Goldman Sachs 2015 Annual Report Download - page 15

THE GOLDMAN SACHS GROUP, INC. AND SUBSIDIARIES
Institutional Client Services
Institutional Client Services serves our clients who come to
the firm to buy and sell financial products, raise funding
and manage risk. We do this by acting as a market maker
and offering market expertise on a global basis.
Institutional Client Services makes markets and facilitates
client transactions in fixed income, equity, currency and
commodity products. In addition, we make markets in and
clear client transactions on major stock, options and futures
exchanges worldwide. Market makers provide liquidity
and play a critical role in price discovery, which contributes
to the overall efficiency of the capital markets. Our
willingness to make markets, commit capital and take risk
in a broad range of products is crucial to our client
relationships.
Our clients are primarily institutions that are professional
market participants, including investment entities whose
ultimate customers include individual investors investing
for their retirement, buying insurance or putting aside
surplus cash in a deposit account.
Through our global sales force, we maintain relationships
with our clients, receiving orders and distributing
investment research, trading ideas, market information and
analysis. As a market maker, we provide prices to clients
globally across thousands of products in all major asset
classes and markets. At times we take the other side of
transactions ourselves if a buyer or seller is not readily
available and at other times we connect our clients to other
parties who want to transact. Much of this connectivity
between the firm and its clients is maintained on technology
platforms and operates globally wherever and whenever
markets are open for trading.
Institutional Client Services and our other businesses are
supported by our Global Investment Research division,
which, as of December 2015, provided fundamental
research on more than 3,400 companies worldwide and
more than 40 national economies, as well as on industries,
currencies and commodities.
Institutional Client Services generates revenues in four
ways:
‰In large, highly liquid markets (such as markets for U.S.
Treasury bills, large capitalization S&P 500 stocks or
certain mortgage pass-through securities), we execute a
high volume of transactions for our clients;
‰In less liquid markets (such as mid-cap corporate bonds,
growth market currencies or certain non-agency
mortgage-backed securities), we execute transactions for
our clients for spreads and fees that are generally
somewhat larger than those charged in more liquid
markets;
‰We also structure and execute transactions involving
customized or tailor-made products that address our
clients’ risk exposures, investment objectives or other
complex needs (such as a jet fuel hedge for an airline); and
‰We provide financing to our clients for their securities
trading activities, as well as securities lending and other
prime brokerage services.
Institutional Client Services activities are organized by asset
class and include both “cash” and “derivative”
instruments. “Cash” refers to trading the underlying
instrument (such as a stock, bond or barrel of oil).
“Derivative” refers to instruments that derive their value
from underlying asset prices, indices, reference rates and
other inputs, or a combination of these factors (such as an
option, which is the right or obligation to buy or sell a
certain bond or stock index on a specified date in the future
at a certain price, or an interest rate swap, which is the
agreement to convert a fixed rate of interest into a floating
rate or vice versa).
Goldman Sachs 2015 Form 10-K 3