Goldman Sachs Said to Close Fixed-Income Prop Group (Update1)

By Michael J. Moore
Feb. 16 (Bloomberg) -- Goldman Sachs Group Inc., the U.S.
bank that relies on fixed-income trading for the largest portion of its revenue, will shut its Global Macro Proprietary Trading desk, a person with knowledge of the decision said.
The eight-person desk, which trades currencies and stocks as well as products tied to interest rates and other fixed- income markets, will close in the days ahead, said the person, who declined to be named because the decision wasn’t public.
Stephen Cohen, a Goldman Sachs spokesman, declined to comment.
There “are no real surprises,” said Christopher Wheeler, a London-based analyst with Mediobanca SpA, who has a “neutral” recommendation on Goldman Sachs. “Keeping the prop business going will have little benefit and closing it will be seen as a positive move to comply with Dodd-Frank.”
Morgan Stanley and JPMorgan Chase & Co. are among Wall Street firms breaking off or winding down such trading units to comply with the Volcker rule, a provision of the Dodd-Frank financial law that prohibits banks from betting capital for their own accounts. The intent was to avert losses that might cause the collapse of firms and the financial system.
The group reported results through Goldman Sachs’s fixed- income trading division, the person said. That division generated revenue of $13.7 billion in 2010, 35 percent of the firm’s total.

Morgan Stanley

Goldman Sachs last year shut down an equity proprietary- trading group, Goldman Sachs Principal Strategies, to comply with the Volcker rule. Pierre Henri Flamand, the former head of Goldman Sachs’s Principal Strategies group, retired last year to start his own hedge fund.
The bank said on Jan. 19 that earnings dropped 52 percent in the fourth quarter, its third straight quarterly decline.
Morgan Stanley, the world’s top merger adviser, said last month that it plans to break off its largest proprietary-trading group, Process Driven Trading, as an independent advisory firm by the end of 2012. New York-based Morgan Stanley may also turn its Equity Trading Lab proprietary group into an electronic client-trading unit, two people with knowledge of the matter said this month.