Goldman Sachs Introduces New Option Algorithms

Jan.10, 2008 in Market Outlook

NEW YORK, Jan 10, 2008 (BUSINESS WIRE) — Goldman Sachs Electronic Trading
announced today the launch of two new U.S. Listed Option algorithms, enhancing
the firm’s suite of advanced trading functionality. The addition of Iceberg and
Delta Adjusted algorithms marks the third and fourth strategies in Goldman
Sachs’s growing suite of options execution algorithms and order types, which have
been built on the successful foundation laid by SIGMA and Prowler. These
strategies are available to clients trading electronically over all the GSET
platforms, specifically REDIPlus and our FIX offering.

The Iceberg strategy will post small orders into the various markets holding the
balance. The order placement logic dynamically optimizes the price and the size
of the various orders keeping in sync with every tick in the markets. As the
posted orders are executed, they are replaced with subsequent tranches until the
entire order is filled or cancelled. If the market moves into the limit price,
the order aggressively takes liquidity by sweeping with IOC orders.

The Delta Adjusted strategy is designed to float at a limit with the underlying
security according to the option delta. The order will be temporarily paused if
the price moves outside the upper and lower bounds set on the underlier, keeping
the delta relevant. Additionally, this order will scan all seven option markets
until the order is marketable and then sweep liquidity accordingly.

JP Xenakis, head of electronic listed options sales at Goldman Sachs, noted,
“Over the past years–and particularly in the volatile market environment of the
past few months–we’ve seen an increase in clients’ incorporation of options into
their overall trading strategy. The suite of algorithms and tools that we offer
aids clients in finding optimal liquidity and the best prices.”

Goldman Sachs Electronic Trading offers equities, options, futures, and
synthetics algorithmic strategies across North America, Europe, and Asia. Goldman
Sachs has been committed to electronic options trading for nearly 10 years and
executes over 1 million US options contracts each day. In addition to the latest
liquidity-seeking options algorithms, clients can take advantage of SIGMA smart
routing, sweeping functionality with Prowler, connectivity to all seven US
options exchanges, and complex order types, including butterflies, straddles,
strangles, and custom strategies. Additionally, Goldman Sachs recently introduced
connectivity to several European options exchanges. Clients can access Goldman
Sachs electronic options capabilities via REDIPlus, its award-winning Execution
Management System, via FIX or Bloomberg.

Goldman Sachs is a leading global investment banking, securities and investment
management firm that provides a wide range of services worldwide to a substantial
and diversified client base that includes corporations, financial institutions,
governments and high net worth individuals. Founded in 1869, it is one of the
oldest and largest investment banking firms. The firm is headquartered in New
York and maintains offices in London, Frankfurt, Tokyo, Hong Kong and other major
financial centers around the world.

SOURCE: Goldman Sachs
Goldman Sachs
Ed Canaday, 212-902-5400

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