« Exchanges at Goldman Sachs

The Evolution of the Equities Market


Paul Russo, co-COO of the Equities Franchise in the Goldman Sachs Securities Division, explains how technological change and regulatory reform helped develop a growing class of institutional investor - systematic traders - and what a rising interest rate environment could mean for the equity markets.

This podcast was recorded on August 30, 2017.

This podcast should not be copied, distributed, published or reproduced, in whole or in part. The information contained in this podcast is not financial research nor a product of Goldman Sachs Global Investment Research. Neither Goldman Sachs nor any of its affiliates makes any representation or warranty, as to the accuracy or completeness of the statements or any information contained in this podcast and any liability therefore (including in respect of direct, indirect or consequential loss or damage) is expressly disclaimed. The views expressed in this podcast are not necessarily those of Goldman Sachs, and Goldman Sachs is not providing any financial, economic, legal, accounting or tax advice or recommendations in this podcast. This recording should not be relied upon to evaluate any potential transaction. In addition, the receipt of this podcast by any listener is not to be taken as constituting the giving of investment advice by Goldman Sachs to that listener, nor to constitute such person a client of any Goldman Sachs entity.

Copyright 2017 Goldman Sachs. All rights reserved.

This is an unofficial transcript meant for reference. Accuracy is not guaranteed.
This is exchanged. The Goldman Sachs were people from our firm discussed developments. Curly shaping mark its industries in the global economy objects. Seaward global, had of corporate communication, shared Goldman Sachs one of the bread and butter businesses of Wall Street is changing and so is Goldman Sachs Team behind it. My guess it Paul Rousseau is global. Co C, o o of the equities franchise in the securities division and Goldman Sachs, which means that he's in the business of making markets connecting I want to buy with those who want to sell pretty simple. Well, it is, and it isn't Paul welcomed the programme. Thank you. some of our listeners- might have visions. Maybe for the movies of these trading floors were people stand in front of a computer screen or bunch of computer screens holding a couple? Phones and yelling buy and sell reality. Will differ. So what's changed about the marketplace over
worse if your career here, a lot has changed, is the answer. Just like a strange in all of our lives, I'd say: first off technology has changed the lost, so it is true going away back in time. People used to have two headsets they'd be elegant, wanna get another screaming across the floor. Certainly when I first started, people would communicate orders that way. Now the training for is relatively quiet compared, those days messages are all electronically communicated back and forth. People won't even accept orders in the way they would have naturally done at fifteen twenty years ago. But if you re stepped back and they were. Why have we had all this change? I think basically, it's a combination of the regulatory environment, making some significant changes on the market structure? Really three landmark things occurred, in the late nineties, something called regulation, eighty s which put competition into the exchange system, The small meaning narrowing spreads ready
action and a mass which really got the markets to be faster. That cocktail of regulatory change, which was meant to improve competitiveness, a pricing and frankly, did an excellent job of that kind and with technology invading the industry and exchanges going for profit models? So in the old days they were neutralised organizations, the saucepan anxious they asked me He's themselves. So what's happened is we had this proliferation of exchanges in an all for profit model, their public companies themselves. Many of them and as a result of that we have Seen enormous competition, but it's a lie. these central places where things used to happen to be now virtual central places, the really technology labeled central limit books as opposed to a physical place. You go to So, when you look on CNBC in the morning, and you see the floor cordon quota things, the New York Stock Exchange floor used to have swarms.
