Goldman Sachs and sponsored access

Sponsored access, in some ways, has been an even bigger issue than flash orders for much of the year. It may get even more scrutiny now that the flash trades controversy seems to be focusing the spotlight on broad high-frequency trading issues.

Stoking concerns, Goldman Sachs is launching a sponsored access program, through which certain clients will be able to access securities exchanges directly under Goldman's ID code. But it is taking a measured position on the monitoring: It favors pre-trade monitoring instead of post-trade monitoring of sponsored clients' activity. That may slow activity down, but it will likely put the firm on more reasonable regulatory footing.

It is certainly smart. Client mistakes or foolish behavior--possibly by a rogue--could results in bad news for the broker dealer. So it makes sense to monitor closely before trades are executed. Goldman--and Lime Brokerage--uses FTEN software to monitor pre-trade activity, according to Securities Industry News. An alternative idea, floated by Wedbush, is to analyze data at the NSCC level. But that's still a post-trade solution. At this point, it's unclear how the SEC will rule. There may be some sort of middle ground that includes sampling pre-trade activity vs. monitoring it. 

For more:
- here's the article

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