Goldman Sachs and the Long Arc of Hull Trading

Goldman Sachs and the Long Arc of Hull Trading

"And the men who hold high places - should be the ones who start - to mold a new reality - closer to the heart." - Rush, "Farewell to Kings"

Strap yourself in for this one, as we take a fascinating and detailed walk through some of Alphacution's recent modeling on one of the long-standing Kings of Wall Street; a story that is, on the one hand, not widely known and on the other, not typically spoken of...

It was among the most exciting one-two punches of financial markets deals from the late 1990's and very early 2000's; one where Wall Street - much like other financial centers across Europe had done in prior years - had reached out, once again, to LaSalle Street for their unique prowess in derivatives trading. (Alphacution detailed the roster of leading players who were part of this wave of acquisitions in a Feed post focused on Susquehanna International Group - SIG.)

In this case, the mighty Goldman Sachs had reached out to acquire Blair Hull's eponymous proprietary options market making and quant trading firm, Hull Trading Company (Hull) in July 1999 for $531 million - and then, just over a year later, acquired the New York-based securities clearing operation, Spear, Leeds & Kellogg (SLK) for $6.65 billion in September 2000 - thereby reshuffling the increasingly competitive ranks of players closest to sources of listed order flows.

What follows here is the long aftermath of those acquisitions - along with that of the pre-existing Goldman, Sachs & Co. (GSCO) broker-dealer trading operations - to the present day, as symbolized by the significant cache of regulatory data reported by the combined firms since Q3 1999:

We start this tale with the annotated exhibit below wherein Alphacution first presents the 13F position counts by legal entity for the acquisitions in question, Hull and SLK, in isolation over the 30 quarters beginning Q3 1999 and ending Q4 2006. Here, we note that a vast majority of total positions for these new additions can be attributed to the options market making component of Hull; a fact that is common for option market makers (but rare, in general), particularly when reporting in disaggregated fashion, as they are in this case.

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Furthermore, we see here that by Q4 2003, GSCO has [...]

Mike Bushore

Experienced CEO in Strategic Operations/Technology/Enterprise Risk/Board Governance/Global Regulations

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