People running around doing functions. Now, it's a tv studio with a bunch of things, and that opens there might be a lot of tyranny for an appeal, but other than that. It's really all technology as well. So that's the change. The marketplace itself is involved how about the people in the market? What types? players and strategies are out there today versus what we saw twenty five years ago. We always had retail and our marketplace. Righto. Retail is a constant. Of course. They changed the way they act over the years but you always had retailing. We would say way back when institutions. Those were the two things we talk about, but institutions back then were more similar than they are today. There's more differentiation between the styles of the institutional categories, institutions that would be what we'd still call fundamental investing style organizations, whether they were hedge fund formats or forty act, mutual funds formats. It didn't really matter,
they were out there looking to buy and sell assets that they thought were misprized. Now we talk a lot about passive or index funds. Things like this passive ways of invest that's been around for a long long long time. That's nothing new back. Then the proportion was much smaller. I guess you'd say than the proportion is today, but you had these fundamental groups role the clock forward in time I just explained technology change things, how these regulations sped up the markets will speed itself became important and understood how to network all that exchange information together into a consolidated virtual central of an order book became a value proposition for people you now have all those things you had before
Tell and fundamental styles passive styles, but you also have much more systematic, investing styles. Some of which we call highly quantitative driven some people call high frequency trading. That's a very high sharp ratio, training strategy where there really benefiting from being so we're technology enabled and understanding different flows in the marketplace, but even these systematic nature of things it's just a way of implementing known, and strategies at work in a highly efficient manner. So they may not be doing anything that requires the level of speed but their driving pure efficiency through the system. So largely what I'd say as Technology has enabled these new investing styles to grow and flourish, you're, seeing as their taking more and more sure the money and it's actually forcing all the different styles to upgrade their technologies to upgrade the way, the executing so those classic fundamental step,
no longer can do what they did. Twenty years ago, they ve had to upgrade their models. So I'll say it this way. People using grew to trade. Somehow years ago, people thought that was novel. Everybody uses algorithms to trade. Today, if you don't, I don't know what you're doing exactly you're, not actually taking advantage of the way the markets from short, so that's really where the ships are so Paul. The trading floor looks and sounds different habit. The people who work on the floor, they different than the kinds of people who would have joined firm thirty years ago, of course, as I think any business, would a test as technology has changed, the business model, its change, the skill requirements in the baseline of how people do think. So what we did twenty thirty years ago is just not how the workflow works today. So ass a result huge
if two things the biggest shift would be what humans used to do. Manually, literally picking up a phone hitting a button calling a floor broker communicating and instruction that floor, brokered literally taking that giving it to someone they run to specialist posts? They get an execution, they come back, they relay at. You relate back the salesperson. They relate back the client guess what technology is taken overtones of that a number of those people know rise. They did they don't exist anymore. They literally don't exist because technology has rebel, nice. The workflow the result, the speed at which that happens. Now it used to be on the New York Stock Exchange. You had ninety seconds to put up a print. Ninety second, The world with ever now feel like an eternity part of the market. Getting Austria, is a lot of our clients, said love mutual funds declined set in particular, that's too long. There's too much of our freedom. Gunnar order. Flow speed was
driven by the investor, saying I think, I'm giving up too much edge and it forced the market to get there. That's really her. Regular mass came in and two thousand five The reality is that for structural change it for the manual way of doing some of the things to become automated, were you literally could be traded through was the concept that regulation that mean all sorts of things, in the way we do things had to change, we had two programme to do these things and put technology and whereby sickly, we might have had a person standing on the New York Stock Exchange. For so like all these things, this Ilsa people coming and now we use this term stem science technology engineering math, so the skills of the people coming in are far more stem, like Then they would have been a long time ago that doesn't mean having a good economic framework is invaluable. That doesn't mean you can't majors and valued, but I think
everybody coming now, just as a little more technology enabled and a little more thoughtful. So when I think of how a trader now applies, the judgment value proposition is always going to his client base. He's got a whole suite of tools he's leveraging, not just He's got twenty thirty algorithm. Some of them can be devised by things he thinks are the best way of doing up. We called up special algorithms for people. Lots of clients do the same So this is the way the market has changed. This is the way the skill such changed. What I would say is judgment is always valued by our clients, how you extra that judgment frankly, mechanical and nature, the mechanical peace is what technology has really eradicated on the model and that's made it more efficient. The equities business seems at some level, dominated by two very different phenomena: active and passive investing. How did we get to that point?
