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January 13, 2009

Goldman's New Crossing Option

By Nina Mehta

Goldman Sachs Electronic Trading is angling to execute blocks through X-Cross, a new point-in-time cross that takes place twice a day. Executions occur in Sigma X, the broker's dark pool. This venture puts Goldman in competition for large orders with Liquidnet, Pipeline, ITG's POSIT and others at a time when blocks are increasingly being dribbled into the market in small pieces.

Last month, the broker-dealer rolled out its 10:30 a.m. cross but hadn't yet settled on the time of its afternoon session. Goldman chose 10:30 a.m. because by then, said Dave Johnsen, a vice president in Sigma X business development, the "internal price discovery of the open has played itself out and the workflow has settled down." By doing just a couple crosses per day, the firm hopes to goose interest, making X-Cross a "more momentous" liquidity opportunity for customers.

The broker intends to tap into the "Goldman Sachs family of electronic passive liquidity," Johnsen said. X-Cross, Goldman hopes, will rope together passive block liquidity and orders being worked in the markets through its algorithms. In addition, the firm is counting on customers to submit more natural flow into the crossing sessions, via REDIPlus or FIX. Morgan Stanley, UBS and Fidelity algo orders also have access to X-Cross executions. The aim is to "de-fragment the market" at particular points in time, thereby increasing the chance of getting large fills, Johnsen said.

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