Daily Management Review

Goldman Sachs is giving away its closely guarded software


09/09/2016


During many years, Goldman Sachs has been guarding its software Securities DataBase (SecDB) from competitors. but now it has opened access to its customers.



Beyond My Ken
Beyond My Ken
SecDB is the main instrument by which Goldman Sachs evaluates risks and analyzes value of securities, commodity contracts, derivatives, structural and OTC instruments. SecDB was developed in the early 1990s for Goldman Sachs unit in charge of raw materials trade. The first serious test of the software took place in 1998, when Long-Term Capital Management hedge fund collapsed due to default in Russia, and the bank was able to monitor their risks. It helped him to see deterioration of the subprime mortgage bonds market in late 2006, to make bets on fall of the housing market, and so on.
 
SecDB daily calculates prices of about 2.8 million positions. It allows to assess how changes in certain variables affect value of assets, analyze potential trades and monitor risks.
 
One of the important advantages of this software is an ability to add new tools and connect to SecDB new departments while maintaining a common approach to analyzing and trading.
 
Until now, Goldman Sachs has jealously guarded SecDB, rejecting offers of competitors, such as Deutsche Bank, to license the software. A former partner of the investment bank recalls the issue was discussed a decade ago about how much money such a license could bring. Gary Cohn, who in 2006 became president of Goldman Sachs, told colleagues then that he would not share the software for even $ 1 billion. And for $ 5 billion? "Maybe", - said Cohn. "It was a huge competitive advantage," - Conh said recently about SecDB.
 
Recently, however, the bank started to provide customers with free access to a few applications of SecDB, which can be customized to suit one’s needs. New governing rules limited trading risks of banks, and holding large amounts of stocks and bonds on the balance became more expensive. In addition, proliferation of e-commerce has led to a decrease in profit rate of trading divisions of investment banks. "Regulators have undermined this advantage," - said Peter Carr, a former top manager at Morgan Stanley.
 
New strategy of Goldman Sachs is to attract more customers, who will independently carry out more operations through the bank. "They try to stay ahead, - said Jeffrey Young, Co-Director of Ramius. His company has got access to SecDB through one of the bank's applications. There was a period of instability in the markets, when he needed to constantly keep track on value of derivatives, which he bought from Goldman Sachs. - Instead of stating: "We want to meet needs of customers", they now say "Let's make them happy as possible."

source: wsj.com






Science & Technology

Large U.S. Study Finds Detection Of Irregular Heart Beat By Apple Watch

Apple to present Netflix competitor at the end of March

Live Human Under-Skin Chip Implantation Takes Place At Barcelona

IDC: Wearable tech gadgets market is booming

Second Patient In 12 Years Becomes HIV Free By Bone Marrow Transplantation

Car-Sharing Platforms Could hold The Key To 5G & Auto Industry Collaboration

Bezos tells about his space plans

Fast Company: Apple isn't the most innovative anymore

U.S. Space Program Could Be Delayed Due To SpaceX, Boeing Design Risks: Reuters

What trends will be affecting the health sector in the coming years?

World Politics

World & Politics

China's expansion into Europe: Italy’s ports are next

US watchdog is accused of violating aircraft certification process

Large Section Of Citizens Unhappy With Public Services & Benefits: OECD Survey

Largest companies reveal volumes of plastic produced by them

US Warning To Germany About Intelligence Sharing Over Huawei Ban

Mercer reveals the world’s safest cities

No vaccinations, no school: Italy’s new law

Why the new Aachen Treaty cannot save France-Germany relation