Goldman Sachs has been forced to delay the launch of its new corporate bond trading platform after a series of “logistical issues” beset the investment bank’s foray into electronic fixed-income trading.
The delay highlights the technical difficulties facing big Wall Street banks as they build new electronic trading platforms – a vital component in their response to more competitive markets and new rules requiring increased trading transparency.
GSessions was expected to start trading in mid-May but encountered difficulties including “trade reporting problems," according to a person familiar with the platform.
It has taken a year to develop and is expected to significantly change the way Goldman’s fixed-income team, one of the bank’s largest earnings generators, trades corporate bonds on behalf of their customers.
The bank is also believed to be proceeding with extra caution after a series of high-profile technical glitches hit financial markets in recent weeks. Facebook’s initial public offering was this month marred by software bugs at Nasdaq, while BATS Global Marketspulled its own IPO in March due to technical issues.
Goldman’s exploration of electronic fixed-income trading, first reported by the Financial Times, comes as Wall Street banks are grappling to reshape the structure of big over-the-counter trading markets.
New entrants are also seeking to create their own platforms to compete with banks, with US money manager BlackRock planning to offer its own electronic bond trading service called Aladdin.
Goldman does not split out earnings from corporate bond trading though it publishes revenue for its fixed income, currency and commodities unit, or FICC, historically one of the bank’s biggest profit centres.
New regulation and difficult market conditions have eaten into FICC profit margins, causing net revenues at the division to drop by a third last year to $9.02bn, the lowest level since 2008.
When it comes to corporate bonds, the bank traditionally acts as a dealer sitting between different trading partners and collecting the spread between the “bid” and “asking” price.
GSessions would allow Goldman’s customers to trade directly with each other in a process known as “crossing trades." BlackRock’s Aladdin platform seeks to do the same.
Goldman already has a suite of electronic trading offerings for clients wishing to trade stocks. But such “low-touch trading” has yet to experience the same growth in fixed income, where securities are generally less liquid and more difficult to exchange electronically.
Goldman declined to comment.