Maybe Goldman traders are still making money after all

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De-risking is de-rigueur, but this doesn't mean all GS traders are losing out.

According to a note issued last week by Bernstein Research, Goldman has indicated that its trading performance will be unaffected by new leverage limits associated with becoming a bank holding company because -

...widening bid-offer spreads and less competition in the marketplace will result in higher margins and increasing market shares which could offset the lower leverage.

The FT has also emphasised the joys of being a market maker in the current bid-offer environment.

Whether the flow trading renaissance will continue when spreads narrow remains to be seen.

If Goldman's flow traders have become an important profit centre, what happened to the GS pre-eminent prop trading business? Morgan Stanley and JPMorgan have both publicly pulled back from prop trading, but Goldman has been quiet about its intentions in the area.

Hintz says it's biding its time until the regulatory fog lifts. "Goldman says there are still prop trading opportunities in the market place. You'd want to see what kind of regulations come out of all this from Basel, the European Union etc."

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