Goldman Sachs Said to be Closing Trading Unit, Shares Surge (GS)

Goldman Sachs (NYSE: GS) is said to be shutting down its principal-strategies business, two people familiar with the matter told Bloomberg Friday. The unit, which makes bets with the bank's own capital, is being closed to comply with new U.S. financial regulations.

According to a Bloomberg report, "Wall Street’s most profitable investment bank plans to hold off on announcing the wind-down while the 65 to 70 members of the global unit seek new jobs, the people said, speaking anonymously because the internal discussions about the process are confidential. Some traders and support staff may get roles within the firm, while a team in Asia may raise money for a new hedge fund, the people said."

Shares of Goldman Sachs continue to surge this afternoon, up $8.08, or 5.7%, to $147.86.

Ed Canaday, a spokesman for New York-based Goldman Sachs, said he couldn’t comment.

The Bloomberg report notes that "Goldman Sachs, which says about 10 percent of its revenue comes from proprietary trading, is grappling with a provision of the Dodd-Frank financial reform act that prohibits banks from risking capital by betting for their own accounts. JPMorgan Chase & Co. plans to close its prop-trading units in response to the law, signed by President Barack Obama in July. JPMorgan last month told in-house commodities traders in London that they may lose their jobs, a person briefed on the matter said this week."

The Dodd-Frank Act allows banks at least four years to bring their proprietary trading activity into compliance, with a potential extension of as many as three years, according to a timeline prepared by Davis Polk & Wardwell LLP, the New York law firm.

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