Hedge Fund Manager Ken Griffin Pursues Banking Alternative

The Citadel chief is assembling an army to fill the void left on Wall Street.


Kenneth Griffin, founder of one of the largest and most successful hedge fund firms in the world, has his own take on time.

His vision for the now $13 billion business stretches well beyond the time horizons of those of most of his hedge fund peers, who typically measure performance in years, not decades. That’s because running Citadel Investment Group is the only job the 41-year-old Griffin has ever had.

“This was not something that I started when I was 55 as a second career after Wall Street,” he explains, sitting in a conference room on the 37th floor of Citadel’s Chicago headquarters on a recent overcast autumn day. “This is something I started when I was 21. So from day one, I’ve always had a very different perspective on time and what time means and what the end goal might be.”

For much of the first two decades of Citadel’s existence, the end goal was simple: to build one of the preeminent alternative-asset management firms in the world. Griffin, who famously began his investment career trading convertible bonds from his dorm room at Harvard University, did just that. By early 2008 he was overseeing an army of more than 1,200 at Citadel, whose flagship Kensington and Wellington multistrategy funds had delivered net annualized returns of about 28 percent, soundly beating the Standard & Poor’s 500 index, which was up 11.4 percent a year during the same period.

Then came the collapse of Lehman Brothers Holdings. From September 2008 — when the 158-year-old investment bank filed for bankruptcy, sending a chill through the credit markets — through mid-December, Citadel struggled. Its multistrategy funds experienced three consecutive months of double-digit losses on their way to a 55 percent drop for the year, as Citadel’s convertible arbitrage and other credit-related strategies were hit especially hard by the global liquidity freeze. Griffin also had to deal with rumors that Citadel itself was teetering on the edge of insolvency and had been in talks with the Federal Reserve Board about a bailout. Time, it seemed, was running out for the billionaire investor.

On October 24, 2008, Griffin and chief operating officer Gerald Beeson held an impromptu conference call to squelch the market rumors, at the suggestion of Citigroup head of markets James Forese. They reassured the 1,000 or so people who dialed in for the 12-minute call that the hedge fund firm’s financing was secure: Citadel had more than 30 percent of its capital in cash, they said, as well as $8 billion in untapped bank credit lines. Still, much to the chagrin of investors, Griffin and his team announced less than six weeks later that they were suspending redemptions — putting up gates, in hedge fund parlance — thereby restricting people’s ability to get their money out of Kensington and Wellington to ensure that the firm wouldn’t have to dump positions at fire-sale prices. At the same time, they decided to reduce the risk in Citadel’s portfolios by exiting noncore investment strategies like merger arbitrage and reinsurance that required hefty leverage or where financing had disappeared.

The moves worked. By January, Citadel’s multistrategy funds were once again making money, well before the world’s equity markets bottomed out in March. The areas that had struggled the most in 2008 had the largest bounce in 2009, in particular convertible arbitrage, but Citadel had positive performance across all of its investment strategies, including long–short equity and energy trading. Through November the firm was well on its way to having its best year ever — its flagship funds were up about 59 percent — and talk of its demise had largely been forgotten.

But not by the opportunistic Griffin, who is looking to profit from the same market dislocations that could have taken down Citadel in 2008. Last winter, as his firm was starting to recover, Griffin dispatched one of his top lieutenants, Rohit D’Souza, to New York to develop a plan to launch a full-blown investment bank that could help fill the market void left by the Lehman bankruptcy and the shotgun marriages of Bear Stearns Cos. to JPMorgan Chase & Co. and Merrill Lynch to Bank of America Corp. Citadel Securities, as the new business is called, began hiring bankers and sales people in the spring. By October it had started trading high-yield debt for institutional clients. The next month, Citadel Securities did its first bond underwriting, a $500 million senior note offering for chip maker Advanced Micro Devices. In December it did its first loan deal, teaming up with Credit Suisse and Deutsche Bank as book runners on a $700 million secured credit facility for energy company Targa Resources.

Analysts say that it typically takes three years for a new securities firm just to reach breakeven, and an additional two years to achieve a reasonable return on equity. Although Griffin says he is willing to be patient, he thinks that Citadel can become profitable much faster by leveraging the expertise and technology of its existing client service businesses: Citadel Execution Services, which is the largest equity options market maker in the U.S., and Omnium, a $25 billion fund administration company formerly known as Citadel Solutions.

