Today's Goldman Sachs/Hull Group deal is quite fascinating.
Talk about your vertical integration. Hull was supposed to go public soon and I expected it to do very well, with its software like margins and all. Now GS buys the firm, which is a top worldwide options MM. Personally, I think the deal raises some conflict of interest questions. Goldman is very active in the derivatives market already and this may give them significant pricing power and manipulation ability. Anyone else have any thoughts?
Here is the news release, and I also linked the HULL prosp., which I had already read in its entirety and found quite interesting.
biz.yahoo.com
sec.gov
Goldman to buy market-maker Hull for $531 million
NEW YORK, July 12 (Reuters) - Top investment bank Goldman Sachs Group (NYSE:GS - news) said on Monday it plans to buy Chicago-based electronic market-maker The Hull Group for $531 million in stock, options and cash, to bolster its position in electronic stock trading.
Goldman and other Wall Street firms have been investing in electronic stock trading systems that would compete with the traditional U.S. exchanges. Hull Group, which had planned to sell shares to the public in July, is an electronic market-maker in stock derivatives and stocks on 28 exchanges and in nine countries.
''This acquisition highlights Goldman Sachs's strategy of expanding our electronic market-making capabilities,'' Goldman Chairman Henry Paulson Jr. said in a statement. ''As our clients' needs evolve, we remain committed to being at the forefront of technological innovation in the world's capital markets.''
As global stock trading migrates to electronic markets, Goldman said its acquisition of Hull -- which was founded in 1985 and has a workforce of 250 software and financial engineers and other staff -- would improve its competitive position.
Goldman and other Wall Street brokers have poured money into so-called electronic communications networks (ECNs), that use computers to match, buy, and sell stock orders from brokerage houses in an effort to lower costs and speed up trading during regular business hours and beyond.
Goldman and leading securities firm Merrill Lynch and Co. Inc. (NYSE:MER - news) recently formed a partnership with stock trader Madoff Securities to develop an electronic trading system. Goldman along with Internet broker E*Trade Group Inc. (Nasdaq:EGRP - news) holds a minority stake in another electronic stock trading system called Archipelago. |
