Goldman Sachs’ GSessions creator on why banks stifle innovation
Chris White has been working for large investment banks since the late-1990s, first as a trader and later working on electronic trading platforms. But the creator of Goldman Sachs’ corporate bond trading platform GSessions - which was quietly shelved last year – has no regrets about leaving.
“Goldman is a great firm, but it wasn’t great for me,” says. “To anyone considering a similar move out of banking, ask yourself one question – is your career helped by bureaucracy or hindered? If you work in compliance or law, then stay. Anyone else…”
There’s an element of jest in White’s statement, but it stems from frustration. Investment banks are increasingly positioning themselves as ‘technology companies’, but they’re still not set up for innovation, he says.
“Working on a proprietary product in a big sell-side institution is quite limiting from a career standpoint,” he says. “Large banks don’t foster innovation and a number of interesting and useful ideas are often developed outside of the large banks.”
White left Goldman Sachs in May this year after nearly five years in a technology role. He’s now running his own fintech consulting firm, Viable Mkts, and will be teaching a course on electronic trading at the New York Institute of Finance.
His argument is that despite Goldman’s decision to put GSessions on the back burner, a number of smaller companies have since rolled out similar technology and made it work. Platforms like Liquidnet’s acquisition of Vega-Chi in March last year, for example, or any of the estimated 30 different offerings competing for space in bond e-trading.
“Any nascent technology needs a gestation period, but investment banks are multi-billion dollar institutions which judge every innovation by the same standards as other business areas,” says White. “If it’s not making money quarter on quarter they can’t see the value, but you’re comparing new technology with a mature and profitable business model. It can be difficult to maintain face.”
White’s comments echo those of other senior banking technologists who have since left to go it alone. Kirat Singh, who led the build out of both cross-asset market risk platform, Athena, at J.P. Morgan and Quartz at Bank of America Merrill Lynch, said there was a “disconnect between those building the systems and those making the decisions”.
One of the issues of pushing into a new space with technology is that it’s the hungry competitors rather than the dominant players who are most aggressive. If anything, the big banks have most to lose by the electronification of the bond market, says White.
“If you look at the FX markets in 2000, Citi was by far the biggest player,” he says. “Then Goldman, Barclays, Deutsche Bank and Merrill all invested heavily in technology and unseated Citi. It’s difficult to gain perspective when you’re the dominant player – who would have said ten years ago that Microsoft would no longer be cool?”
At a micro level, the same is happening on the trading floors of large investment banks. Obviously, there are far fewer traders today than pre-e trading, but those that remain with the ‘traditional’ knowledge of fixed income products need to supplement it with an understanding of how markets are evolving, he says.
“We’re teaching some of these traditional groups, who’s experience is of huge value to employers, that they cannot ignore how technology is modernising these markets or they risk being casualty of change.”