Goldman Sachs Group Inc. (GS:US) said it agreed to sell a majority stake in Redi, a unit that provides trading technology, to a group of Wall Street firms.
The buyers include Bank of America Corp. (BAC:US)’s Merrill Lynch unit, Barclays Plc, BNP Paribas SA (BNP), Citadel LLC and Lightyear Capital LLC, according to a statement today. New York-based Goldman Sachs will keep a “significant minority equity stake” in the company. Financial terms were not disclosed. Rishi Nangalia, who previously co-managed Goldman Sachs’s electronic trading business development group, will serve as the company’s chief executive officer.
The diversification of Redi’s ownership may make the unit more attractive to clients compared with being controlled by a single brokerage, according to Jamie Selway, head of electronic brokerage and sales at Investment Technology Group Inc.
“Goldman is heading toward a consortium approach,” Selway said in a phone interview. “Clients are more comfortable with broker neutrality in the context of independent technology providers or consortium of broker dealers. The operation of these systems requires a technology culture and can be expensive.”
Goldman Sachs acquired the software that formed the basis for Redi when it purchased New York Stock Exchange specialist Spear, Leeds & Kellogg LP in 2000 and has expanded it to handle trades in asset classes such as currencies and interest rates.
Goldman Sachs’s plans come about two years after London-based Barclays Plc (BARC) sold the RealTick trading platform, which lets customers access services from multiple brokers, to New York-based ConvergEx Inc. Barclays said in December 2010 that it planned to use the system within its investment banking unit and offer the platform to customers. The bank got RealTick when it acquired parts of Lehman Brothers Holdings Inc. in 2008.
Citigroup Inc., JPMorgan Chase & Co., Knight Capital Group Inc. and other securities firms bought execution-management systems starting in the mid-2000s to give mutual funds and other clients access to exchanges and algorithms, or trading strategies that allow them to process larger orders in small pieces over a preset period, along with other transaction services. Some platforms were open to the algorithms of multiple brokers or technology providers while others focused on those from a single firm.
Investment Technology Group (ITG:US) and Instinet Inc., a subsidiary of Tokyo-based Nomura Holdings Inc., offer execution platforms to customers. Both firms are execution-only brokers that don’t trade with their own money. Bloomberg LP, the parent of Bloomberg News, offers similar systems.
To contact the reporters on this story: Lu Wang in New York at firstname.lastname@example.org; Christine Harper in New York at email@example.com
To contact the editors responsible for this story: Lynn Thomasson at firstname.lastname@example.org