Goldman Sachs has created a new team to take on high-speed traders like Virtu and Citadel Securities at their own game (GS)
- Goldman Sachs is hoping a brand new technology team will help the trading giant better compete with the fastest traders on Wall Street.
- Raj Mahajan, who joined the firm in 2015, will run the new group alongside Konstantin Shakhnovich and Ezra Nahum.
- The three will report jointly to the chief information officer and the leaders of the securities division.
- Large banks are looking for ways to compete more effectively with the likes of Citadel Securities and Virtu, which have shown an ability to innovate more quickly due to their smaller teams and flatter organizational structure.
Goldman Sachs is taking a bold step to improve teamwork in its securities division and better compete with the fastest traders on Wall Street.
The investment bank has created an engineering unit within its sales-and-trading division that will now oversee the front-to-back development and management of trading systems, according to a series of internal memos obtained by Business Insider.
Raj Mahajan, brought on in early 2015 to overhaul the technology underpinning Goldman’s equities trading unit, will be one of three co-heads of the new division. Konstantin Shakhnovich and Ezra Nahum will also share duties.
All three will report jointly to Elisha Wiesel, the firm’s chief information officer, and the leaders of the securities division, which houses the units trading stocks, commodities, currencies and fixed income securities.
The new structure replaces a patchwork of technology teams that didn’t always answer to the securities division leaders. And the new team will be in charge of just about every technology function that touches a trade, from the moment it comes into the firm to the final stages of clearing and settling.
Integrating the process, front-to-back, under one team means the securities division will own the technology and, in theory, allow it to be more nimble in answering client demands.
A common complaint across Wall Street has long been that engineering and control employees who don’t interact with clients aren’t as attuned or accountable to customer needs as the front-line traders. That’s been true at Goldman Sachs as well, according to insiders.
That structure has held back Wall Street banks like Goldman as they look for ways to compete more effectively with the likes of Virtu and Citadel Securities, newer market-making entrants that have shown an ability to innovate more quickly due to their smaller teams and flatter organizational structures.
Elsewhere on Wall Street, Credit Suisse has taken a similar approach to better position themselves against the fastest traders on Wall Street. Recently, the firm announced it was bringing together high touch, program trading, and electronic trading groups under a single umbrella, led by electronic trading veteran Anthony Abenante.
Investors are also judging banks on how fast or cheaply they can execute trades after new European rules forced the separation of trading commissions from research. In the past, many banks could count on trading business in return for valuable research.
The reshuffling also addresses one of David Solomon’s key concerns. The Goldman Sachs president and presumptive replacement for CEO Lloyd Blankfein has been considering ways to improve internal communication so that the bank can more seamlessly deliver products and services for clients, according to people familiar with his thinking.
There’s a belief that the divisional structure and existing silos may be preventing Goldman from best serving clients. There’s talk internally about considering a different setup than the historical divisional setup, according to people with knowledge of the discussions.
Mahajan’s elevation also means new jobs for other executives. Michele Docharty, co-head of synthetic product distribution, will also now run global execution services in the Americas, while Liz Martin will handle the global day-to-day responsibilities for electronic trading from London. Notably, they are among the more senior women in the securities division.
Sean Hoover, co-head of global execution services with Mahajan since 2016, will exit the firm.