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Goldman Sachs Has Started Giving Away Its Most Valuable Software

The sketches, dashed out on a yellow legal pad, more or less match what Mr. Dubno drew on a white board 25 years ago, in a dusty corner office on the fifth floor of Goldman’s old downtown headquarters: a schematic for a software database that would help the investment bank make billions of dollars in well-timed trades, and sidestep billions more in losses.

Called Securities DataBase, or SecDB, the system remains Goldman’s prime tool for measuring risk and analyzing the prices of securities, and it calculates 23 billion prices across 2.8 million positions daily. It has played a crucial role in many of the seminal moments of the firm’s recent history, including its controversial trading just ahead of the financial crisis.

Goldman had guarded it closely, resisting offers from rivals such as Deutsche Bank AG DB -0.98 % to license the database. One former partner recalls huddling with Gary Cohn, one of Goldman’s top executives, a decade ago to ponder what a licensing deal would be worth. Mr. Cohn told his colleagues he wouldn’t do it for $1 billion. For $5 billion? Maybe, he said, according to the former partner.

“It was such a competitive advantage,” Mr. Cohn, who was promoted to president in 2006, said recently.

There is perhaps no better sign of the changes that have engulfed Wall Street than this: Goldman has recently started giving clients the tools that made it a trading powerhouse, for free.

The firm’s motives aren’t altruistic; rather, many of the edges that once made Goldman’s traders feared and admired have been blunted. New rules have limited banks’ trading risks, and made it costly to hold large inventories of stocks and bonds on their books. And electronic trading has squeezed margins, dimming the clamor of trading floors across Wall Street.

Traders and executives tap into SecDB to inform how to price securities, and how the value of those assets may change with a twist on the dial on any one of thousands of potential variables. That information can be used to analyze potential trades—and then to monitor the risks posed by those positions.

What made it the envy of Wall Street, though, was its ability to scale up to include new classes of securities, new trading desks, even whole businesses. And the data it harnessed was all in one place. Megamergers left rivals with a hodgepodge of different systems and different factions of employees loyal to each of them. Goldman avoided big acquisitions, evading issues that would slow its ability to track risks.

Thus, Goldman’s new gambit:...


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