By Gary Gordon of ETF Expert
What was the goal of financial-regulatory reform? Presumably, to increase oversight over Wall Street traders and reduce excessive risk-taking by proprietary trading desks.
Yet, Charlie Gasparino for FoxNews.com reports that Goldman Sachs (GS - Get Report) is already ahead of the curve. In less than two weeks since a $550 million settlement with the Securities and Exchange Commission, Goldman has moved half of its stock-trading operations to its asset-management division.
Why? Instead of taking risky market positions with company capital and operating as a separate trading entity within the larger corporation, traders working as part of a client-centered, asset-management group can take similar market risks. In other words, Goldman might simply need to label its investment activity as "customer-related" to trade as it sees fit.Similar moves appear to be under way at Bank of America (BAC - Get Report), Gasparino reported. Why Bank of America? The firm picked up investment bank Merrill Lynch (MER) in 2008. It's not clear whether the capital-markets subsector of financial services will benefit from the shift. Since the regulations effectively passed both houses of Congress, two of three stock exchange traded funds with the most capital-markets exposure have gained handsomely, although this can also be attributed to less legislative uncertainty as well as a broader stock-market rally. That said, a lot of smart folks seem to think Goldman Sachs (and Bank of America and JPMorgan (JPM - Get Report), et al.) will turn the new rules to their advantage. Investors will certainly want to keep an eye on financial-services ETFs that have made gains since the bill passed. Among those ETFs are iShares Broker Dealers (IAI), which is up 2.8% (although sibling iShares Financial Services (IYG) is at negative 0.2%); KBW Capital Markets (KCE), also up 2.8%; and S&P 500 SPDR Trust (SPY), up 1.7%.
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