The bank's debt-trading has not been going that well in the recent years. But keeping the commitment to the fixed-income business doesn't necessarily mean sticking to the number of people working for it.
Unlike other big players in the banking industry like Morgan Stanley (NYSE: MS), Goldman Sachs (NYSE: GS) has stayed away from cutting on its fixed-income units. However, followed by the years of falling revenues in this sector, the bank is preparing to delegate the tasks associated with the debt-trading to the machines, reports Financial Times.
Now it looks like Goldman Sachs is trying to find the solution for reviving the debt-trading business that has not been going so well for the bank by relying on computers. Recently, the bank has developed a computer software called "Goldman Sachs Algorithm" that allows the users to trade U.S. corporate bonds without the human assistance.
However, computer-enabled trading has not yet gained much of a popularity in the corporate-bond market but its share of "investment-grade notes" traded electronically has almost doubled in 2 years, says Bloomberg. Therefore, Goldman Sachs Algorithm could be a timely response to the emerging market trend.
"It's pretty absurd if in this day and age you can only trade a bond through a human being," said Seth Merrin, the CEO of Liquidnet Holdings, according to Bloomberg.
A company MarketAxess (NASDAQ: MKTX) has been the leader in the industry offering "e-trading" solutions for corporate bonds, with its shares growing by 52% only in this year. Yet the industry seems to be hard to enter as many other companies tried and failed to repeat the success MarketAxess. As of writing, MarketAxess trades at $166.575.
Bloomberg says that Goldman Sachs' plan to make its debt-trading electronic is far too ambitious for now but maybe it will allow the bank to kill two birds with one stone in the future and keep its commitment to the debt-trading at lower costs.