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What's prompting the exits from Goldman's electronic trading business?

"All my equities friends are looking for jobs right now"

As predicted, there's been another exit from Goldman Sachs' U.S. electronic equities trading business. 

Zheng Guo, a vice president (VP) level equity derivatives agency trader at the firm's New York office, is understood to have resigned last week. Neither Goldman nor Guo responded to a request to confirm his disappearance, but Guo is no longer listed on Goldman's internal directory.

After 12 years at Goldman, Guo is thought to be off to a competitor. He's not the only one. - Both Andy Andreo and Alvin Gattoc resigned last week and their exits followed a spate of other departures in previous months. 

Three exits in two weeks aren't exactly a cataclysm, but some at Goldman suggest they're symptomatic of a deeper malaise within the business. 

One former Goldman electronic salesman, who left the firm voluntarily, says he gets regular messages from ex-colleagues who want to move on. "Every single one of my friends at Goldman are looking for jobs right now. If you are in equities trading, then it’s a no brainer to go to Jane or Citadel Securities."

Goldman insiders suggest there's some impatience with Raj Mahajan, the co-head of securities division engineering who was hired in 2015 to improve Goldman's electronic trading business and who's said to be "obsessed with speed."  "He hasn't built as much as we expected and is quite political," claims one GS insider.

One recently ex-electronic securities professional says Mahajan has accomplished less than expected and that there are complaints internally that the senior managers who oversaw Goldman's loss of share in equities trading after 2014 are still in place. "There is a big issue with lack of accountability. The same people who oversaw Goldman go from # 1 in equities to an also-ran are still in power."

Not everyone at Goldman Sachs would agree with this narrative. Although the firm unquestionably lost equities market share to the likes of JPMorgan and Morgan Stanley between 2008 and 2014 (when its equities sales and trading revenues went from $13bn from $6.7bn), it's been making amends of late. 

“Over the last several years Raj and team have grown market share in electronic trading in each region, improved our ranks according to 3rd parties, and they continue to win new mandates based on the strength of our offering and people," says Goldman spokesman Patrick Lenihan.  

Under Mahajan the firm has also made key hires like Mike Blum, the former chief technology officer at the high-frequency trading firm KCG Holdings as the CTO for its electronic trading unit, and Matt Kilsby as an MD in London. In 2018 it did a deal with Bloomberg TradeBook, which brought 1,200 new clients to the bank and increased revenues to the highest level for three years. And it acquired Pantor Engineering, a Stockholm-based trading technology firm with a reputation for speed and excellent analytics. 

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AUTHORSarah Butcher Global Editor

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