In a move that reveals a shift in hedge fund and buy-side firm trading, Goldman Sachs is planning to create a separate subsidiary for its REDI Technology electronic trading group. Goldman is also inviting rival firms to take stakes in the unit.
REDI designs execution management systems (EMS) used by Goldman’s hedge funds and institutional clients for securities and derivatives trading. Goldman acquired REDI as part of a $7 billion package in 2000. After that, Citibank, J.P. Morgan and Lehman also bought front-end trading platforms.
But, according to Wall Street & Technology, within the past year, firms have sold off their single-dealer EMSes, as banks may lack the funding to support and upgrade the EMS software. Meanwhile hedge funds and investment managers are using multi-broker platforms. Independent providers like FlexTrade, Bloomberg and ConvergEx have become increasingly popular.
Goldman will maintain a “significant” stake in REDI through Principal Strategic Investments Group, its private equity arm.