Goldman Sachs Returns to ETFs After 8 Years: Goldman Sachs Group has resumed
its role as a lead market maker for exchange-traded funds (ETFs) after an eight-year hiatus,
reentering a space now increasingly dominated by high-frequency trading firms.
Contents
New Partnership
The Role of Market Makers
Trading Firms Fill the Gap
A Highly Profitable Infrastructure
Capital Group
A New Partnership for Goldman Sachs
The bank has assumed this role for the CG US Large Growth ETF,
listed on the exchange under the ticker CGGG, with an estimated value of $34 million.
The fund was launched by Capital Group at the end of June.
This marks Goldman Sachs’ first public return to a business it had largely exited in the U.S. back in 2017,
According to informed sources who requested anonymity.
The move reportedly stems from increasing client demand.
The bank has not issued an official comment on the matter.
The Role of Market Makers in ETFs
Lead market makers play a fundamental role in the structure of ETFs.
They are responsible for pricing buy and sell orders and occasionally help finance new funds.
Being designated as a “lead market maker” reflects a commitment
to providing ongoing liquidity,
which typically requires substantial capital and strong trading support.
It’s worth noting that Goldman Sachs’ withdrawal in 2017 coincided with regulatory changes
following the financial crisis,
which pushed many banks to scale back or exit this space altogether,
according to Bloomberg News reports at the time.
High Frequency Trading Firms Fill the Gap
In the absence of traditional banks, firms like Jane Street,
Susquehanna Financial Group and Citadel Securities
emerged as dominant forces in the secondary trading of ETFs.
Data shows that Jane Street is the lead market maker
for over 800 ETFs listed on exchanges such as NYSE Arca, Cboe, and Nasdaq.
Citadel covers over 450 ETFs, Virtu Financial oversees more than 700,
and Susquehanna services over 600, according to figures compiled by Bloomberg Intelligence.
A Highly Profitable Infrastructure
Athanasios Psarofagis, an analyst at Bloomberg Intelligence, stated:
“When you analyse the revenues of firms like Jane Street and Citadel,
It becomes clear that the real profitability lies not in the ETF products themselves,
but in the surrounding infrastructure—market making, operational services,
and trading. It’s a highly competitive space, but large banks are well-positioned to thrive in it.”
Capital Group Welcomes Its Partnership with Goldman Sachs
Capital Group, the issuer of the CG US Large Growth ETF,
expressed enthusiasm over Goldman Sachs’ return.
Scott Zeiffer, Head of ETF Products and Capital Markets at the firm, commented:
“We are always looking to build partnerships with high-quality liquidity providers.
With the rapid growth in the ETF space, it’s exciting to see Goldman Sachs
take on the role of lead market maker for our fund.”
Goldman Sachs Returns to ETFs After 8 Years