Goldman Just Bought An Encrypted Messaging System That's Going To Be A Bloomberg Killer

Goldman Sachs confirmed its intention to kill off Bloomberg's chat system with the acquisition of a company called Symphony on Wednesday.

Thirteen other institutions, including JPMorgan Chase and Morgan Stanley, were involved in the $66 million purchase, a move that will likely turn heads at Bloomberg, which has largely dominated the market for a financial sector communications tool.

Banks have been whining about the cost of Bloomberg's $20,000 terminals for a long time, but setting up their own systems probably won't be a huge money-saver. Privacy is the massive elephant in the room here.

The issue is Bloomberg's blunder over reporter access to chat rooms. Last year it was revealed that Bloomberg reporters had been accessing anonymous trader chat rooms without identifying themselves: The massive firm tries to focus on financial services and cutting-edge reporting, but those two do not always seem to mix.

It seems several several banks are still concerned about privacy issues, even after Bloomberg's own investigation found that the reporters were not using the discussions as direct material in articles. The system Goldman and the other institutions have now purchased is not just safe from reporters - it's designed to be safe from just about everyone.

Bloomberg terminals offer a lot of other features, but the messaging aspect creates a network that it's hard to disengage from, so new systems could weaken the company's hold on the market. David Rho at MMG Partners also told the Wall Street Journal that if Bloomberg lost their message system domination, they could be forced to reprice their terminals.

There's another aspect to the security discussion that might soon crop up. Perzo, the private communications service that Symphony will use, is designed to be incredibly secure. As Business Insider's Dylan Love reported back in November, before it was clear that Perzo would be used for financial services "It's designed in such a way that any third party, Perzo included, can't decode the messages."

That was considered to be a great defense against any national agencies that might want to look at your communications. But it's not clear what it would mean if a regulator wanted to look into Goldman employees' message history. The system will be ready in mid-2015, so it probably won't be long before we find out.