Friday, May 1, 2009

Goldman Sachs Principal Transactions Update: 1 Billion Shares

Update: It is, of course, Goldman's prerogative to provide their view on the matter. Below is a quote from Goldman Sachs spokesman Ed Canaday (hat tip Felix Salmon):
The NYSE report that Zero Hedge discussed shows Goldman Sachs trading over 1 billion shares in the principal program trading category. What the table doesn’t show, but a deeper look at the numbers reveals is that the vast majority of this total is trades by our quantitative trading desk. This desk is participating in a relatively new NYSE program called Supplemental Liquidity Providers. The NYSE started the program to attract liquidity to the exchange. As an SLP, this the desk makes markets in NYSE stocks. They often do high-frequency trading (which is simply auto-quote market making) where they send out hundreds of “baskets” of stocks at one time. Program trading, as defined by the NYSE report is any strategy that sends out a “basket” of 15+stocks at one time. I am happy to discuss this with you if that description doesn’t make sense.
Zero Hedge will counter with its thoughts at the earliest available opportunity. However, it is curious to note that according to this disclosure, Goldman is now fully channeling its quant trading ("high-frequency trading" as disclosed by Canaday) which is much more than "auto-quote market making" through its program trading. An immediate question for Mr. Canaday is whether Goldman Global Alpha is also part of this hi-fi trading. As for the SLP program, maybe GS can disclose just what is the basis of trades that according to their program trading desk provides "supplemental liquidity"? I am sure both GS shareholders and ZH readers would be happy to get much more information on this matter.


Weekly NYSE program trading update. No surprise from last week, with Goldman dominating program principal trading. Curiously non-principal transactions (facilitation and agency) at Goldman are shrinking dramatically and the ratio of Principal to Non-Principal is a recent record at over 7x. Goldman's non principal transactions are much lower than almost other top 10 NYSE member firms. Also curiously total Program Trading volume has declined significantly from 5.1 billion shares in the prior week to 4.8 billion shares in the last week.

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