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What it takes to get to the top in equities trading at Goldman Sachs

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Goldman Sachs has just named R. Martin Chavez, one of three heads of its equities business, to its management board. So far, so standard: Goldman runs the world’s biggest equity trading operation with a 15% market share according to analysts at Sanford Bernstein. Last year, revenues in its equities principal trading and market making business both rose 5%.

Less standard is Chavez’ background. He may work in equities trading now, but he was previously an engineer, M&A banker and technologist. In announcing his promotion in an internal memo, Goldman Chief Executive Lloyd Blankfein and President Gary Cohn lauded Chavez, 48,  for his, “previous work in the technology industry, his cross-divisional experience and his deep insight into regulatory reform, market structure and operational infrastructure.”

These are the attributes which will now get you to the top in equities trading. Technical knowledge and knowledge of market structure are now key.

“Banks are increasingly appointing two heads of their equities businesses,” said Marcus Newman, a recruiter at Riversdale Consulting. “One will come from a vanilla equities trading background and one will come from an electronic trading background. Electronic traders used to be the younger brothers, but you’re now seeing them being given equal, if not more weight.”

At Goldman, Chavez runs equities along with Michael Daffey and Paul Russo, with the three men acting as global co-chief operation officers. Daffey was previously head of Goldman’s equities business in Europe. Russo was previously head of Goldman’s equities business in America. Goldman didn’t immediately return a request for comment.

Goldman isn’t the only bank to have elevated its electronic trading professionals. Royal Bank of Canada Capital Markets has just promoted Stuart Baden Powell as head of European electronic trading.  Earlier this year, Barclays hired Richard Evans, an electronic trading expert from Morgan Stanley, as its COO for equities. In October 2012, Deutsche Bank made Andrew Morgan and Stuart McGuire co-heads of its EMEA equities trading business. Morgan has a background in electronic trading, while McGuire came from the cash side of the business.

Rebecca Healey, a senior analyst in London at strategic advisory firm Tabb Group, said electronic trading expertise is now at a greater premium in Europe than in the US. “A combination of regulation and economic pain is putting Europe on a faster track to automation. In the US we saw a slight drop in the proportion of trades that were conducted electronically last year as banks moved to a traditional voice broking model to sell research.

“In Europe, electronic trading continued to rise as a proportion of the total,” said Healey. Some 43% of all long only trading in Europe takes place electronically, she said. In the US, the comparable figure is 45%.

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