One Kronos is a new type of stock exchange, similar to NASDAQ, handling over 0.3% of all US equities trades daily within three years of launching, totaling billions of dollars in trades.
The platform enables advanced, atomic trades that are especially valuable to institutional investors, such as executing complex strategies in a single bundled transaction.
Founders Kelly Littlepage and Steven Johnson discuss their journey from early friendships and technological tinkering in Colorado to launching a company fundamentally changing institutional markets.
The founders met in middle school and bonded over a shared interest in computers, later maintaining their relationship through college and different tech careers.
Academic experiences, especially in auction theory and physics, influenced their view of market structures as computational and mathematical problems.
Exposure to real-world trading problems and auction theory led to the realization that capital markets could benefit from new types of exchange mechanisms.
Concept Development and Technical Foundations 03:18
The founders connected problems experienced in trading (such as mismatches in how markets and traders interact) with their backgrounds in cyber security and large-scale data analysis.
They viewed stock exchanges as distributed databases, identifying latency and arbitrage conditions as technical challenges to be solved.
Their focus shifted to developing an exchange immune to latency race conditions and building advanced optimization and matching techniques.
Initial conception began around 2011, with the project officially starting as a company in 2016 after the founders left their jobs and joined Y Combinator (YC).
The journey to launch included navigating YC rejections and advice to build quick MVPs, but ultimately took five to six years and $10 million to fully launch.
They addressed not only scaling complex optimizations but also making combinatorial auction concepts accessible to market participants.
The process involved educating regulators on their novel exchange mechanics, as One Kronos departed from ubiquitous market models like price-time priority.
The technical and regulatory challenges were compounded by the need to legitimize their approach, including fulfilling mundane requirements like demonstrating in-office printing capabilities.
They streamlined operations, automating regulatory tasks wherever possible, and benefited from growing industry conviction in their model.
They faced the daunting commercial challenge of attracting initial liquidity, requiring both buyers and sellers on day one.
Early adopters connected to the exchange despite minimal liquidity, motivated by the potential for market innovation and first-mover advantages.
The first day saw just 200 shares traded; it took multiple months before substantial trading activity and a growth “hockey stick” occurred.
Motivation and Persistence in the Face of Doubt 15:14
Despite years of skepticism and the absence of early trades, the founders were encouraged by consistent feedback affirming the correctness of their model, even as many doubted its feasibility.
Their commitment stemmed from a first-principles belief in the problem and a determination not to abandon an idea they felt must exist.
The founders describe how traditional markets often force participants into inefficient strategies due to sequential auctions, leading to exposure problems and missed opportunities.
Combinatorial auctions, like those used in FCC spectrum sales, allow participants to express complex constraints, leading to more efficient, risk-managed outcomes.
One Kronos introduces atomic, multi-asset trades where constraints are embedded, fundamentally changing how trading algorithms interact with the market.
The company operates with a team of about 40 people, handling a significant share of US equity trading with a mix of employees from technical and finance backgrounds.
Their culture emphasizes engineering, first-principles thinking, and maintaining a small, highly effective team, inspired by companies like WhatsApp.
The founders discuss the tradeoffs of leaving lucrative finance jobs to pursue risky startups, noting the importance of passion for the problem over financial incentives.
Personal and family considerations played roles in their decisions, with minimizing regret and being comfortable with uncertainty as guiding principles.
The founders encourage others from quant finance backgrounds to tackle unsolved problems in financial infrastructure, noting the challenges posed by limited public information.
The field requires a critical systems engineering mindset rather than a “move fast and break things” approach, given the scale and stakes involved.
Their long-term mission is to drive the cost of matching trades to zero, aligning profits with genuine user value, and continuously breaking down complex sub-problems in market infrastructure.