“Citadel Securities is the extension of a set of capabilities rather than a de novo startup,” Griffin says. “So that gives us a very different perspective on where we’re going to take this business.”

That may be true, but Citadel is far from the only firm hoping to capitalize on Wall Street’s troubles. Boutique investment banks like Evercore Partners and Moelis & Co. are already seeing a boost in their advisory business. They are benefiting not only from the disappearance of Bear, Lehman and Merrill but also from the fact that survivors of the financial crisis like Citigroup are hamstrung as long as they are partially owned by the U.S. government, which forces them to adhere to tough restrictions on risk-taking and compensation.

Private equity firms are also looking to get in on the action. Blackstone Group, which began doing restructuring and mergers and acquisitions work in 1985, has expanded its corporate advisory group during the past year. Kohlberg Kravis Roberts & Co. is building up its much newer capital markets business, which has focused initially on structuring investment products and underwriting equity and debt offerings for its portfolio companies.

And the competition is not limited to U.S. firms. Global players like Barclays and Macquarie Group have used acquisitions to bolster their U.S. presence. In September 2008, Barclays bought Lehman’s North American operations out of bankruptcy, giving the U.K. bank’s Barclays Capital unit a nice lift in the underwriting league tables (see “ Wall Street’s Would-Be King ”). This September, Australia’s Macquarie announced that it was acquiring Fox-Pitt Kelton Cochran Caronia Waller, a New York–based specialist investment bank focused on financial institutions.

“It’s breathtaking how the landscape on Wall Street has been altered,” says Robert Profusek, who chairs the M&A practice at law firm Jones Day in New York. “It’s not surprising that others are looking at the industry and saying, ‘It’s a very profitable business, and a lot of the capacity was either obliterated or is in limbo, so let’s move in.’”

As the battle for the future of Wall Street takes shape, Citadel has some distinct advantages. For a new firm, Citadel Securities is fairly well capitalized. Griffin and his partners (both internal and external to Citadel Investment Group) have staked it with more than $1 billion of their own capital and are prepared to put up another $1 billion. The privately held Citadel also is not likely to attract the same public scrutiny that has dogged Goldman, Sachs & Co. during the past year, as that firm has been lambasted by critics for the record earnings and bonus payments they say have come at the expense of taxpayers. Nor does Citadel have to worry about having government pay czar Kenneth Feinberg tell it how well it can compensate its bankers.

Citadel does need to be concerned about continuing the progress it made in 2009 in turning around its asset management business. At the end of November, Citadel lifted the suspension on redemptions; by early December investors had pulled out $1.1 billion from Kensington and Wellington, a sizable sum — though less than the $1.5 billion in redemption requests Griffin had received before putting up the gates. It could be a further 18 months before Citadel’s multistrategy funds start collecting their 20 percent performance fees again. In the meantime, Citadel has launched several single-strategy hedge funds, which are already collecting performance fees, but those have been slow to garner interest — and dollars — from investors.

Most important, Griffin and his team will have to convince potential clients of Citadel Securities — both corporations and institutional investors — that they can trust their livelihoods to a hedge fund firm.

“One of the challenges is dealing with the perception — on the part of the public, Congress and regulators — that hedge fund managers are cowboys and crooks,” notes Mitchell Nichter, who heads up the hedge fund practice at law firm Paul Hastings in San Francisco. “There are some bad apples, but that kind of generalization is totally inaccurate. Nevertheless, the perception is there, and it is going to have to be overcome.”

The information leakages and potential conflicts of interest are no different for Citadel Securities than for any investment bank whose firm does proprietary trading or has an asset management arm. For its part, Citadel is putting up the same Chinese walls and legal constructs around its securities business that have become de rigueur on Wall Street, made easier by the fact that its investment bank is being run out of New York, more than 700 miles from the firm’s Chicago headquarters. “The geographic separation really does help,” says one Citadel banker.

But will it be enough?

“If any firm is going to raise red flags, it is Citadel, because they are so smart and so aggressive,” asserts one former hedge fund manager who has known Griffin for more than a decade. “Ken has created the platinum standard in the hedge fund industry, but he doesn’t win style points.”

