Goldman Sachs Group Inc. (GS:US) will hold its third internal bond-trading session today after helping its clients buy and sell $150 million of debt on the system in the last week, according to a person familiar with the initiative.
The fifth-biggest U.S. bank by assets plans to hold two electronic-trading rounds, one for investment-grade debt and one for high-yield, each day that it operates the new system, called GSessions, said the person, who asked not to be named because the details are private.
Goldman Sachs is starting GSessions as banks reduce the amount of corporate bonds they hold, responding to regulations requiring they increase capital as a buffer against losses. The Volcker Rule, seeking to prohibit federally insured banks from making bets with their own money, may also hinder lenders’ ability to commit money to buy securities from clients, according to analysts including Sanford C. Bernstein & Co.’s Brad Hintz.
Debt of Newmont Mining Corp., AT&T Inc., Goldman Sachs and Ally Financial Inc. traded in the sessions on June 21 and 26, with 39 of the New York-based bank’s clients participating in the five-minute sessions, the person said.
The bank charges less for the electronic trades than for transactions handled over the phone, the person said. The difference to buy and sell the bonds, known as the bid-ask spread, is posted before the trading begins and doesn’t change. Goldman will step in to take one side of a trade if there is interest from a buyer but no seller or vice versa.
Tiffany Galvin, a Goldman Sachs spokeswoman, declined to comment on the debut of the new platform, which was reported earlier today by the Wall Street Journal.
BlackRock Inc. (BLK:US), the world’s largest money manager, said in April that it plans to start a bond-trading system that will allow investors to bypass investment banks. It will match clients’ orders using its own system, rather than relying on Wall Street firms or other electronic networks to trade bonds.
The BlackRock platform may shut off a source of revenue for investment banks, which have seen fees from trading bonds for money managers decline with interest rates at about record lows and as concern mounts that a European country may default on its debt.
Other electronic trading systems for fixed income include Tradeweb Markets LLC, MarketAxess Holdings Inc. (MKTX:US) and Bloomberg LP, the parent company of Bloomberg News, which also provides news and information to the financial community.
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