You could probably think a few things about GS’s earnings released this morning. If you’re an employee, you might gulp nervously at that $292k comp accrual so far and the 1,300 folks whose mastery of the universe became less masterful this quarter. If you’re a shareholder, you have to be modestly pleased with mostly adequate revenues in most businesses though kind of pissed about ICBC. If you’re an accounting purist, you thrill to the idea of a bank that managed not to book billions in DVA gains.
Here, though, is a thing not to think: “Goldman Sachs lost money by doing all of the things the Volcker Rule says it shouldn’t be doing.”
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The division, called Process Driven Trading and run by (part-time musician) Peter Muller, has generated about $4 billion in profits in the 10 years through 2006. It will be renamed PDT Advisors, run by Muller, allow Morgan Stanley to retain a stake in the new venture and take about 60 MS employees along for the ride. [WSJ]
With the passing of the Dodd-Frank Bill, one pesky thing that banks have had to spent a couple hours getting in line with is the Volcker Rule, and what it means for their proprietary trading desks. Whether to spin them off, send the employees to a farm in the country where they can run around, move them to the basement or just rename the group the ‘troprietary prading’ unit, about which no one will be the wiser, the whole thing has been a bit of a headache. One person who hasn’t lost any sleep over the mandate, however, is Vikram Pandit. Because unlike his counterparts at say, Goldman, who’ve clutched their pearls and felt faint at the thought of a world without prop, Vickles got behind the rule before it was even a twinkle in Volcker’s eye. Continue reading »
While Wall Street publicly is dismantling its dedicated proprietary trading desks, some veterans of the Street are skeptical that the banks will really stop trading with their own money. They say banks could continue making house bets by disguising proprietary trading as making markets for clients. House bets, when they are mixed with client trades, are more difficult for regulators to detect. “To me, it is all smoke and mirrors,” one former Goldman managing director said. “The truth is that most of the position-taking occurs at the market-making level.” [Reuters]
The bank plans to hold off on announcing the wind-down while the 65 to 70 members of the global unit seek new jobs, the people said. Some traders and support staff may get roles within the firm. Earlier plans for most members of the Principal Strategies group, led by Hong Kong-based Morgan Sze, to leave together and form a hedge fund were shelved, people with knowledge of the matter said. Now Sze, 44, may set up a fund with a smaller team focused on Asia, they said. Employees in London and New York are considering different options, the people said. The team’s members in New York, led by Bob Howard, are in talks to join another asset-management firm, according to two people. [Bloomberg]
Bloomberg reports the firm “told traders who bet on commodities for the firm’s account that their unit will be closed as the company begins to shut down all its proprietary trading” and will “eventually end all proprietary trading to comply with new curbs on investment banks.” In July JPM axed about 40 prop traders and earlier this month, Blythe Masters told the commodities unit to calm the fuck down, assuring them that “no one’s going to get screwed. We’re not going to do crazy things on compensation at the end of the year.”
Other banks would take Friday and enjoy the weekend but not Goldman Sachs, according to CNBC’s Kate Kelly. They get shit done before close of business and none of this Summer Friday crap. Of course, there are still a lot of unknowns, a lotta ins, lotta outs, lotta what-have-yous, including but not limited to, will GS seed this entity? Will it act as prime broker and if so, will it be treated like every other client or will it get extra-special treatment, like being told beforehand trades will be front-run (“we’re just going to help ourselves to this, thanks sugar”)? These are the things we need answers to. Continue reading »
Nothing’s been decided yet but they’re thinking things over at 200 West, lots and lots a things. Maybe they’ll spin the unit into its own hedge fund. Maybe they’ll move the prop team into the basement and keep them locked in there, like the third Olsen sister no one knows about. Eventually people will forget, until they’re discovered, years later, in a raid by the NYPD. Maybe they’ll do nothing (best place to hide is in plain sight). CNBC’s Kate Kelly reports: Continue reading »
As previously mentioned, JPMorgan began “swinging the ax on prop traders, starting with energy group,” which cut about 40 heads, two weeks ago. In case there was any doubt– sometimes employers like to play elaborate practical jokes on people–, today the Journal confirms those firings.
The House of Dimon has allegedly begun “swinging the ax on prop traders, starting with energy group” with “around 40 people gone so far.”
