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Jared Dillian
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In this piece from 10th Man, author Jared Dillian discusses how the ETF revolution is less about ETFs and more about indexing; about how people have come to view stocks less as stocks and more as blobs of stocks.

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August 23, 2005

Goldman Sachs Elevates Sales Trading Role

By Michael Scotti

(Traders Magazine, August 2005) -- Goldman Sachs appears to be ahead of the curve again. What on the surface appeared to be a run-of-the-mill layoff of roughly 30 traders at the end of June, was actually a strategic move to streamline traditional roles on its equity trading desk: Sales traders have expanded responsibilities, including committing capital for block transactions.

Goldman Sachs declined to elaborate. But one wire service reported that the cutbacks affected less than 10 percent of the equities and options departments.

Many of the functions provided by position traders at the firm have migrated to the sales traders. They now also passively work orders in algorithms while trying to find the other side of the trade for clients.

In fact, two veteran block traders at Goldman-Ben Bramm and Ron Morgan-were moved to sales trading. Both Bramm and Morgan had been positioning merchandise for clients for years. They already had strong relations with the buyside and knew the clients, said one of GSCO's West Coast accounts.

The move, according to traders, is seen as a consolidation of the trading roles of sales trader and position trader, as the Street strives for greater efficiency in an industry with tightening margins. It also represents the equity side of the business taking on more of a fixed-income look, where the sales people are also traders.

One sellsider said that's to be expected with more heads of equities at bulge-bracket firms having fixed-income backgrounds. "They see how profitable the bond departments are with so many fewer people," the trader added.

Goldman's sales traders have been committing capital on small- and mid-sized situations for the last 10 months or so, according to one head trader on the buyside. That's typically the job of the block trader. The trader said he only learned this after the news broke of the layoffs. "[My sales trader] said it was a continuation of something they had been doing for a while, only they hadn't advertised it," the head trader said. "It really makes a lot of sense. There's no reason the sales trader shouldn't be driving the entire order."

Others said that there is a great need today to have more knowledgeable trading pros interacting with clients. "Why talk to a maintenance man, when you can talk to someone who has the purse strings to capital and can get the trade done in a timely manner?" asked one sellside trader.

"[Goldman] always seems to be ahead of the game," said one buyside trader in Boston. Goldman was the first to go to sector trading, the trader pointed out. The trader said he recently called the local Goldman desk, and an options trader picked up. The good news is that he was familiar with the account and took the order. "It wouldn't surprise me if we started to see them start looking at cross-selling opportunities," the trader added.