Goldman Sachs Disbanding Prop Trading Unit (GS)
According to a Bloomberg report, Goldman Sachs (NYSE: GS) is going to be disbanding its Principal Strategies Unit, which was its proprietary trading unit.
This comes as the investment bank looks to comply with the Volcker Rule, which curbs banks usage of using its own funds to make bets on the markets.
The group has 65-70 employees, and some of them may be offered other jobs elsewhere within the bank. Another group of the employees based in Asia may be starting a hedge fund.
Earlier in the week, J.P. Morgan (NYSE: JPM) announced it was also shutting down its prop trading unit, in order to comply with the new financial regulatory rules.
The "Volcker rule" was enacted as part of the most comprehensive financial regulatory reform since the Great Depression. Its purpose is to to limit risky trading and investing by banks and bank holding companies.
The Dodd-Frank Act, which encompasses the Volcker Rule, gives banks at least four years to end their proprietary trading activities, although there is a potential extension of three years, according to a timeline set by Davis Polk & Wardwell LLP, a New York law firm.
Shares of Goldman Sachs are sharply higher on the day, gaining $7.77 to trade at $147.55.
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