Either way, Goldman Sachs and junk-bond trader Tom Malafronte are swimming in an extra $100 million.
The 34-year-old trader bought billions of dollars in junk corporate debt on the cheap starting in January, then locked in profits as prices recovered, according to people familiar with the matter….
As a market maker, Mr. Malafronte bought the bonds from clients anxious to sell them and ultimately lined up other investors to buy them—at a higher price. Goldman profited from the difference, people familiar with the matter said.
Let’s just be clear about that whole “market maker” thing, because it’s legal, while its doppelgänger, proprietary trading, is in Paul Volcker’s Big Book of Things Banks Can’t Do Anymore. Even if they’re basically the same thing.
It is difficult—if not impossible—to define clearly the difference between trades made to meet clients’ demands and those conducted just to make money, said Hal Scott, a professor with Harvard Law School who has testified before Congress about efforts to regulate the banking industry.
“No one has been able to distinguish between market making and prop trading,” Mr. Scott said….
A Goldman spokeswoman declined to comment on the nature of Mr. Malafronte’s trades but added, “We have made a concerted effort to grow our market making franchise across credit, and remain focused on meeting the diverse needs of our clients.”