Goldman Sachs (GS) Prepares Prop Trading Shake-Up
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Goldman Sachs Group Inc. (NYSEL GS) is preparing to comply with the new financial reform bill that limits the risk taking activity of banks on Wall Street, by shifting its proprietary traders to its asset management division, according to FOX Business Network’s Charles Gasparino on Thursday.
The move could be announced as early as Friday, and it involves turning the firm’s proprietary traders into asset managers that will invest client money in hedge funds controlled by Goldman.
The firm hold the largest proprietary trading operation on Wall Street, totaling roughly 1,000 traders. Goldman is moving the traders into the asset management division to take advantage of a loophole in the “Volcker Rule” that prevents banks from engaging in proprietary trading.
The proprietary traders have used the firm’s own capital in the past to make risky market bets, a practice that the FinReg bill has been put in place to curb.
The Volcker Rule limits banks to having only 3 percent of its own capital in private equity, while Goldman has an estimated 30 percent of its more than $100 billion in assets comprised of company money, according to Gasparino.
Morgan Stanley (NYSE: MS) and Bank of America (NYSE: BAC) are both reportedly preparing to cut assets and close businesses to comply with the new regulations, but Goldman moves may be the most significant due to the size of its equity operations.
Rochdale Securities analyst Richard Bove said that the new regulations may in fact benefit Goldman, as it will take risk off the firm’s balance sheet while creating more fees from client money.
Shares of Goldman Sachs closed the regular trading session on Thursday down 57 cents to $155.84.
The move could be announced as early as Friday, and it involves turning the firm’s proprietary traders into asset managers that will invest client money in hedge funds controlled by Goldman.
The firm hold the largest proprietary trading operation on Wall Street, totaling roughly 1,000 traders. Goldman is moving the traders into the asset management division to take advantage of a loophole in the “Volcker Rule” that prevents banks from engaging in proprietary trading.
The proprietary traders have used the firm’s own capital in the past to make risky market bets, a practice that the FinReg bill has been put in place to curb.
The Volcker Rule limits banks to having only 3 percent of its own capital in private equity, while Goldman has an estimated 30 percent of its more than $100 billion in assets comprised of company money, according to Gasparino.
Morgan Stanley (NYSE: MS) and Bank of America (NYSE: BAC) are both reportedly preparing to cut assets and close businesses to comply with the new regulations, but Goldman moves may be the most significant due to the size of its equity operations.
Rochdale Securities analyst Richard Bove said that the new regulations may in fact benefit Goldman, as it will take risk off the firm’s balance sheet while creating more fees from client money.
Shares of Goldman Sachs closed the regular trading session on Thursday down 57 cents to $155.84.
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