Wall St. Faces Specter of Lost Trading Units

Subject: Wall St. Faces Specter of Lost Trading Units Fri Aug 06, 2010 11:30 pm

They are the elite among the elite at Goldman Sachs, highfliers who are the envy of Wall Street.

But on Washington’s orders, Goldman is now considering a step that once would have been unthinkable: disbanding the corps of market wizards at the heart of its lucrative trading operation.

Under the new Dodd-Frank financial regulations, Goldman must break up its principal strategies group, the wildly successful trading unit that has helped power the bank’s profits. Goldman is considering several options, including moving the traders to another division or shutting the unit altogether, according to people briefed on the matter.

Across Wall Street, other financial giants are also embarking on the delicate task of complying with the new rules governing their trading and investments.

Morgan Stanley is considering ceding control of its $7 billion hedge fund firm, FrontPoint Partners. At Citigroup, executives have sold hedge fund and private equity businesses and are now discussing paring back proprietary trading, which relies on a bank’s own capital to make bets in the financial markets.

JPMorgan Chase has already begun dismantling its stand-alone proprietary trading desk and is modifying the structure of some investments of One Equity Partners, its internal private equity business. While many of these plans are still under discussion and could take years to fully put into effect, the Dodd-Frank rules are slowly starting to change Wall Street, at least on the surface.

How deep the changes will go is uncertain. Citigroup and others, for instance, are considering moving proprietary traders to desks that handle trades for clients, although the traders would still be able to make their own bets in the markets.

Analysts nonetheless characterized the coming shift as nothing short of a sea change. Some of the banks’ big businesses — trading, hedge funds and private equity, for example — must now be overhauled.

More: https://www.nytimes.com/2010/08/06/business/06wall.html?src=me&ref=business

Wall St. Faces Specter of Lost Trading Units

Wall St. Faces Specter of Lost Trading Units

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