Goldman Says Stake In Simon Available -- WSJ

By Liz Hoffman Features Dow Jones Newswires

This article is being republished as part of our daily reproduction of WSJ.com articles that also appeared in the U.S. print edition of The Wall Street Journal (July 6, 2017).

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Goldman Sachs Group Inc. is seeking to sell a stake in Simon, its two-year-old web app that sells complex financial products to retail investors.

Goldman is soliciting investments that would value Simon at about $75 million and lay the groundwork for a spinoff of the business, according to people familiar with the matter.

Simon is an online marketplace for structured notes, bondlike instruments that pay investors based on the performance of other financial metrics, like the S&P 500 or oil prices. It has done well with retail brokers who buy these products but has been slower to take off among banks that issue them -- Goldman rivals.

This is a common challenge on Wall Street: Initiatives that need multiple banks to thrive -- to reduce costs, deepen liquidity and product choice, and gain clients' trust -- can be hampered by old rivalries. Shared platforms are cheaper and more efficient but are a tough sell when they are backed by a single bank.

Bringing in outside investors could bolster Simon's credibility as a neutral platform and give it an edge in a growing crowd of tech-enabled competitors.

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Goldman is talking to several firms about a deal to both invest in Simon and agree to sell products through it, the people said. There is no guarantee, though that the talks will produce a deal.

Goldman declined to comment.

Simon connects banks that issue structured notes to retail brokers who buy them on behalf of clients. It was originally developed as a conduit between Goldman's traders and its own wealth advisers, and opened up to outside firms in 2015.

Since then it has enrolled thousands of advisers at brokerages such as Raymond James Financial Inc. who can use the app to customize notes for their clients and learn about these complex products.

But it has been tougher to attract rival banks to the platform. J.P. Morgan Chase & Co., one of the largest issuers of structured notes, chose to partner with International Business Machines Corp. to develop its own competing platform.

Among the largest banks that sell structured notes and certificates of deposit, only Goldman does so through Simon. Others such as Barclays PLC and Credit Suisse Group AG use independent brokerages or their own sales forces.

Some other banks have resisted Goldman's fees, according to people familiar with their concerns. Others say they would prefer a neutral platform that isn't run by one bank. Independent competitors are springing up, too, such as Transparitrade, launched by a former Wall Street lawyer.

Having outside investors in Simon would put some distance between it and Goldman's own trading desk and potentially bring new banks onto the platform. That could give brokers more choices when selecting products for clients.

It would also mark the latest bid by Goldman to monetize software it initially developed for internal use. Goldman in 2015 spun out a series of apps it had built to allow its employees to access their work email on mobile devices. An internal chat tool called Live Current became the basis for the Symphony message service now available across Wall Street.

That effort is likely to continue as R. Martin Chavez, formerly Goldman's top engineer, settles into his new role as chief financial officer. He has been a driving force behind the bank's push to share -- and profit from -- its once- closely held technology

Write to Liz Hoffman at liz.hoffman@wsj.com

(END) Dow Jones Newswires

July 06, 2017 02:47 ET (06:47 GMT)