finance Wanna won. The first thing they teach you is diversification is the only free lunch. You know nothing's freeing the world, that's the only free lunches, the line that use almost on the first day of the course. So having one stock is a highly risky thing for anyone to have turns out. As you get to twenty or thirty stocks, you get the majority, the diversification, so. Everybody should have a portfolio, not single assets, simple simple concept indexation, really taken there to a whole new level. Instead of trying to figure out the alpha and any idiosyncratic stock you're, not spending a lot of resources trying to do that, you're, just trying to be the average and as long as the tide keeps moving up, that average keeps moving up. That's a good thing, I think the innovation. More recently, as how cheap that has become the other thing they teach. You
finance when one is the capital ass. A pricing model which says beta market beta is something that you should basically get for. Free is consistent with that diversification concept, and you should pay a lot for alpha. So a few fine s managers who can deliver pure alpha pay a lot of money because that is rare and that his heart, you should never pay a lot for beta and the reality of passive funds. Is they ve, driven the price abated down? For average investors so much, you can get a poor handfuls of basis points, whereas an active manager. Their worst accusation waged against the industry is their closet, beta people, but their charging substantially higher rates for not very different investment.
else. So I think the reality is passive. Has forced the price of beta down as investors look at returns, they say we're. I see pure alpha I'll pay up, but where I don't, why would I pay for form of closet beta. As a result, I might as well go more passive and I think the phenomena of the last five or six years. Really the post financial crisis years. We ve seen tremendous assets flowing into passive to the detriment of active, literally, over a trillion dollars has drained out of active managers. All that money has gone the passive and much more Why is that phenomenon? Now? I would argue: it's been a really hard environment to show high correlation, what alpha how'd, you show your alpha in such a low rates environment, so
Real test to me is not the window we ve been in the real test is the one coming: One of the next two three some years when more normalize economies more normalize, and we start to see ok, who can deliver that alpha in a more sustainable way? guarantee people pay for that. I've no worries that people pay for that the pay a lot for it. Frankly, some of the high frequency quantitative stretches. We talked about their gaining the assets, the quickest, because they seem to have the highest component of right now or at least are the demonstrate at best right now. So money will move for sure. But for now, when it so hard guess what why pay more for beta, then you need to- and I just think that's the natural. Successfully through. So your job is basically to connect these different types of buyers and sellers inequities. How do you think about servicing these different customers with different strategies. They must be demanding different the things from you is a broker
good news is, it turns out All of them need the same core issues. They may not all know how to translate that way, but in my view of the world, what you need is an excellent execution factory and we have a business unit. We called our execution services unit and its related to our trading unit. But basically, I told you before everybody uses I'll go. Some things are: trading desks are probably the single biggest customer of our algorithm factory, because of course, they have the same needs as everyone else to access the markets so that core tool set, I would say, as you have to have excellent exchange. activity, your technology really matters. Speed really does matter, unfortunately, is just the way the world is, so there's been a bit of an arms race there, but we ve made tremendous investments, as I think most of my pure competitors would have as well. So at its core. You build that excellent execution factory, I think
that is your base and then, from there you're gonna service. Each client base a little bit differently. I'll, give you a good example. This quantitative can, we talk about. They never want to hear about your researcher content ideas. We think the stock is relatively undervalued. First, this one they don't care. Please don't bother me with it. However, your fundamental community. That's really their bread and butter. So you ve got these different communities which have different value propositions based on that investing style. So at one end, the fundamental group needs that execution factor as much as anybody, because you ve got to deliver great executions. Best execution is a concept of regulatory concept that we all live toward and they prove to their boards that they drive as well at the right price, of course, and we
these different value propositions. I called the barber model. We have our classic high touch model. This would have been what it has been when I first entered the business twenty plus years ago, you would have had people voice delivering in for shit, exchanging values, helping people do hard things at the other end of the bar bell. You ve got this rule. very low touched, maybe no touch electronic factory and I think for you to be great in the new world the service, the range of clients you ve gotta, have both you ve gotta have both under the bar bells equally strong, because those high touch classic services that we talk about at tremendous alpha to those Klein bases and having that great factor at the other end is a Rick. We were meant to execute with quantitative group, but it turns out that seem. Investment is good for the high and group too. That's your value and then there's this extra thing in the middle world
actual intermediary at our core. That's what a market maker is. Our job is to bring flows together and try to reduce frictions and doing so when you have a very. Diverse set a client groups from fundamental all the way to quantitative they don't act the same. They act very differently in each other independent. You could almost argue so the ability take those flows and find net downs in the middle to the benefit of your client base. So people pay less sprats. That's the trick here. Everything that's been going on. It's all about penguins spreads, that's all the regulatory changes in the market that happen our job as didn't, pay, less spreads. Then the public markets, because we find the other side so people, the trade in them That's, ultimately these services. We provide- and I would argue by having a great diversified group a client basis over those different segments. Passive included, fundamental systematic
want to we're going to find the best, the best net dancer clients and, at the end of the day, that's how you deliver scale to your client base and that's really where our strategy drives we're building an economy of scale business to derive. Although value distribution back to our clients, there's three core pillars in the equity business through our prime services Pillowy spoke about it. We ve talked a lot about the stock market. That's in our, delta pillar, we call it some people call Adele to one. We set one delta and then there's our derivative or nonlinear pillar, the three pillars, the three time zones of the world across the client bases big technology, investment that all equals economy, a scale that drives a better business for me and for my clients and for my shareholders that's that's your mom there's a move afoot that maybe hasn't got as much attention as it deserves may because it's starting in Europe.
