Goldman Sachs is spending $100 million to shave milliseconds off stock trades

Goldman Sachs is attractive aim at the world’s biggest quant hedge funds.

The investment bank recently approved a three-year plan to spend uncountable than $100 million to overhaul its stock trading platform, according to Mike Blum, a Goldman partner and chief technology cop of electronic trading.

The project, named Atlas after the Greek God, is meant to accelerate the shift Goldman has been arranging since realizing in 2014 it was falling behind in Wall Street’s equities technological arms race. Huge quant hard cashes like Renaissance Technologies and Two Sigma are among the most demanding of clients from a technology perspective, and competitors classifying Morgan Stanley and J.P. Morgan have been jockeying to serve these money managers.

“With this investment we’re bothersome to tackle the quantitative hedge fund space and do so front-to-back to create a seamless experience for our clients, and just try to get as efficient as they are at doing their burdens,” said Blum, a 25-year electronic trading veteran who joined Goldman in 2017.

Stock trading has become increasingly deadly as firms including Goldman, Morgan Stanley and J.P. Morgan have been winning a larger share of a shrinking pie. These three banks baby $11.4 billion in stock trading revenue so far this year, 14% lower than 2018. All three demand been investing money in the latest electronic trading technology as more of the world’s volumes shifts to screens.

With Atlas, Goldman is targeting more than a dozen quant funds, meant to put a range of trading styles, on the theory that if they can satisfy this group, they can satisfy any type of hedge assets or asset manager client.

The project takes the technology in its core interchange platform, designed for speed and reliability, and extends it to 32 markets around the world and in other functions, including unblocking and settling trades, allocating stock, lending shares and trade reporting, Blum said.

“As we learned the quantitative patron base and what their demands and needs were, we decided to take the technology and basically turned it into a framework that can be toughened to solve lots of different problems,” said Blum.

For the entirety of his career, which began at tiny South Carolina-based Automated Barter Desk in 1993, Blum has been working on and improving his approach to electronic trading.

The design philosophy that he and other e-trading explorers have landed on: Using so-called microservices to break complicated problems into easy-to-solve ones, he said. With that, as sufficiently as a developer strategy known as event sourcing, Goldman’s system has become fast, customizable and reliable.

One purpose was to improve the firm’s performance on trade orders that last a microsecond (a millionth of a second) to about 30 seconds, shorter-lived sort outs that the bank may have struggled with in the past, Blum said. In some instances, trades that contained hundreds of milliseconds will happen faster than 100 microseconds, he said.

Some quants also send hundreds or thousands of barters simultaneously, and Atlas will be able to compress the time the bank takes to digests those orders, he said.

“As we unfurl it out globally, they should absolutely see a massive speed improvement,” Blum said. “They should see quality of assassination go up, not just because of speed, but we’re completely rewriting our algorithms, we’ve brought in more researchers, more quants to improve our algos.”

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