Our Gold Book panelists applauded Goldman Sachs this year for a risk management infrastructure that steered the firm away from the subprime mess as well as for its widely used algorithmic trading products and its ability to manage technology efficiently -- "They very rarely have projects blow up," one panelist notes.
According to Goldman's Joseph Squeri, managing director, global head of equities technology and co-head of securities technology, "Within Goldman Sachs, everything we do has risk management ingrained in it, we don't look at it as a separate function from our trading systems." The firm, Squeri points out, has an in-house built platform for analyzing risk pre-, intra- and post-trade. "Because we have a common platform across all our businesses, we can give traders and business leaders the information they need to make decisions in real time," he says.
Much of Goldman Sachs's overall IT capability, Squeri relates, can be attributed to a culture of collaboration. "What makes IT work well here is our ability to collaborate across all disciplines -- application development, infrastructure, our quant teams and our business -- and packaging that all together into an application that meets the needs of our internal and external client base," he says. "We have a collaborative culture that brings them together and makes it work."
To help encourage collaboration, Squeri adds, about six years ago Goldman Sachs forged its equities, fixed income and other related divisions into a single securities division. "IT executives now find that what used to be insurmountable is now possible," he says. "From the top, [CEO and chairman] Lloyd Blankfein, on down, it's anticipated that we would work as a team to leverage as much as we can from the different disciplines as best as possible. It's ingrained in our DNA." Collaboration even is considered in performance reviews, Squeri notes, adding that each manager gets reviewed not only by his direct manager but also by peers and subordinates; employees even have the opportunity to submit unsolicited reviews of people they have worked with.
Although it does work with some vendors, Goldman Sachs has a bias toward in-house development versus off-the-shelf vendor packages, except for commoditized functions, according to Squeri. "This gives us a competitive advantage and enables us to be more nimble so that we could adapt the technology to meet whatever business need is facing us," he asserts.
Currently Goldman's largest IT project is its rearchitecture of order management connectivity and routing for trading. "We've been able to reduce our latency by 90 percent and increase throughput more than 1,000 percent, providing advantages to our clients and ourselves," Squeri reports. He explains that these improvements have come through rewriting the order management, routing and exchange connectivity paths in C++. The underlying hardware, he adds, comprises industry-standard Linux servers housing Intel Nehalem chips.