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Macaskill on Markets: Goldman’s risky bet on velocity

The firm is pushing the idea that velocity management can drive sustainable growth for its global markets business. But will investors view this as an updated version of proprietary trading?

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Goldman Sachs is working hard to convince investors that recent strong performance by its traders represents gains in market share that will provide sustainable future revenue growth.

This is being done with a novel marketing approach that has prompted disquiet among competitors and could set Goldman up for the old-fashioned business failure of over-promising and under-delivering.

The marketing pitch avoids the dry understatement with which banks typically describe strong results from their trading divisions.

Goldman’s senior executives love a buzzword and the theme of the moment is ‘velocity'

Goldman’s senior executives love a buzzword and the theme of the moment is ‘velocity’.

Stephen Scherr, Goldman’s chief financial officer, explained the concept on the firm’s third-quarter earnings call with analysts on October 14.

“I would say the performance of the trading businesses in the third quarter, frankly like it was throughout most of the first part of the year, was really done with an eye toward high velocity turn on balance sheet; that is, we were very well prepared to commit capital to facilitate intermediation but saw our mission equally as moving and trading on that risk very efficiently, and so we could see the kind of turnover that we needed.