FT: Goldman Sachs eyes tech and data analytics to “fix” fixed income

FICC’s (fixed income, commodities and currencies) contribution to Goldman’s group-wide revenue peaked at just over 52%, or $23.3 billion, in 2009. Last year, FICC generated $5.9 billion of revenues, as it fell to just 16.1% of group-wide revenue, its lowest level in at least 20 years. The decline since 2016 is 22%, worse than peers.

Facing a crescendo of calls to “fix” FICC, David Solomon, the new chief executive who has no ties to the trading side of the business, is changing course. Solomon is gambling that Goldman can do new things: from adding cash management services typically offered by commercial banks to opening up its technology platform in the same way as Google Maps has done for Lyft, the ride-hailing app.

Goldman sees mastery of technology as an accelerant, much as it has quickly built a sizeable retail bank by investing in a clean website and avoiding the bricks-and-mortar branches that encumber rivals. “There are things that clients aren’t getting from those big players — the technology and data analytics. With a white sheet of paper we think we can really solve their problem,” Solomon said in February.

Some clients already connect directly with Goldman through its digital trading and risk management platform Marquee, which Jim Esposito, co-head of the FICC division, describes as “our digital storefront for institutional investors”, with 13,000 monthly active users. “Our ambition is large,” he said. “Longer term we want every existing Goldman Sachs institutional and corporate client to use Marquee and we’re optimistic this platform will attract many new clients too.”

Greater use of technology is supposed to improve efficiency across the business. Ezra Nahum, co-head of Goldman’s securities engineering division, said one of the biggest change since Solomon took over is the “front to back” strategy which requires trading executives to take responsibility for the entire life cycle of a trade, rather than just focusing on bringing in business.

One large asset manager said that Goldman was sharing technology and ideas and expressing an interest in trying to solve his problems. “Of all the sell-side firms, they probably have turned that ship around more than anybody else,” he said. He has significantly increased the business he does with Goldman in the last two years.

Also, in a focus on fintech investment, the FT’s John Thornhill spoke with Rana Yared, a partner and managing director at Goldman Sachs’ Principal Strategic Investments, about how technology is transforming the banking industry. Failing fast in banks is not an option, she noted, so “strategic” investment (which at Goldman Sachs is pegged at $1+bn of balance sheet) is the way forward.

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