Citadel is rebuilding a core tech platform to transform how the hedge fund uses data. 2 tech leaders take us inside the multi-year project.

• Citadel is completely rebuilding a new platform for all of the hedge fund’s reference data.
• Reference data is used to identify different securities when making a trade.
• The platform is currently being rolled out and will let the fund move into new asset classes faster.

Making changes to a core system on Wall Street is akin to having heart or brain surgery.

Engineers and senior tech executives, like surgeons and doctors, exercise caution when detangling complex webs of systems. A single blunder, such as failing to recognize an outlier or a typo buried deep within a piece of code, can bring down an entire ecosystem of applications.

Engineers at Citadel, the country’s most powerful hedge fund, are currently ripping out and replacing one of the core systems: the reference-data platform.

Reference data is information related to specific aspects of a given trade, such as what is being traded (such as a security or derivative), who is trading (the counterparties involved), the value or price of a trade, and so on.

Citadel’s reference-data systems are massive, containing the entire universe of products across all markets, with each product and market tracing back to millions of entities.

Reference data, and the systems that store it, play a significant role in every single trade executed at Citadel. This is due to the fact that reference data is the standardized language used to communicate information about trades and everything related to them.

Having a system that can scale with market growth and support the complexity of multiple trading strategies can have a cascading effect on the firm’s overall efficiency. However, Citadel’s rapid growth was being hampered by the existing solution, an unwieldy combination of legacy systems that required an upgrade.

The transition to a new reference-data platform is currently underway. Every trading desk will be affected, from equities to fixed income, quantitative research, commodities, credit converts, and equity volatility. Citadel will begin to phase out the legacy system as early as 2024.

Citadel claims that with the new solution, it will be able to enter new asset classes much more quickly. Developers will be able to create new tools more quickly. If successful, the entire organization — both the hedge fund and Citadel Securities, the market maker — will move more quickly and precisely.

“There isn’t a team or system in the organization that does not touch this platform,” Rituraj Deb Nath, head of enterprise data engineering, a group that oversees the hedge fund’s and Citadel Securities’ reference data and pricing requirements, told Insider.

“Before you can do anything in the market, instruments must be defined.” You can’t trade it, you can’t quote on it, you can’t risk it, and you can’t figure out how much it’s worth without it. And the precision with which you can do that, the clarity with which you can express that, is critical to the overall efficiency of the firm,” Deb Nath explained.

Citadel, on the other hand, approached building a new reference-data system from the ground up in the same way the hedge fund approaches investing: with meticulous planning and analysis.

“It’s very rare for financial institutions to rebuild something as core as the reference-data infrastructure,” said Robert Tan, the project’s lead engineer. Tan came to Citadel from Google in 2019 as part of the hedge fund’s elite recruitment program, NXT.

“It’s used frequently and is something that many people would be afraid to touch,” Tan explained.

The new platform was built to set up Citadel for future generations and asset classes

Tan stated that Citadel completed planning, analysis, and development work throughout 2022. Businesses have been transitioning to the new platform in recent months. The cost of the rebuild was not disclosed by the company.

Citadel was mostly an equity and fixed-income shop nearly 20 years ago when the previous reference-data platform was built, not the multi-strat giant it is today.

The older platform “served us well through nearly two decades of investment, but as markets matured and Citadel’s businesses evolved to incorporate new strategies, we found ourselves needing to handle additional complexity,” said Deb Nath, who has had a storied tech career on Wall Street at sell-side powerhouses such as Bank of America and Goldman Sachs.

Citadel discovered that, in addition to updating old technology, it needed to respond to the ever-changing market faster. “When new opportunities emerge, we need to respond quickly — and that necessitates a flexible platform designed to handle a diverse set of instruments and markets,” Tan explained.

Citadel can respond to new asset classes entering the market with the new platform. Tan explained that when new asset classes emerge, which they do with greater frequency and shorter time horizons these days, a swath of back-end processes are required to begin working with them, from sourcing the data to representing and pricing them.

Tan explained that the new platform is designed to allow for the rapid adoption of new trading strategies and asset classes, sometimes in a matter of days.

There is also more crossover between trading desks, making precise communication between different businesses even more important.

“It’s critical for our systems to be able to accommodate growth in various asset classes and support the ever-increasing crossover between them,” Tan said.