Goldman Sachs Group Inc (GS) to Vend Floor-Trading Biz

Goldman Sachs

Goldman Sachs Group Inc (NYSE:GS) has agreed to sell its operating rights as a designated market-maker in the New York Stock Exchange (NYSE) to IMC Financial Markets, according to a report by The Wall Street Journal. However, Goldman, which joined NYSE in 1896, will continue to serve as a brokerage firm for the NYSE-listed stocks.

Based in Amsterdam, IMC (International Marketmakers Combination) Financial Markets is a high-speed trading firm and operates in over 90 exchanges around the world. Owing to the deal, the company will recruit 15 floor brokers from Goldman Sachs Group Inc (NYSE:GS).

The designated market-maker unit or the floor trading business was added to Goldman’s operations when the company purchased Spear, Leeds & Kellogg, one of the largest trading firms, for $6.5 billion in 2000. Though no official figure has been revealed, the deal value is expected to be below $30 million.

Goldman’s decision to exit this business reflects the ongoing weakness of the floor trading business. In this arena, a number of brokers facilitate stock trading in exchanges by providing quotes (ask/bid price) for buyers and sellers in opening and closing session of every business day. However, new regulations and strong presence of electronic trading that facilitates trading with ease and accuracy, has led to the gradual fading of floor traders who once dominated the markets.

We believe the initiative is a part of Goldman Sachs Group Inc (NYSE:GS)’s strategy to offload businesses with declining yields and focus more on profitable ventures.

Others companies that have sold their market making units in the past few years include Bank of America Corp. (BAC).

Notably, with gradual decline in the floor trading business, there are a meager six market-makers left on the NYSE floor including Barclays PLC (BCS) and KCG Holdings, Inc. (KCG).

Goldman currently holds a Zacks Rank #3 (Hold).

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