Griffin raised hackles on Wall Street in October 2008, just as the financial crisis was heating up, when Citadel announced that it had entered into a joint venture with Chicago’s CME Group to launch a clearinghouse and trading platform for credit default swaps. Some investment bankers saw it as an assault on their lucrative over-the-counter derivatives business. Griffin at the time said it was simply a way “to bring stability and transparency to the CDS market.”

Neither Griffin’s critics nor his fans likely were surprised by the news this October that D’Souza was leaving Citadel, barely one year after being hired to expand its capital markets business. Industry insiders who know D’Souza say that the former global head of equities and alternative investments at Merrill Lynch is a brilliant quant but not an obvious choice to lead a client-facing enterprise. “Rohit is an introverted engineering type,” explains one former colleague. “He is the guy you hire to build the engine, not to build the client relationships.”

Griffin turned to the hedge fund side of his business for a replacement, tapping Patrik Edsparr as the new global CEO of Citadel Securities. Although Edsparr, 43, built his star on Wall Street as a proprietary trader at JPMorgan before joining Citadel in May 2008 to oversee its fixed-income investments and European operations from the firm’s London office, he has had a lot of experience with clients — even more so since he arrived at Citadel. In his first year there, Edsparr held more than 150 investor meetings. “I spent a lot of time, primarily outside the U.S., seeing existing and potential new investors, talking about who is Citadel, what are our capabilities and how can we partner,” he says.

LIKE MANY PEOPLE IN THEIR 40s, Ken Griffin has gone through a midlife crisis. The difference is that he had his when he was in his early 30s. At the time, Citadel had about $6 billion in assets, ranking it among the biggest hedge fund firms in the world, and Griffin was enjoying all the trappings of wealth, including a $6.9 million penthouse apartment on Chicago’s Gold Coast and seats on the boards of Chicago’s Museum of Contemporary Art and Public Library Foundation.

“As some of the more material needs in life are satisfied, you take a step back and ask, What are my different choices in life? Why am I here, and what can I do?” Griffin says reflectively. “And that was actually quite liberating because, objectively, I thought about all the different things I could do with my time, about how I could spend my life in the business field, and I realized I could not pick a better platform to be a part of than Citadel’s — the scale, the relevance, the impact.”

Griffin considers himself a borderline workaholic, though in his case he doesn’t think the word should have a negative connotation (“This is fun for me,” he insists. “I love to build.”). As a teenager growing up in Boca Raton, Florida, Griffin co-founded a small computer company that sold educational software. When he got to Harvard in 1986, he got hooked on the market and by his sophomore year was managing more than $1 million in two convertible arbitrage hedge funds. After graduation one of Griffin’s investors introduced him to Frank Meyer, the founder of Chicago-based Glenwood Capital Investments, one of the world’s first fund-of-hedge-fund firms.

“Ken had two traits that I found impressive,” Meyer says. “He was well above average in pretty much everything he did, which is rare. And he had been an entrepreneur.”

Meyer was also impressed with the young trader’s ability to take a relative weakness and turn it into a strength. While Griffin was running his hedge funds at Harvard, he visited all of the stock loan departments on Wall Street, which provide the shares that convertible arbitrageurs need to short, and convinced them to give him a break. “Ken was tiny, but he was able to get terms similar to the Feshbach brothers’ [famed short-sellers during the 1980s], and they were managing a billion dollars,” Meyer notes.

In the fall of 1989, after graduating from Harvard in three years, Griffin moved to Chicago at the urging of Meyer, who gave him $1 million in Glenwood capital to manage. A year later, Meyer helped him raise $4.6 million for his first fund, Wellington Partners. By 1998, Citadel had expanded beyond convertible arbitrage into other quantitatively driven strategies like statistical arbitrage.

That same year, Citadel passed $1 billion in assets and Griffin convinced his investors to agree to new lockup terms that would significantly restrict their ability to get out their capital. Citadel also created its own securities lending operation and diversified its funding across multiple prime brokers. The changes helped the firm avoid getting caught in the fallout when hedge fund Long-Term Capital Management nearly collapsed after Russia defaulted on its bonds. In fact, Citadel was one of the better-performing multistrategy firms in 1998, with Wellington up 30.5 percent.

