. You can follow me at the Stalwart. Follow our producers, Carmen Rodriguez at Carmen Erman, Dash o' Bennett at dashbot, Kale Brooks at Kale Brooks and Kevin Lozano Evan Lloyd Lozano and for more Odd Lots content, go to bloomberg.comoddlods we have a daily newsletter and all of our episodes and you can chat about all these topics 24. Seven in our Discord, Discord, GG Oddlauds.
Tracy Alloway
And if you enjoy Odd Lots, if you like it when we do these live shows and ask Susquehanna if they can make markets in alien invasion contracts, then please leave us a positive review on your favorite podcast platform. And remember, if you are a Bloomberg subscriber, you can listen to all of our episodes absolutely ad free. All you need to do is find the Bloomberg channel on Apple Podcasts and follow the instructions there. Thanks for listening.
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Episode Title: Why Susquehanna Is Building a Prediction Markets Business
Date: June 6, 2026
Hosts: Joe Weisenthal, Tracy Alloway (Bloomberg)
Guest: Jeremy Mallett, Head of Prediction Markets at Susquehanna International Group
Format: Live recording, City Winery NYC, May 28
This episode dives deep into the rapidly evolving world of prediction markets, following the surge of interest in alternative financial instruments. Joe Weisenthal and Tracy Alloway speak with Jeremy Mallett of Susquehanna International Group (SIG), one of the first—and still one of the most active—institutional players in prediction markets. The discussion uncovers how prediction markets function, their emergent role in hedging "real world" risks, institutional participation, and the mechanics and challenges underlying this nascent sector.
Mallett reveals how SIG straddles boundaries between traditional financial market making and the quirky, fast-moving, and sometimes bizarre world of event-based contracts—from snow in New York to Taylor Swift's wedding date—and why the firm is betting on prediction markets to become a true institutional risk management tool.
Quote:
"...our bread and butter remains market making and we try to use that to kind of make a market or bring a market to any asset class we're looking at." – Jeremy Mallett (05:11)
Quote:
"...we're confident enough in this price because of the price discovery mechanism that we'll make tens of millions of dollars of risk to a company that needs to hedge..." – Jeremy Mallett (10:57)
Quote:
"...the things that have the most economic value tend to be the things that need us the most. And so that's really where we try to play." – Jeremy Mallett (17:11)
Quote:
"...it's actually easier in prediction markets because this stuff is more obvious. There's a million reasons that someone can buy Apple stock, but like there's not that many reasons that someone can buy like is Maduro going to be out." – Jeremy Mallett (24:08)
Quote:
"...prediction markets came around and that process went to a day or even inside of a day. So I think really that's the real valuable thing that happened with prediction markets." – Jeremy Mallett (30:49)
The episode was lively, candid, and slightly irreverent—especially in discussing the oddities of prediction markets. There’s a blend of technical depth, practical market trading insight, and humor (Taylor Swift wedding contracts, Jesus Christ returns). Jeremy Mallett, while clearly quantitative and analytical, repeatedly stressed both the social and technical limits—and unique opportunities—of prediction markets.
This episode provides an authoritative, inside look at the emerging frontier of event-based finance. SIG isn’t just making markets for quirky contracts—they’re actively building the rails and plumbing necessary for prediction markets to become genuine tools for institutional hedging and risk management. The path forward is part technology, part market structure, and very much a cultural/economic bet that the "future of trading" will be broader, weirder, and more probabilistic than ever before.