Goldman Sachs bails on clearing business: Sources

Goldman Sachs Group Inc., the Wall Street firm that makes more money trading equities than any other bank, stopped providing clearing services for some of its smallest U.S. clients, three people told of the decision said.

Goldman Sachs limited clearing for accounts that manage less than $5 million, lifting the previous $1 million threshold, said the people, who asked not to be identified because the decision was private. While the firm continues to clear trades for some accounts below the new limit, it’s winnowing out clients that are riskier, have lower growth prospects and are more retail rather than institutional in focus, one of the people said.

“We are conducting a routine analysis of our business and in some cases the profile of clients was not consistent with our current standards and criteria,” said Ed Canaday, a spokesman for the New York-based bank.

Goldman Sachs’s equities division generated $5.43 billion in revenue for the first nine months of the year, down 32 percent from $7.95 billion in the same period of 2009, according to the bank’s third-quarter earnings report. The firm handles U.S. clearing through its registered broker-dealer subsidiary, Goldman Sachs Execution & Clearing LP, known as GSEC.

The firm started the review of the business about four or five months ago, according to one of the people familiar with the matter. The company notified a number of clients this week that the changes would mean they would have to find new clearing agents, two other people said.

While the decision wasn’t a reaction to any of the new U.S. rules for Wall Street, it was partly in response to increasing regulatory scrutiny, one of the people

Bloomberg

Related Topics: Goldman Sachs & Co.