Goldman's Giant New Rival: Collateral Damage
NEW YORK (
) --
Goldman Sachs
(GS) - Get Report
and other big securities dealers made bundles of money last quarter because they faced fewer competitors, but now
BlackRock
(BLK) - Get Report
is hoping to change that.
BlackRock, soon to be the world's largest money manager, is working on a way to cut out the middleman on a lot of its equity trades, according to a report in the
Financial Times
on Saturday. Currently, it executes trades through banks like Goldman,
Morgan Stanley
(MS) - Get Report
,
JPMorgan Chase
(JPM) - Get Report
or
Citigroup
(C) - Get Report
. While that list is far from exhaustive, it got significantly smaller with the failure or acquisition during the crisis of important players like
Bear Stearns
,
Lehman Brothers
and
Merrill Lynch
.
As the article notes, BlackRock CEO Larry Fink complained in July about the easy money the Wall Street banks were making by charging hefty commissions for simple trades.
It is probably only a matter of time before BlackRock starts trading bonds and currencies and other products on its own, and other big money managers like Fidelity Investments and PIMCO follow suit.
This will hurt Wall Street not just because of the lost commissions, but also because they will lose some of the market intelligence they currently enjoy by being in the middle of trades.
For Bank of America, the news is mixed. While it won't do as many trades with BlackRock, it will benefit from BlackRock's cost savings since it holds a large stake in the money manager.
The news is just the latest signal that BlackRock is becoming ever more important in the world of finance. It is amazing how it has grown during the crisis -- benefitting at least as much as Goldman and JPMorgan from the new order of things, while getting less attention for doing so. While everyone in the world of finance understands the importance of BlackRock, it is still relatively unknown to the general public.
That can't continue indefinitely, but given all the grief Goldman has been getting, it's hard to imagine Fink and his troops are too upset about their relative anonymity.
--
Written by Dan Freed in New York
.
