Bond bot bonanza
Goldman program is trader-free zone
Goldman Sachs is a moneymaking machine — literally.
The Wall Street firm is planning for a future when more bond trading is done automatically by computers, a departure for a line of business that heretofore has been both human- and capital-intensive.
The program, called Goldman Sachs Algorithm, has been around for about a year, but the bank has started using it to execute smaller corporate bond trades, according to a report on Wednesday.
The GSA push is occurring in the wake of the greatest number of layoffs since the aftermath of the financial crisis. In New York alone, Goldman has cut roughly 420 jobs this year.
While Goldman is mum on the breakdown of those layoffs, industry watchers believe at least half of them were traders in the fixed income, currencies and commodities group.
Goldman’s FICC headcount is down about 10 percent since 2012, while pay and benefits are down around 20 percent over the same period, according to a May presentation by the bank.
“While electronification has been unfolding in equi- ties for some time, we have also seen an electronic evolution across certain FICC products, with regulation helping to accelerate this shift,” Gary Cohn, Goldman’s chief operating officer, said at that time.
A Goldman spokesman declined to say how much the bank will trade through GSA, adding that comparing compensation for bond traders and the cost of a computer algorithm is like “apples and oranges.”
Electronic trading is nothing new in some markets — most stocks are traded automatically by computers — and the bank acquired a new electronic stock-trading company earlier this year.
But bonds are trickier to automate in a market that largely relies on people to haggle over price and bond prospectuses that can run hundreds of pages.
The Financial Times first reported on the GSA expansion.