Google Trading Systems

Now, the newswires are full of Google buying the global online advertising industry - buying Admob being the latest - but that is not the most interesting Googlestory today.

No, the most fascinating is that Google's getting into the financial trading business - Businessweek:

Google, it turns out, has launched a trading floor to manage its $26.5 billion in cash and short-term investments. The hoard is the third-biggest cash pile among U.S. tech companies, after Microsoft (MSFT) and Cisco's (CSCO).

One of the company's goals is to improve the returns on its money, which until now has been managed conservatively. Google doesn't disclose its rate of return on investments or the targets it has set, but analyst Aaron Kessler of ThinkEquity estimates the company's 2010 return (including interest income and realized and unrealized gains before tax) at around 2.5 percent.

Strangely enough, of all the other things Google is trying, I think this one is in many ways more closely aligned to their skills - lots of quant needed, handlig large nimbers of transactions very well...plus, its a growth industry and is featherbedded by taxpayers in tough times

Google's trading room opened in January. The plan is to keep the war chest growing safely and ready to be deployed should the right mergers-and-acquisitions opportunities arise. The investment team has grown to more than 30 people, up from six three years ago. Many of the new arrivals are former Wall Streeters who left lucrative careers at Goldman Sachs (GS), JPMorgan Chase (JPM), and other banks. The man in charge is Brent Callinicos, Google's 44-year-old treasurer, who joined from Microsoft in 2007, back when Google had $11 billion in cash. "This isn't fast money, this is patient money," he says. His crew works in a recently remodeled finance building on the company's corporate campus in Mountain View, Calif., complete with a rock climbing wall, massage chairs, murals of tropical sunsets, and bamboo wall panels. In a second-floor space accessed by key card—the trading room—the Wall Street vets tap out trades at desks with six computer screens.

One of the things we've been watching with interest over the last 2 years is the growth of Internet based "Non Bank" banks - by and large totally unregulated entities dealing with large amounts of funds. We also suspect, as regulation catches up with the last cycle's Private Equity pirates, this area will only grow and grow.

Not that we think Google will behave with anything less than total integrity of course, as they are doing with the "accidental" WiFI data they collected