Goldman Lays Off Stock Traders--Sources
Reuters
Tuesday February 10, 2:26 pm ET
By Jake Keaveny
biz.yahoo.com
NEW YORK (Reuters) - Investment bank Goldman Sachs Group (NYSE:GS - News) laid off several dozen stock traders and sales staff on Tuesday, cutting costs as the stock-trading business is hit by shrinking commissions and stepped-up competition, according to people close to the firm.
The layoffs come as Goldman shifts resources away from the traditional business of making stock trades for investment firms in favor of faster growing businesses such as equity derivatives, convertible bonds and big block trades of stock.
The sources, who declined to be named, said layoffs were focused on employees that generated the least profits within all businesses that make up the equities division. The so-called cash equities area -- executing plain vanilla stock trades -- has been hit the hardest, they said.
"Equities is going to be more quantitatively driven and electronically driven," said David Hendler, a financial services analyst at independent research firm CreditSights Inc. "The old way of doing things is less important."
Goldman spokesman Ed Canaday would not comment on the layoffs, but said that the firm continues to "actively hire people in equities, as we do in other areas of the firm."
One area of the cutbacks is in business with investment firms that have not been generating enough trading commissions to justify Goldman's staffing, the sources said.
The sources said at least "several dozen" traders and sales staff were laid off. They did not provide an exact number or names.
Goldman is "as committed as we've ever been to our equities business," said Goldman's Canaday. "Cash equities is a fundamental part of our equities business and we are not de-emphasizing it in any way."
COMMISSIONS UNDER PRESSURE
The cutbacks show that stock trading remains under pressure even amid a strong rebound in stock prices.
The average commission per share for stocks traded on the New York Stock Exchange (News - Websites) was as high as 12 cents in 1990, compared with less than 5 cents now.
The rise of electronic trading and the introduction in 2000 of decimalization -- or calculating commissions by cents rather than larger fractions of a dollar -- have caused commissions to shrink by more than 30 percent since 1999, according to industry estimates.
At Goldman, the commissions earned from stock trades declined by 15 percent in its fiscal year ended November, even though the broad stock market rose by 13 percent during the same period.
At the same time, revenue from equities trading -- which includes trades that Goldman makes with its own capital as well as block trades -- surged by 72 percent, more than making up for the decline in commission revenue.
BLANKFEIN TAKES CONTROL
Lloyd Blankfein, the former head of Goldman's bond trading division who was named president and chief operating officer last month, has overseen a reorganization of its equities team.
Last year, the stock trading desks were folded into the same division with derivatives, or securities whose value is based on an underlying security, and with convertible bonds, or bonds that can be converted to shares.
In recent months Blankfein replaced top management with executives with experience in his former division -- which trades bonds, currencies and commodities -- or in equity derivatives.
Among the changes, which only emerged on Monday, Gary Cohn was made co-head of equities with Michael Evans in September. Cohn also still helps manage the fixed income, commodities and currencies unit, a job he got in 2002 when Blankfein's responsibilities increased to include both fixed income and equities.
Michael Ryan and David Heller were named global heads of sales and trading of all equity products in October, it became known on Monday. Ryan was previously co-head of global derivatives and equity sales, while Heller helped head the trading of derivatives, convertible bonds and stocks in the United States. |
