[yummyfajitas]

I was responding to this: "One of the key things that Goldman has (as a hedge fund) is the ability to see what all their clients are doing...Hedge Funds, OTOH, are used to being spokes, rather than hubs, and so don't expect to know what everyone else is doing."

A market maker is merely a prop desk running a particulra strategy. They have no information on Goldman's clients. They behave exactly like any hedge fund.

Insider trading is a red herring, I don't know why you bring it up. Mdda claims Goldman is breaching their fiduciary duty to their clients.

[EugeneG]

"A market maker is merely a prop desk running a particulra strategy. They have no information on Goldman's clients. They behave exactly like any hedge fund."

The common understanding is that a market maker is not exactly a prop desk. The clients of a market maker are the counterparties who take the other side of the market maker's markets. (These counterparties are Goldman clients). Market makers are not hedge funds and don't fundamentally behave like hedge funds, though I suppose both during their line of work take views on markets, so there are some similarities.

My point was, market makers, by definition, know what (their) clients are doing and take market views based on this. The major value in being a market maker (which is a huge part of Goldman's capital markets business) is seeing client flow.

[mdda]

Actually, Goldman repeatedly claimed in their defense of their actions on the Fab CDO that they had no fiduciary responsibility to their clients.

Also as a market maker, it's difficult to ignore what's going on if all the smart money is selling, and all the dumb money is buying.

FWIW, the vast majority of market-making is taking place outside of the stock exchange : End-users are at a natural disadvantage, since they can't see all the flows.