to unbundle research base. We say: look, let's make investors pay for research separately. How might that change the way in which this market operates? We're heading down an unbundling wrote at least in certain jurisdictions and Europe, its not law or rules globally, but for certain jurisdictions it is What does that mean? And how does at times that certain play through on on hand. A lot of clients already have unbundled in many regards, so I would say for a portion, the community, it's just the evolution, is gonna. Take the next step for some people, it's pretty new and it feels pretty trim added to them, but I think when you start to unbundle things, it actually puts more pressure. Frankly, on both the cell side, the by side to consolidate and I'll, explain why? you're someone who right now is getting your research. Let's say your content in exchange for execution revenues, that's how you pay for it. When you have to write that hurt
chuck a lot of them are looking and saying. How many do I really want and by the way you just can't accept it for free, it's illegal, to accept it for free, and you really have to say to people you don't want from. Please don't send me anything you're not allowed to. So when you start looking at that, almost an all these providers, business models are going to have to change a lot because some people are going to get knocked off of number or less so the consolidation things starts people and pay centrally. For the best research we write and they're going to send a most comprehensive Sweden ripe and today, fifteen people might provide you the same thing, but you can honestly say past seven or eight, probably there's nothing that unique so take my chances. less than half and as a result of cutting it in half those other. Seventy people often lost revenue model They no longer have that. On the flip side, though, the execution model, arguably, is also unbundling from the content model. That's not true.
endlessly new, but it will two more consolidation and the reason the consolidation theme on the cell side is similar what my comment a moment ago. in reality for me to provide the best excretion, my clients, having that big diversified group of clients to net down against, is a value. That's an ass, not everybody can own that asset and what I say, as at some point, I should be able to as a scale provider demonstrate that my execution performance on average is better than people who don't have that scale and slowly, but surely that means that, while it will start to move to People who have that scale problem has been known for a long time for its ability serve the classic equity log short hedge funds, which, in energy policy that our prime brokerage or people what's unique about those hedge fund
what they required a broker in. How are these types of funds adapting to the trends we ve talked about? This meant a lot in the press about this, but what's happening to that, Classic Goldman Club the long short hedge fund community. Again part of this fundamental investing community group that I phrased is going through lot of changes like everyone's going through a lot of change for them. How do they deliver their investment returns, their long short, so picking stocks to short against to belong within the sector is part of the alpha that their provided to the client base, How easy or hard has happened in the last four years, frankly spent pretty tough, the truth come out over the next handful years, when we more normalized back to different opportunity set how they they perform so that hedge from community that fundamental longshore community, it's a vibrant business model, but it's under a lot of change as well, because guess what returns?