Although Citadel had reduced its liquidity risk by using multiple prime brokers, the firm was still vulnerable if a contagion were to sweep across Wall Street. “As the firm grew larger, we became focused on how we would mitigate that risk,” recalls COO Beeson, 37, who joined Citadel in 1993 as an accounting intern while he was an undergraduate at DePaul University in Chicago. In 2003, Citadel, which by then had gotten investment-grade ratings from Standard & Poor’s and Fitch, built the infrastructure that enabled it to go to the big banks around the world that were not involved in lending directly to hedge funds and borrow from them. In 2006, Citadel became the first hedge fund firm to do a public bond offering, raising $500 million in medium-term notes.

Throughout the past decade, Citadel has shown an uncanny ability to expand into new strategies at just the right time. In 2001, at the height of what would turn out to be a nearly two-and-a-half-year bear market, Citadel created its global equities team. The group, which has since grown to 145 people and is managed by co-heads Brandon Haley, Jeff Runnfeldt and Steve Weller, buys stocks long and shorts others based on analysis of company fundamentals. Citadel’s global equities strategy has made money every year of its existence, including 2008, generating roughly $6 billion in cumulative gains.

In 2002, following the bankruptcy of Enron Corp., Citadel launched an energy trading business, hoping to take advantage of the hole in the market left by the energy giant’s collapse. Mark Stainton, who joined the firm in 2006 from Deutsche Bank, heads Citadel’s energy team. In the fall of 2006, Citadel leveraged the team’s expertise to acquire, in partnership with JPMorgan Chase, what was left of the energy portfolio of troubled hedge fund firm Amaranth Advisors, which had lost more than $6 billion trading natural gas futures. For its part, Citadel made “well north of $1 billion” on the acquisition of Amaranth’s energy holdings, according to sources familiar with the situation.

None of this would have been possible without cutting-edge technology. During the negotiations to purchase the assets of Amaranth, the energy group used Citadel’s portfolio management software to analyze about 17,000 positions in Amaranth’s energy book. The global equities team is also a big user of technology; its analysts and portfolio managers are constantly collecting data and intelligence on thousands of companies around the world, which go into a central information system developed by Citadel called Viewpoint. Almost everything is automated at the firm, including the treasury function. “We self-fund, and we do that with technology while working in close collaboration with our business counterparts,” explains chief information officer Tom Miglis, 55. “We populate most of our funding by pressing a button and filling all the various funding counterparties with the asset that we want to put against that funding — electronically. ”

Miglis has broad Wall Street experience. In 1982 the former Coopers & Lybrand accountant joined Salomon Brothers, where he worked on the mortgage desk with market pioneer Lewis Ranieri. In 1987, after the October crash, Miglis moved to Salomon’s technology group; by 1996 he was running it. He left Salomon after Smith Barney acquired the firm the next year, and then, following a brief stint as CIO of Bankers Trust Co., which was bought by Deutsche Bank, he started his own consulting and software business.

In March 2001, Miglis got a call from Griffin, who was looking for help with some technology issues. Two weeks after they met, Griffin hired Miglis for a temporary assignment that would soon become permanent. By the fall, Miglis and most of his 35 employees had relocated from New York to Chicago, although the Citadel CIO to this day continues to commute home to Long Island on weekends.

Technology has been an important driver of the rapid growth of Citadel Execution Systems. The origin of the business dates back to 2003, when Citadel started making markets on the International Securities Exchange, whose electronic trading platform had by then begun to take meaningful business from the traditional options exchanges. Pretty soon the guys on Citadel’s desk were getting calls from the ISE looking to place trades for its clients. Griffin and his management team realized they couldn’t have traditional hedge fund people working with exchanges and broker-dealer clients, so in June 2004 they brought in Matt Andresen, the former CEO of electronic trading network Island ECN in New York, to build a client-facing market-making business. Andresen, who two years earlier had sold the privately held Island to Instinet for $568 million, says he didn’t expect to ever take another job where he wasn’t CEO but was blown away by Griffin’s intellectual curiosity during a marathon three-and-a-half-hour interview.

“Ken had the stones to offer me a job right on the spot,” Andresen recalls. “I tried to get out of it without committing, but I knew I would be coming to Citadel.”

