Goldman Sachs is in the process of combining its high-touch and low-touch equities trading desks by breaking down the legal entity broker-dealer barriers that separate the two.
According to a Goldman source, the aim is to achieve technological and operational efficiencies and to offer clients the ability to opt in and choose one point of contact for both their electronic and block trading needs. They can still choose to have an order worked by either the cash or electronic desk.
At present, any merger doesn’t necessarily mean the buyside trader will only get coverage by one sales exec instead of two,
Buyside clients will have the ability to choose how their orders will be worked, according to Goldman. That is, a buyside trader can either “opt in” and have orders worked by the new combined desk -one touch – or can “opt out” and have the order handled in the traditional fashion exclusively by either the cash or electronic sales traders, Goldman tells Traders Magazine.
Why the merger?
Goldman is not alone in this business model change. This is part of a trend that is shaping up among the larger bulge bracket brokers that began last year. Cost control is the driving factor. With commissions down, margins are pinched.
The buyside knows the brokers are looking to more efficiently service their trading needs while maintaining profitability in the current trading environment.
“I am well aware that many of the bulge brackets are reducing their “touch-points” with buyside trading desks and research departments with various large asset managers as they try and manage their costs and head count,” said Robert Felvinci, director of portfolio management and trading at Spinnaker Trust in Portland, Maine. “I believe we will continue to see this consolidation until bulge brackets feel they have their costs under control.”
Goldman expects to complete the merger by sometime in the second quarter.
