Goldman continues to make issuing its own ETFs through its asset management unit a priority, however, even as it steps back from providing the infrastructure to keep such funds trading.
Since last year, the number of ETFs backed by Goldman as a LMM on Intercontinental Exchange Inc's NYSE Arca trading venue has plunged to 178 from 380, according to documents published by NYSE.
Goldman is no longer the lead market maker on major ETFs including the $78 billion iShares MSCI EAFE ETF, $14 billion Guggenheim S&P 500 Equal Weight ETF and $8 billion WisdomTree Japan Hedged Equity Fund, according to NYSE data.
NYSE Arca is the largest exchange for ETFs by number of listings. Other exchanges offer similar programs to encourage market making.
Bill Belden, head of ETF business development for Guggenheim Investments, said Goldman is no longer lead market maker on several of their ETFs as of last month, "as they have largely stepped out of the LMM business."
Goldman continues to be a force in ETF trading even as it withdraws from LMM assignments at exchanges. It held a 9 percent market share for U.S. ETF trading at the end of the second quarter, up about 20 percent over the same period last year, according to exchange traded volume from NYSE Arca and Nasdaq.
Stepping In
One of Goldman's competitors, speaking on condition of anonymity, said the bank had "a very attractive book of assignments," adding that "there is high demand for [exchange-traded products] that Goldman is dropping."
Lesser-known but deeply experienced trading firms, including New York-based Jane Street Group LLC and a subsidiary of Amsterdam-based IMC BV, have picked up some of Goldman's former LMM assignments, NYSE data shows.
Despite Goldman's exit, some bank-owned trading operations see value in the business, such as RBC Capital Markets, part of Royal Bank of Canada, which has stepped into new LMM roles.