Five years later, Citadel Execution Services accounts for more than 9 percent of the daily listed equity options activity in the U.S. and 4 to 5 percent of all trading in New York Stock Exchange and Nasdaq stocks (buying and selling as many as 1 billion shares a day). Citadel’s clients include Ameritrade, E*Trade, Morgan Stanley and Scott Trading. Because its market making is entirely automated, the firm can man the business with a team of just 28 people. Still, there was some consternation outside Citadel at the news last spring that Andresen was leaving. But Andresen, who was replaced as CES president by colleague Andrew Kolinsky, insists that he simply needed a break. “I had built these businesses, and they were mature,” he says. “At some point you have to turn over the keys.”

The firm’s other client-facing business, Omnium, is taking longer than CES to gain traction. Since Citadel spun out its internal fund administration operation as an independent company in May 2007, Omnium has won just 38 clients, and more than half of its $25 billion in assets under administration belongs to Citadel. Although those who have seen its fund administration software give it rave reviews, the challenge for Omnium president John Buckley and his team has been to convince potential clients that the information that travels over that technology won’t be used by Citadel’s hedge funds.

In 2008, when Chicago-based Wolverine Asset Management was looking for a new fund administrator, the firm was initially wary of doing business with its Windy City rival. “Going into the process they almost didn’t make our short list of potential administrators just because of the existence of the relationship with their hedge fund business,” says Wolverine chief operating officer Kenneth Nadel, whose firm manages an $800 million convertible arbitrage fund. “I think everyone is going to have that issue up front. But we decided let’s meet with them, because we had heard good things about them. They had put in place the right separations. Additionally, we came to the conclusion that it would not make sense for them to risk either of their businesses, particularly their hedge funds, by taking information across the line.”

Part of the problem may simply have been the name of the firm, which up until September was called Citadel Solutions. Now, however, the affiliation with Citadel’s hedge fund business could be a selling point, because any firm whose funds were down 55 percent and survived would have to have done something right. “Citadel’s extraordinary infrastructure helped it navigate the broad market dislocation of 2008,” says Buckley, who was co-CFO of Europe and Asia for Lehman Brothers in Tokyo before joining Citadel in May 2006. In August, Citadel got a big win when Alvarez & Marsal, which is overseeing the disollution of the Lehman Brothers estate, chose it to provide administrative services and create an asset servicing platform for the wind-down, which could take four years.

Griffin’s efforts to clean up the swaps market took a hit in September when the CME announced that it was dropping plans to use the electronic trading platform developed by Citadel and would instead simply offer clearing for CDS contracts. “We moved away from the execution platform because there isn’t sufficient demand for it,” says CME chief executive Craig Donohue. “Change is hard.” Citadel also saw its stake in the CDS initiative diluted as several other firms joined as partners, including AllianceBernstein Holdings, BlackRock, BlueMountain Capital Management, D.E. Shaw & Co. and Pacific Investment Management Co.

PATRIK EDSPARR REMEMBERS EXACTLY what he was doing when he got a call from his boss, Ken Griffin, in October with a job offer he couldn’t refuse. Edsparr, the London-based CEO of Citadel Europe, was on holiday with his wife and three young daughters in Jordan, and they were on their way to the Dead Sea when Griffin called to tell him that Rohit D’Souza was leaving the firm. So while his daughters floated in the water (it’s virtually impossible to sink in the Dead Sea because of the high salinity), Edsparr spent his vacation time on the phone with Griffin floating ideas about Edsparr’s new role as head of Citadel Securities.

Griffin first met Edsparr in 2004 when the two sat next to each other at a dinner thrown by JPMorgan to celebrate the reopening of New York’s Museum of Modern Art. Edsparr at the time was head of global proprietary trading for the bank, and he and Griffin talked occasionally over the next few years. When Griffin recruited him in March 2008 to join Citadel, the timing of the move was questioned by the senior management of JPMorgan because the bank was in the process of buying the troubled Bear Stearns and Edsparr, in addition to his role as head of proprietary trading, was responsible for JPMorgan’s fixed-income, foreign exchange and interest rate businesses. Tensions between JPMorgan and Citadel escalated over the ensuing months as Griffin hired away several members of Edsparr’s team, culminating in late September in a one-day ban by the bank on trading with Citadel, just as the financial crisis was heating up.

In his new job, Edsparr intends to follow the strategic plan developed by D’Souza and others to roll out the securities business in stages, starting with institutional sales and trading of high-yield and investment-grade debt. “There are not that many meaningful high-yield and investment-grade trading firms out there, so you don’t get lost in the clutter,” Griffin notes, “whereas the world is filled with hundreds of equity sales and trading and research boutiques.”

