Stay informed with free updates
Simply sign up to the US & Canadian companies myFT Digest — delivered directly to your inbox.
Sam Bankman-Fried’s shambolic rise and fall brought unwanted attention to Jane Street, his former employer. But on Wall Street the trading firm has long been whispered about as its least-appreciated but most consistent money machine.
We got another reminder of that overnight from Bloomberg News, which has gotten its mitts on some financials that the otherwise secretive Jane Street revealed as part of its borrowing programme:
Jane Street Group LLC reeled in $7.3 billion of net trading revenue in the first nine months of last year, as the proprietary trading giant benefited from market swings and an expansion of its products.
The figures — disclosed to investors as part of a debt deal — also showed the company expected to generate $3 billion to $3.5 billion of net trading revenue in the fourth quarter, according to people familiar with the matter. That would bring it close to the $10.7 billion it made in the full year of 2022, the people said, asking not to be identified discussing private information.
. . . The firm’s total trading revenue for the first three quarters of 2023 was more than $15 billion, after accounting for dividends and interest among other items, the people said.
It also delivered about $4.9 billion of earnings before interest, taxes, depreciation and amortization during that period, compared to $7.9 billion for the full year 2022, according to the people. Jane Street estimated fourth quarter Ebitda in the $2.2 billion to $2.7 billion range, which would put the full-year figure around $7.1 billion to $7.6 billion, less than the year prior.
Those are gobsmacking numbers for a small trading firm that is still virtually a cipher even in swaths of the finance industry. The more widely-known Citadel Securities reportedly generated revenues of about $7.5bn in 2022, and $4.5bn in the nine months through September 2023. Wot losers.
For comparison, Coalition Greenwich estimates that the entire combined revenues of the bond, currency, commodity and equities trading businesses of -deep breath- Bank of America, Barclays, BNP Paribas, Citi, Deutsche Bank, Goldman Sachs, HSBC, JPMorgan, Morgan Stanley, SocGen, UBS/CS and Wells Fargo will clock in at about $141bn this year.
In other words, Jane Street alone makes about 7 per cent of the revenues of the combined trading armies of Wall Street’s biggest firms.
And those companies are vastly larger. Ca $10bn of net trading revenues would equate to about $5mn per Jane Street employee on average (that includes the secretaries). Goldman Sachs’s 2022 revenues per employee was about $977,000. Even at Blackstone the number is “only” $1.8mn.
And the profitability is wild, with most of it clean profit. Assuming that Q4 earnings come in as Jane Street is guiding lenders then total 2023 ebitda of about $7.5bn is not far from the operating income of Fidelity, a financial behemoth with about $4tn of assets under management and tens of millions of savings, trading and pension accounts that oversee over $10tn.
Jane Street is especially known for its prowess as an “authorised participant” in the ETF market (it is notable how it is named as an AP in all 11 bitcoin ETF proposals). While impossible to know how its trading revenues break down by segments, it’s not implausible to believe it’s making more money out of ETFs than BlackRock (whose $3tn iShares ETF business generated $5.5bn of revenues in 2022).
Unsurprisingly, Jane Street is said to be among the best-paid places to work in finance. Levels.fyi, a site that tracks developer compensation, listed Jane Street as the best payer for entry-level engineers in 2023 (and far ahead of its nearest rivals) with fresh graduates taking down $325k a year.
Anyway, this is a (very) long-winded way of saying phoaarrrrr, and hopefully elicit some good tips, as another deep dive into Jane Street might be overdue. Surely they must be due for a stumble soon?