hard their fees tend to be higher, certainly higher than passive, higher than mutual fun active they're kind of the next year. Up on that wrong, I think the render pray and pressure you're, seeing some consolidation there so that the industry is just going to continue to keep moving through this equity people are optimistic people, I'm always optimistic. So I'm quite optimistic as markets normalize. All these strategies will have their chance to show their wares after all, a bit the top that market data analysis that has gotten, if anything, more valuable over time and certainly systematic trading shops, is they become a bigger part of the market that becomes more important, may not care about research but the care about big data. So what about? way these funds invested. It's been so effective in the recent period. I think, within this big, systematic Rome I buy for kid, what I'd call highly quantitative, high frequency, very latency, sensitive strategies against things which may be
people are implementing in a systematic way. We want to be very efficient, you don't have a lot of slippage, but by the same token, they're kind of known series like you, can look up in textbooks and kind of get the theories of why some of these things exist and why they work it just are implementing them differently than they did before. So within the Super high frequency space. This super low late, see trading strategy, technology itself and understanding the data and being faster than others at interpreting that debt and executing monks that data that's a key value proposition. They provide to people, so we use the example. Sometimes like market data is the fuel going through the system what kind of makes the system go round? They respond to this information in time, sequences that classic fundamental investors can even digestive yet so their strategies are highly tuned to this end
highly tuned movements going on in the ecosystem of trading the futures market may take a move and they may see at the same time. Something else is having on one of the many stock exchanges which exist around they'll. Put those two things together and create an action to Dell execute their job is to take out minute amounts of return over millions of executions. Not. A lot in any one execution. So it's just a completely different model in the way the running. Without that market data without techniques, gee without generally low latency and in the way execution works. That would not work so that investments I'll could not have existed twenty years got just couldn't of in any kind of efficiently. Now it's basically, everything is green light for the strategy to grow. So you're seeing lots of investment towards those things and I think, as
look more and more down these roads. People are trying to think about what data sets, not just classic research in the form of here's. Your report, datasets could help me. So these strategies, as you describe them, were first and foremost about speed and being faster was in some ways the strategy just plain and simple as the technique, Gee gets quicker and quicker, as you describe, is the ability to differentiate yourself, hard earned or do we do most, I'm sure limit. None are absolutely harder when a lot of these strategies were starting to build up. Certain people had a huge technological. Because they really knew how to be faster than the others over the last five six seven years that gap, whatever it's been, has narrowed dramatically.
To appoint now where, if your strategy was solely based on being faster, that is not a good strategy anymore. You can't make money, that's wretch anymore. You now have to have other elements playing into the strategy, so I think that's the evolution so for sure the market continues to be more efficient and are about the kind of things which were the ear. things this is the low hanging. Fruit goes away, quick, so a lot of market watchers expect that when equity market breadth expands passive strategies become most popular. You alluded to that'll earlier to these folks, just a matter of when If we do you think about that argument, and how important is it tat, both active and passive, in the marketplace, It's hard to envision a marketplace were religious completely. Many by passive, but in some ways that seem to be where we're headed at the moment A pendulum swings too hard one way or the other way chances are. It's gotta come back toward the middle, so I
There is sensible economic framework. They have a core base, your portfolio and passive. That just makes sense to get you diversification going, then it's more. How do you tilting your alpha? So who you give your money too, is gonna help you extracted from office where we were that pass, it was actually a surprisingly small percentage of most people's portfolios. Fifteen where we are now, is it's a much more substantive point, but even when you try to get industry data on this? It doesn't appear the penetration of passes greater than thirty percent of the assets out there. So I dont know where that right equilibrium is but I know if everyone's going passive, it tends to be probably easier to find alpha by being more active and, if everyone's always active, frankly being passive, probably looks a little bit better and risk adjusted space. So it's just like this balancing
so I think all these things are gonna be here for a long time. I think everybody will be upgrading the weather. things to be more and more efficient, like every other business in the world, you constantly have to get more and more efficient, but realistically, There is room for all these things because to get to the what they call the affair frontier and investing you gotta mix and match some of these things. three years ago, Michael Louis managed to make the equity markets an item for The discussion were buckled. Flash boys they describe the equity markets is rigged. favour? Basically, the high frequency traders phenomenon. We're just discussing Was your response that argument in how has the market evolved since then evolution is the response. There is a lot of regulatory focus, but I think what largely took places people who were less shit who were either slower, latency space. Somehow leaving a little bit of edge out their started to improve, so they took
