According to The Financial Times Goldman could be one of the first banks to use electronic trading for all its FICC (Fixed Income, Currency and Commodities) business:
Goldman’s fixed income, currency and commodities unit, or FICC, has historically been one of the largest profit centres for the bank. But new rules and difficult markets have eaten into its profit margins, causing net revenues at the division to slump by a third in 2011 to $9.02bn, the lowest level since 2008.
Now the bank is considering implementing electronic trading platforms for its FICC business, marking an important departure for the unit, which has traditionally prided itself on “high touch,” or traditional trading, undertaken by desk-based brokers on behalf of the bank’s clients.
Wall Street’s biggest firms are grappling with how they should respond to new rules governing banks and markets, with many thought to be torn between pushing back against change, or winning first-mover points through early adaptation. Goldman is expected to be among the hardest hit by these new rules, which ban banks from proprietary trading and also seek to make markets more transparent by moving more products on to exchanges.
Rates and currencies, where technology is more advanced, are thought to be the prime contenders for electronic trading.
“Banks and brokers need to incorporate a greater use of computerisation and technology in fixed income, similar to what the equities segments had to deal with [more than 10] years ago,” said David Hendler, banking analyst at CreditSights. Doing so would also help Goldman lower costs, he said. “Goldman Sachs and others are waiting for the final Volcker and derivatives rule making under Dodd-Frank before they can redesign and begin implementing more electronic platforms,” he added.