Tags: GoldmanSachs | Closing | SigmaX | DarkPool

Goldman Sachs Considers Closing Sigma X Dark Pool, WSJ Reports

Wednesday, 09 Apr 2014 07:13 AM

Goldman Sachs Group Inc. may shut its Sigma X dark pool as private trading venues contend with public criticism and technical glitches, the Wall Street Journal reported, citing unidentified people familiar with the matter.

The bank raised a possible closure during talks with market participants in recent months as executives consider whether revenue generated by the platform is worth the risks, the newspaper said, citing the people. A decision isn’t imminent and Goldman Sachs could keep the business, the publication said.

Tiffany Galvin, a spokewoman for the New York-based firm, declined to comment on the report to Bloomberg News.

Dark pools face mounting scrutiny as state and federal authorities examine whether investors are being treated fairly by U.S. exchanges and alternative venues. New York Attorney General Eric Schneiderman has said he’s concerned that some platforms may sell services, such as faster data feeds, that give an unfair advantage to high-frequency traders seeking to profit from split-second price discrepancies between venues.

Goldman Sachs already is the biggest broker on IEX Group Inc.’s upstart stock platform, which purports to curb predatory trading practices. IEX Chief Executive Officer Brad Katsuyama was portrayed as a champion for fairer markets in Michael Lewis’s latest book, “Flash Boys.” Lewis portrayed Goldman Sachs as reforming its practices to treat clients more fairly.

‘Critical Mass’

Goldman Sachs wrote in a memo to its equities unit last month that “it would be best for the overall market if IEX achieved critical mass, even if that results in reduced volumes” on Sigma X.

Sigma X is among the world’s largest dark pools. While brokers are supposed to seek the best prices for their clients, Lewis’ book describes Katsuyama’s observation that banks including Goldman Sachs tended to use their own venues to execute orders. Goldman Sachs’ dark pool, for example, executed almost half of the orders routed there even though it accounted for less than 2 percent of the entire stock market, he wrote.

After discovering pricing errors on Sigma X, Goldman Sachs sent checks to customers to compensate for the mistakes, which dated back to August 2011, people with direct knowledge of that incident said last month.

Goldman Sachs is also looking to sell its New York Stock Exchange market-making unit to Dutch investment firm IMC Financial Markets, two people familiar with the matter said last week. Goldman Sachs is seeking as much as $30 million for that business, said one of the people, who asked not to be identified because the talks are private.


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Goldman Sachs Group Inc. may shut its Sigma X dark pool as private trading venues contend with public criticism and technical glitches, the Wall Street Journal reported, citing unidentified people familiar with the matter.
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2014-13-09
Wednesday, 09 Apr 2014 07:13 AM
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