Open Source Investment Bank? Goldman Sachs Opens Up Prop Trading Systems

Goldman Sachs to begin to open up its proprietary trading strategies and data to buy-side clients as they take an

In a bid to strengthen its relationships with buy-side clients, Goldman Sachs is opening up proprietary trading strategies and financial databases to customers. The strategy was revealed in a report from the Wall Street Journal, of which Goldman Sachs CIO, R. Martin Chavez, explained that the investment bank is taking a page from Silicon Valley as they have decided to apply an open approach.

Until now, Goldman Sachs has used its proprietary technology and strategies as a value added service provided to its buy-side customers, such as asset managers, hedge funds, and fund managers to entice them to trade with the investment bank. Examples include trading on behalf of their customers to execute large trades, of which Goldman’s strategies are used detect ideal order entry times to maximize execution quality.

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By opening up portions of their proprietary systems, customers will theoretically be able to conduct their own analysis and trade with the broker of their choice. However, Goldman Sachs is making a bet that by opening up its strategies and market data it will strengthen its relationship with customers, and increase their overall business with the firm.

Among the initial apps being made available to clients are tools for its Marquee trading platform. The apps include SIMON and Strategy Studio. SIMON is a solution targeted at smaller brokers with the ability to create and analyze equity linked derivatives for retail customers. Strategy Studio is a quantitative trading tool to assist money managers to create investments out of their economic views. The two apps follow the release by Goldman Sachs of a Marquee app to handle block trades.

In addition to the apps, customers will be watching to see how much of Goldman’s data base, named SecDB, will be made public. Considered one of the best in Wall Street, according to Goldman Sachs, SecDB is able to calculate 23 billion prices for 2.8 million positions and 500,000 market scenarios. For customers, availability of accessing the database would provide important research for their own analysis of finding trading ideas.

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