Griffin didn’t have to look far for a person to lead the build-out of Citadel Securities’ sales and trading operation. In March 2009 he tapped Peter Santoro, who had joined Citadel’s global markets and quant strategies group the previous July from Citigroup, where he had been global head of equity trading. During his first eight months on the job, Santoro met with at least 600 potential new hires, including analysts, salespeople and traders, as Citadel Securities grew its institutional markets team to more than 40 people.

In early December, however, Santoro abruptly left the securities firm after Edsparr brought in two senior members from the asset management side of the business: Chris Boas, who had been global head of structured credit trading at Morgan Stanley, assumed the new position of global head of credit markets, and Ravi Mattu, Lehman Brothers’ longtime global head of equity and fixed-income research, became global head of research and strategy.

“Citadel has built a deep pool of talent,” says Sean McGould, president and co-CIO of Lighthouse Investment Partners, a longtime Citadel investor. “If you’re not performing, you are not going to be there very long. Citadel is not afraid to make changes.”

Citadel began trading high-yield and investment-grade debt early this fall and by December had 400 clients, including traditional money managers, hedge funds and pension funds. Edsparr expects the firm to roll out trading in equity derivatives next, probably by February, followed by cash equities sometime later in 2010. The latter will be accompanied by the launch of an equity research operation.

During the build-out the institutional markets team has worked closely with Miglis’s technology group to develop sales and trading systems. Unlike Citadel Execution Services with its fully automated market-making operation, Citadel Securities requires technology that can support electronic and human trading. “We’re trading actively in the corporate bond market in both high touch and low touch — low touch being trading in electronic venues, high touch being talking to clients via a sales force,” Miglis explains.

Citadel has been able to speed up development time by leveraging the hundreds of millions of dollars it has spent on technology over the past two decades for its administration, asset management and market-making operations. For example, Citadel Securities’ custom-built Portfolio Monitor software has many of the same features as Citadel Investment Group’s trading software, which posts changes to a portfolio in real time and to the books and records within one second of a trade’s being placed, giving a real-time view of P&L risks and positions. Citadel Securities is also using Omnium to handle many of its back-office needs rather than building its own capabilities.

Technology, however, will have little to do with the success of Citadel Securities’ advisory business. “Our approach to investment banking is no different than any other firm’s,” says Citadel investment banking head Todd Kaplan, a 22-year Merrill Lynch veteran. “What distinguishes us is a combination of our relationships, ideas and strategic focus.” The 45-year-old banker has known Griffin since the 1990s, when Kaplan’s group at Merrill Lynch was an active player in the convertible bond market. Kaplan left Merrill in November 2008, not long after BofA announced it was acquiring the firm, and began talking to Griffin last winter about what it would take for Citadel to launch an investment bank.

Kaplan, who had been the global head of leveraged finance at Merrill from 2003 up until his departure, joined Citadel in March to begin building his team. In May he brought aboard Merrill colleagues Brian Maier and Carl Mayer as head of industry groups and head of leveraged finance, respectively. It was Maier who reeled in one of Citadel Securities’ first advisory clients: casino operator Fontainebleau Las Vegas Holdings, which has been operating under bankruptcy court protection since June.

Building trust will be critical for Citadel. The firm can put all the proper safeguards in place to ensure that clients’ information remains sacrosanct — which head of global compliance John Nagel says it is doing — but ultimately, it will be the quality of service of the team that Edsparr is assembling that will determine its fate. It will have to deliver that service without any day-to-day involvement from Griffin, who, from his perch on the other side of the Chinese wall in Chicago, is focused on continuing the turnaround in Citadel’s hedge fund business. That won’t, however, prevent Griffin from spreading the Citadel Securities message when he meets with CEOs of other companies and money management organizations.

“Right now there’s a window of opportunity for firms to enter the securities market,” he says. “And that window will close again, the barriers to entry will rise again, and it will revert back to the way it was. But right here, right now, there is a need in the marketplace that’s unfulfilled, and we hope to fulfill it. And if I didn’t do it now, I wouldn’t try it in my career. This is it.”

Citadel will need to move quickly. Since Griffin began building out his firm’s securities business last spring, the financial markets have recovered sharply and his competition — both legacy players and new entrants — has been emboldened. The new establishment will soon be closing ranks.