Goldman fires back on HFT

July 27, 2009

Goldman Sachs is not known for being particularly forth coming with the press. The investment firm’s two favorite words for dealing with media inquiries are “no comment.”

But all of sudden Goldman is taking an aggressive stance when it comes to the subject of rapid-fire high frequency stock and commodities trading–an activity that is drawing increasing scrutiny from the press, regulators and even the folks on Capitol Hill.

A Goldman spokesman just emailed me a quick statement, trying to downplay the firm’s involvement in HFT. The spokesman notes that “even using the broadest definition, high frequency shares trading accounted for less than 1% of Goldman Sachs’ total revenue in the first half of 2009.”

The spokesman goes on to note that Goldman’s proprietary trading HFT desk does not receive so-called “flash quotes” from stock exchanges. A flash quote is a controversial practice in which an exchange allows some hyperactive HFT desks to get a sneak peak of other customers orders.

On Friday, New York Sen. Chuck Schumer called on the Securities and Exchange Commission to ban flash trades, saying it gave some Wall Street firms an unfair trading advantage.

And finally, Goldman says it believes all HFT should be “subject to appropriate regulatory oversight.”

That last piece of news is certainly a welcome development; as is Goldman’s decision to open up a bit on the murky subject of HFT.

Up until now, the firm largely has been silent on the subject of automated, computer-driven trading. But Goldman has been drawing a lot of press scrutiny on the subject, ever since the July 3rd arrest of a former employee on charges of trying to steal some of its top secret HFT trading code.

Let’s hope this new standard of openess at Goldman will extend beyond HFT and isn’t just a rapid-fire response to a letter writing campaign by a US senator.

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