Goldman revamps electronic stock trading to catch rival

Mon Mar 14, 2016 9:38am EDT
 
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By John McCrank

NEW YORK (Reuters) - Raj Mahajan achieved a rare feat when he rejoined Goldman Sachs Group Inc (GS.N: Quote) last year with the coveted title of partner, the Wall Street bank's highest rank. Then he got to work on fixing the pipes.

That plumbing has to do with the technology Goldman uses to route stock orders to exchanges and private trading pools. The bank has long been one of the top two stock brokerages in terms of revenue and customer rankings. But in recent years Goldman's status slipped in electronic trading because its technology did not keep up with client demands for ever-faster trades.

Goldman hired the tech-savvy Mahajan to revamp the business in March 2015. Since then, he has hired dozens of technologists and support staff to elevate Goldman's position in a fast-growing slice of the market and win back business from its chief competitor, Morgan Stanley (MS.N: Quote).

"When we look at how Goldman wants to be positioned for the future, simply put, we want to deliver the best execution quality to our clients, which is tantamount to saying we need the best technology," Mahajan said in an interview.

The 43-year-old was promoted to co-head of global execution services last month. He began his career at Goldman Sachs in 1996 as a commodities analyst, but left the bank in 2000 to launch a trading technology firm with R. Martin Chavez, who is now Goldman's chief information officer.

Their startup, Kiodex, was bought in 2004 by financial software maker Sungard, where Mahajan became president of global trading. He later became chief executive officer of high-frequency firm Allston Trading before rejoining Goldman as partner, a rank held by around 1.5 percent of Goldman employees.

Mahajan said the idea of fixing the cracks in Goldman's pipes to make trades move faster and more efficiently to find the best liquidity is what motivated him to return.

"I thought that played right into my skills," he said.   Continued...

 
A view of the Goldman Sachs stall on the floor of the New York Stock Exchange July 16, 2013. REUTERS/Brendan McDermid