Goldman Sachs to shutter prop trading unit

What will happen with Goldman Sachs' Principal Strategies Group (NYSE: GS). The media has been rife with stories for several weeks about the future of this vaunted proprietary trading operation, one of two big units at the bank.

The latest Bloomberg scoop holds that the unit will indeed be shuttered, a consequence of the Volcker Rule. The bank apparently is holding off making an announcement to allow employees to find new jobs.

This is somewhat surprising because many people expected members of the unit, which acted as an internal hedge fund, to either be folded into Goldman's asset management unit or be spun off into a separate hedge fund. There was also talk that these traders would be distributed to market-making units, where they would still be called on for their prop skills. But in the end, the unit is being shut down.

A group of traders, however, may apparently form their own Asia-focused hedge fund. My guess is that this is really the only option for the bank. Had Goldman done either of the expected options, it would certainly have raised a howl in Washington, as it would appear that the bank is circumventing the rules. There are likely other issues involved that we just don't know.

For more:
- here's a good analysis from CNBC

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