Monday, November 20, 2017

© Reuters.  Electronic trading outfits best Wall Street in ETF market-making© Reuters. Electronic trading outfits best Wall Street in ETF market-making

  • The ETF business is booming, and with it should be a boost to the likes of Goldman Sachs (NYSE:GS) and some peers who used to dominate the lucrative business of ETF market making.
  • A combination of tighter regulation (higher capital requirements) and the rise of high-frequency traders have wiped out margins though, and traditional banks are rapidly ceding market share – electronic outfits now account for 83% of ETF market making, up a whopping amount from just 66% a year ago.
  • “Goldman Sachs had been looking to exit the business for a while as the rewards didn’t offset the obligations,” write Rachael Evans and Annie Massa at Bloomberg, citing a source close to the matter. The bank has resigned its lead role on more than 300 of the 359 NYSE-listed ETFs it used to assist.
  • Banks, though, may get a second chance as worry about excessive concentration in the hands of unregulated firms has the SEC looking to maybe take some action. Credit Suisse (NYSE:CS), for one, has recently boosted the number of ETFs it works with.
  • Now read: Credit Suisse’s Muddy Future

Original article

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