Thursday, October 15, 2009

Goldman: Our Trading Profits Come Because of Speed

The highlight of the Goldman investor conference, held this morning after Goldman reported earnings, was the mysterious high velocity trading that Goldman condicts.

Goldman CFO David Viniar during the call said:
Most of our revenue in trading. It’s been our client trading. There has not been a lot of write up of our assets. It’s been mostly client driven, helping them make markets….the velocity of our assets are so fast that the spread really doesn’t affect it.
Analyst Mike Mayo asked:
Can you quantify trading velocity?
Viniar responded:
Hard to do. What we are losing in terms of margins, we are making up for on how quickly we are able to move it.
That was the end of the discussion on velocity trading, but as Michael Corkery at WSJ, who live blogged the event, put it:
Goldman emphasizes that its success it not because it’s necessarily smarter at making traders, it’s just faster. Key word of the third quarter: “Velocity”
So what is this "velocity" all about? Who knows? Max Kaiser seems to think it is front running, it may very well be. You really need someone at Goldman or the NYSE to explain the high flying black box that Goldman is using. That's the only way to understand it, for sure. Goldman has captured the NYSE, so they are as likely not to tell you as Goldman itself.

I'm working on a couple of leads that might provide some info, but I could use more. Anyone who is familiar with what Goldman is doing, please feel free to contact me anytime at Confidentiality is guaranteed.

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