Goldman Sachs found itself being quizzed on controversial issues surrounding high-frequency trading on Wall Street yesterday as it posted an 11 per cent fall in first-quarter profits.
In a conference call on its results, the US banking giant's chief financial officer, Harvey Schwartz, also denied reports that it is planning to close its own "dark pool" trading platform, Sigma X.
The behaviour of high-frequency traders and the ways in which securities can be traded off-exchange in dark pools has become the subject of fierce debate in the United States after claims in Michael Lewis's recent book Flash Boys that such computer-driven traders have in effect "rigged" the stock market against other investors.
Mr Schwartz said yesterday: "Our focus on the equity market structure isn't specifically around high-frequency trading necessarily – it's really about the fact that over the last 10 years-plus the market evolution, speed of execution, has gotten ahead of the market infrastructure and the market plumbing.
"We are focused on working with all market participants and regulators to ensure that the market infrastructure catches up with the speed."
On Sigma X, he said: "We have no strategic plans for Sigma X at this stage."
There was no update on the sale of its market-making business on the New York Stock Exchange, which it bought as part of a £3bn takeover of Spear, Leeds & Kellogg in 2000. In another sign of how technology has transformed trading in recent years, the bank is reportedly looking to sell the business for about £18m.
The questions came as declines in Goldman's fixed-income trading revenue weighed on the bank's first-quarter results. Goldman's net income fell to $1.95bn (£1.16bn) in the first three months of the year, from $2.19bn in the same quarter of 2013. Revenue fell 8 per cent to $9.33bn, but beat Wall Street estimates of $8.70bn.
"We are generally pleased with our performance for the quarter given the operating environment," said Goldman's chief executive, Lloyd Blankfein. "Investment banking and investment management generated solid results, while market sentiment shifted throughout the quarter, constraining client activity in various parts of our franchise.
"Our collection of businesses gives the firm significant room for growth as economic conditions broadly improve and we continue to remain focused on prudently managing our capital and cost structure."
Goldman's rival Morgan Stanley appeared to fare better over the quarter, reporting that its net income rose 56 per cent, helped by a jump in its fixed-income business and strong wealth management results.
Its net income was $1.51bn, up from $962m a year earlier.Reuse content