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April 9, 2014

Goldman Mulls Closing Dark Pool

Goldman Sachs Group Inc. GS +1.16% is considering shutting down one of the world’s largest private stock-trading venues, according to people familiar with the matter.”

“In conversations with market participants over the past several months, Goldman executives have broached the subject of closing its so-called dark-pool trading operation, known as Sigma X, the people said.”

“Goldman executives are weighing whether the revenue that the firm generates from operating Sigma X is worth the risks that have been highlighted by a series of trading glitches and growing criticism of dark pools, the people said.”

“No decision is imminent, and Goldman could keep the business, according to the people.”

“A move to shutter one of the biggest dark pools could compel other big banks to take similar steps, potentially changing the way buy and sell orders from big investors course through the markets each day.”

“Dark pools are trading venues where investors are granted a greater degree of anonymity than in the public markets. About 14% of stock trading took place in dark pools in January, most of it routed through entities run by big banks, according to Rosenblatt Securities, which advises institutional investors. Goldman’s consistently ranks among the top five dark pools in the market, according to Rosenblatt.”

“The dark-pool business has hit a rough patch lately. Competition has increased in the already fragmented market as new dark pools have emerged. A recent spate of technological glitches in the stock market, meanwhile, underscores the risks that come with operating private trading platforms.”

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Read full Wall Street Journal article here.

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