Citadel's Sentinel: CIO Tom Miglis Aims to Do the Impossible

That means leveraging technology to do things other funds can’t. The firm operates on a single security master, transaction, and position database with real-time reconciliation. “Critical in our success in the last five years is knowing everything that a counterparty knows about us better than they do,” says Steve Belluardo, the firm’s technology co-head for front-office technology.

Citadel also actively enhances the reliability of its hardware, much of which is managed in-house and, if not co-located, is connected by an all-fiber network on a dedicated floor in the firm’s eponymous Citadel Center on South Dearborn Street in Chicago.

“Investors entrust us with their capital, and for us there is no greater responsibility. The faith they place in us drives us to constantly improve and innovate to generate the strong returns they expect. We must constantly perform,” Miglis says, explaining why the firm, unlike publicly traded investment banks, always has to seek new opportunities, whether novel or just a subtly better way to trade in equities markets that are 100 years old.

The few stories separating the firm’s blade stacks from its traders, however, is where the separation between asset managers and technologists—both physical and cultural—ends.  

“Citadel has a fantastic culture of collaboration between our business leaders and technologists.  Our systems fulfill the needs of our portfolio managers’ vision, increasing our ability to capitalize on opportunities in the global markets,” Griffin tells Waters. Indeed, on the trading floors they are literally side by side, the technologists sitting with the businesses, or as Miglis proudly puts it, “the businesses sitting with the technologists.”

Little Acorns
Convertible bonds arbitrage, a historical strength on the firm’s asset management side, offers one illustration.

“To know how effective your model is in converts, the type of research you need to do requires almost industrial scale testing and calibration. We have some of the best quants in the world, but there is a two-way flow—we understand the world better because technology enables us to see the results over time and across parameterizations. We’re running our modeling approach back in time, and it’s going to take 10,000 cores about a week to do a study to help parameterize a new innovation, and we’re pushing limits on that constantly. The internal cloud architecture gives our head of quantitative research (QR) much higher throughput and lower turnaround time,” says David Grossman, a managing director.

Building those tools offers a profound opportunity for the firm’s technology staff, who are asked to make a difference right away. For example, the fund’s primary electronic QR environment for converts began as a plot tool, created as part of a project for a developer in the firm’s year-long, modular Financial Technology Associate Program (FTAP) training scheme. “Someone a year out of school plants a little idea—an acorn, really—and frequently those blossom into major technology investments,” says Ryan Garino who, with Grossman, co-heads Citadel’s credit desk. Both are going on a decade with the firm.

The Long Way
That opportunity reflects Miglis’ own background. An accountant by training and a graduate of City University of New York’s Baruch College, Miglis made it to Citadel via the long way around, and as an auditor, hard work was taught early. “When you’re auditing, you step into a firm and know nothing about it. You have a handful of weeks to figure out whether their books are accurate. No one is especially interested in talking to you, but you need to extract information from them to do the job.”

As a result, Miglis has an affinity for names a politician would envy.

“I had the good fortune of working in their mortgage business from the ground up. Here I was in their financial division, involved in writing collateralized mortgage obligation (CMO) indentures and bond administration for early deals, because it had to be done. It was about crossing boundaries,” he says.

Pushing them, too. Miglis recalls Lewie Ranieri, known as the inventor of mortgage-backed securities (MBSs), once calling up, asking him to execute a novel MBS product with deals already in place: “I told him, ‘Well, that’s impossible,’ and he shot right back, ‘I know, go do it!’ and hung up the phone.”