that kind of low hanging fruit that was feeding. If you will, the concept of what Michael was talking about, they basically just started to eradicated from the system. Technological investment changed the way you're executing. Obviously, new exchange structures have come in which competing with the model directly, so the market has responded by effectively create. some level alternatives. As well as honing in on we're potential inefficiencies could exist right, not to save the did exist, but could exist and there just narrowing those gaps. that's what the mark. You talked about new alternative, I access or the centre piece of Michael's book bread Cati on the founder, Seagal attention for challenging the existing exchange model and create a big debate, especially around there location become an exchange? What role Exchanges, including I ex play today, we all rope
letters and Goldman Sachs wrote a supportive comet letter saying let him be an exchange, are core thesis? Was we have a lot of look alike. Exchange out there in the world. They all I just different shades of the same concept. Bread had, I actually quite a different concept, so you know what? Let's see what happens? I think there was a group of people upset because it was breaking up, maybe a vested in wrists group that had spent a lot of money investing to optimize a certain model demise round. The exchanges that exists and on the current world show it had a lot of controversy with it, but again we were supported with the concept of very simply, I dont mind. True innovation, in these spaces we have the managers, of course, but I think realistically, you want to come pushing the market and, if there's a value, the market will bear it out over time. So you know I'd argue that juries out on all this and is evolving, but for sure it's has an impact on the way people think
our big angle, on the markets right now- and this goes into this- look like businesses, verse, truly new, innovative things. The problem right now as we frame it is operational risk. So the flash crash is an example of this. We are so technologically enabled as a market that things. You have to worry about as Windows system breakdown, when does the system just get overloaded effectively and how do we handle those times having more and more fragmented markets. Does it add depressed discovery, or is it actually add more complexity to the system than any possible press discovery benefit? I think these are the new tricky questions, that regulators have to be thinking long and hard about. I know we think long and hard about, because in many, Is we re ensure the market structure? We are the largest people at the clearing corporation with money, standing there in cases problems. So we care a ton about the system being safe and efficient
we ve got to make sure our objective functions are lined with safety soundness and not just expanding for the sake of expansion. So to respond for all these changes. What kind of investments have we particularly focused on to serve our clients? One of the core things going forward? We need to be able to do for our clients and what kind of human making sure there I've must have set ten times technology and how to change the industry abuse the theme of scale? So my simple view on this is we ve got a diverse group of client styles. They could be hedge funds or mutual funds, but there are fundamental nature or they could be more systematic, doesn't matter if their mutual funds systematic or their headphone. This is what matters is providing this core base. So the core base has to be one. This great execution factory. We have spent the last three to four years, heavily heavily investing in technology literally redoing, most things. So I think we recognised years
Jack. Whether method came in or not, and unbundling was a bigger theme. It didn't matter. This was the way the world was going regardless. You had to beef up all those things, so we ve made tremendous investments there. One too, I think we're making investments to be more diverse across these clients, styles, you know this is not about. I care about one client base more than the other. To the contrary, I care about them all and the real I care about him all is because they will actually help each other I can bring them together in a very systematic way myself. So the best way for me to cut spreads for Any one group is to deal with all of the groups, so it's an an stratagem, add inclined basis, not subtracting or de emphasising, and I think ultimately with that great factory, with a great diverse
occasion across clients, we ve maintained our global diversification. We think being around the world, for our clients is a critical value proposition, not everybody's made that decision, but I think, there's a handful of very strong players who have kept that few. He d back on an asian markets some thoughts on how China's equity markets are developing been a lot of fits and starts. There's been a ton of focus on the red, investor there. In Germany, opening up in the mainland exchanges has at playing up China's a pretty fascinating place because composition of flow, it doesn't look like, let's say the: U S, market, the retail portion of China'S- probably eighty, some percent- that's not how the? U S looks s not how most about markets in the world look, so it has very different characteristics. I would just say it's in a state of maturity,
