Goldman Sachs Joins High-Frequency Market Making Battle with JPMorgan and Jane Street

Goldman Sachs is building a new high-frequency market making team as part of its electronic market making group. The bank is currently hiring engineers in New York to build the infrastructure for this business line, which is focused on US ETFs. This project seems to be part of a 'major, multi-phase ETF initiative' and will also include international ETF expansion in future phases.

The focus on low-latency infrastructure comes at an interesting time, with some experts suggesting that HFT strategies may not be as profitable as they once were. Hudson River Trading's head of AI Iain Dunning told Bloomberg last October that 'all the latency has been arbitraged for the most part.' JPMorgan is also pushing into this space, and its 'AI Markets Lab' will focus on both high-frequency and mid-frequency trading strategies.

Goldman Sachs largely exited the ETF market making space in 2017 but made an official return last summer by becoming lead market maker on a new ETF from Capital Group. Jane Street accounts for 21% of market share for ETF market making, while Susquehanna and Citadel Securities account for 14.4% and 11.2%, respectively.