maybe forty years ago. That's where the? U S was there just some purity time back from where we were so when you look at it We need the establishment of these big institutions, the institutional portion of them. It is small, the mutual, segment alone is basically sub ten percent, so just think of that is just again not at all what we look like. So when I do you really retail investors, making you have retail investors linking being
active managers for themselves exactly and with their does like the fifties in the: U S right with that will come. Are they all being diversify ate all these things? I said, but verification like that's just not what their thinking about the thinking about this thing can double tomorrow I gotta get in, so I think that market has characteristics which are just not the same characteristics of more developed markets around the world. So China is on a path of developing that, and I think what China is also specifically dealing with is their tends to be these bubbles which get created in their economy. The bubble might be in real estate, the Bob might be through credit expansion. The bubble might be through the equity market, they're kind of balance, and yet they had an equity market bubble. They had a lotta leverage in their economy, both known
region, I'd call it shadow leverage, know things: people just borrowing money to effectively lover up inequities that bubble pop for them. So I think they're kind of maturing through that and as their maturing through that, their finding techniques of getting release valve so one of the really spouses they call it connect it's the China market to offshore. What's the international market connecting to Shanghai or shuns and, for instance, to trade in specific assets. So China's a closed economy, their currency is not a free currency. The equity market is not as great restriction, so I just think they're walking down path but they're, trying to do very thoughtfully, because you know what there's a lot of money at stake in the last thing, they weren't you a vigil Heidelberger exactly, and that creates a lot a country,
mercy on shore, as you can imagine and political backlash, so I think they ve got this very delicate process. That they're going with the most positive thing is their regulatory infrastructure. Frankly, there very thoughtful when you talk to really very thoughtful, but it's a huge thing, they're trying to administer at heart. So it's close it up by talking the future. At the beginning, we talk about how the trading floor looks quite different sounds quite different is different, going forward, as you think about it. Is it and be less and less talk less and less. Occasion, more more machines talking to each other. The Loi been alive, people come out of that business and a global basis though, still be space for this sort of more high touch personal approach, and what would it look like if you can project for a little bit like all these things there in these constant shifts? But, as I said earlier, this barbell concept these
hi touch super value. Added services are critical and will maintain being critical to clients for a long time to come, because if you can help people create returns. Dr real alpha, real differentiation, there very happy to compensate for that there's no debate and investors are very happy to pay for that. On the other hand, you need this great factory, so it's easy to say the factory. is critical and we're gonna constantly be investing and people who develop algorithms for us and so forth. Those easy rules to protect down ten years. I frankly think the other end of the barbarous just as easy to, but the differences because of where we came from and out? Eighty plus per cent of the world? Look like that high touch under the barbell offices, rebalancing so during the rebalance process, it feels who feels hard feels difficult, right and is true. It is hard, it is difficult. We
say the skills of the new recruits we bring in today. If we were helped, that's it. none of us, would have jobs Ah, yes, but no doubt- and I think every generation feels that coming through the business, but this is about evolution the reality is, there's a rebalancing. These skills, but I firmly believe both are gonna be required because all those involved instead that live under the fair. It's not like One is going to zero. That's just not the way this place at me. feel that way when you're in some short window time. I don't believe over a long enough window. So I think we'll mean that balance- and it's just dancing where that right emphasis is in that, but over time we're gonna need both because our clients, you're gonna, need both and that's my view, Paul thanks for joining us. That's great my pleasure
That concludes this episode of exchanges. Goldman Sachs objects. You were, we hope you join us again next time. This part Gaskell's recorded on August thirtieth, two thousand. Seventy, this podcast should not be copied distributed, published or reproduced in whole or in part. The information contained in the spot cast is not financial research nor a product of Goldman Sachs, global investment research. Neither Goldman Sachs nor any of its affiliates makes any representation or warranty as
accuracy or completeness of the statements or any information contained in this podcast, and any liability, therefore, including in respect of direct indirect or consequential loss or damage, is expressly disclaimed. The views expressed in this pot cast are not necessarily those of Goldman Sachs and Goldman Sachs is not providing any financial, economic, legal, accounting or tax advice or recommendations in this podcast. This recording should not be relied upon to evaluate any potential transaction. In addition, the receipt of this podcast by any listener is not to be taken as constituting the giving of investment advice by Goldman Sachs too that listener, nor to constitute such person a client of any Goldman Sachs Entity
Transcript generated on 2021-10-13.