JPMorgan Commodities Exit May Sap Liquidity Until Others Step in

JPMorgan Commodities Exit May Sap Liquidity Until Others Step in

A decision by JPMorgan Chase & Co. (JPM) to exit its physical commodities business would temporarily reduce market liquidity before other companies quickly take its place, according to analysts and traders.
New York-based JPMorgan, the largest U.S. bank, said yesterday that it’s “pursuing strategic alternatives,” including the sale or spinoff of its commodities business, after an internal review. The statement came three days after a congressional hearing investigated whether deposit-taking banks should be allowed to trade raw materials such as oil and industrial metals.
July 23 (Bloomberg) — Joshua Rosner, managing director at Graham Fisher & Co., Tim Weiner, global risk manager of commodities and metals at MillerCoors LLC, Saule Omarova, a law professor at the University of North Carolina at Chapel Hill, and Randall Guynn, head of Davis Polk & Wardwell LLP’s financial institutions group, testify at a Senate subcommittee hearing on U.S. banks, financial rules and commodity trading. The panel is led by U.S. Senator Sherrod Brown, an Ohio Democrat, who is among lawmakers and regulators who say banks can drive up prices when they control both the physical products and the financing. (Source: Bloomberg)
July 23 (Bloomberg) — Senator Sherrod Brown of Ohio, Graham Fisher & Co.’s Joshua Rosner, Davis Polk & Wardwell LLP’s Randall Guynn and Senator Elizabeth Warren of Massachusetts comment during a Senate Banking subcommittee hearing on the ability of some U.S. banks to own and trade raw materials. (Excerpts. Source: Bloomberg)
JPMorgan owns and trades financial and physical commodities including crude oil, natural gas and power, and describes itself as “one of the world’s leading energy market makers.” The bank may be the first to exit physical commodities, though others may follow if regulations are changed, as suggested by Senator Sherrod Brown, an Ohio Democrat whose subcommittee of the Senate Banking Committee held the July 23 hearing.
“It looks like they want to get ahead of what appears to be a new wave of regulation that will limit the activities of the banks in the commodities sphere,” said John Kilduff, a partner at Again Capital LLC, a New York hedge fund that focuses on energy.
Regulators need to take a “long, hard look at the practice of banks holding physical commodities,” Brown said in a statement before the hearing. JPMorgan’s decision to consider selling or spinning off its commodities business is “good news for consumers and taxpayers,” he said in an e-mail yesterday.
Liquidity Drop
While the exit of JPMorgan and other banks may reduce liquidity in the short term, they will be replaced by commodities-trading firms such as Switzerland-based Glencore Xstrata Plc. (GLEN), Kilduff said.
“Maybe JPMorgan is just getting ahead of the game a little bit,” said Tariq Zahir, a New York-based commodity fund manager at Tyche Capital Advisors. “Commodities have been part of their business, but not a big driver of their revenue. If Goldman or Morgan Stanley (MS) decides to get out of commodities, people will definitely take more notice of that.”
The effect on the market of JPMorgan’s exit may depend on whether the commodities business finds a new life, either on its own or in the arms of a buyer.
“If JPMorgan were to sell or spin off the physical commodities business and it became a new entity, the impact on the market would be minimal,” said Andy Lipow, president of Lipow Oil Associates LLC in Houston. “If JPMorgan were to just shut it or sell to someone with the same business, that may sap liquidity from the market.”
Metal Warehouses
The congressional inquiry came three weeks after the London Metal Exchange said it wants to help unclog growing queues at repositories, which companies ranging from beer makers to wire fabricators say have reduced the availability of aluminum and copper.
At the same time, prospects for gains in commodity prices may be dimming. Analysts at banks from Citigroup Inc. to Goldman Sachs Inc. have said the decade-long commodity bull market is ending after higher prices spurred expansions at mines, farms and oil fields.
Increased regulatory scrutiny of banks and commodities, along with the outlook for lackluster gains in many raw materials, provides a “one-two punch,” to bank commodity businesses, John Stephenson, who helps oversee about C$2.7 billion ($2.6 billion) at First Asset Investment Management Inc. in Toronto, said in a telephone interview.
“The banks are saying ‘I don’t need the hassle, and there’s no money to be made anyhow,” Stephenson said. “If it was the only game in town, and you were printing money, and there were just a few pesky regulators hanging around, that would be another thing. But with the light being shone now, the implications are very negative.”
To contact the reporters on this story: Edward Welsch in Calgary at; Joe Richter in New York at
To contact the editors responsible for this story: Dan Stets at; Steve Stroth at

Biofuels to Attract $69 Billion Over Next Decade, Navigant Says

Biofuels to Attract $69 Billion Over Next Decade, Navigant Says

Biofuel producers will invest as much as $69 billion to expand output during the next decade, driven in part by U.S. policies that increase blending of plant-based fuels into petroleum-based fuel, according to a report from Navigant Consulting Inc. (NCI)
Annual biofuel sales will increase to $7.6 billion by 2023 as fuel blenders meet mandated growth targets in the U.S., the Chicago-based company said today in a statement.
Standard ethanol made from corn and sugar cane will remain the largest segment of the market and most of the investment in research and production will go to advanced biofuels including biodiesel, biobutenol and cellulosic ethanol made from inedible agricultural products.
To contact the reporter on this story: Christopher Martin in New York at

Brady facilitates automated trade entry and reconciliation with Nasdaq OMX

Brady plc (BRY.

via Pocket July 17, 2013 at 07:40PM

Citigroup has made four hires to its London power and gas sales team, as the US investment bank continues to build its commodities arm while its peers scale back in the sector

Citigroup has made four hires to its London power and gas sales team, as the US investment bank continues to build its commodities arm while its peers scale back in the sector

Citi adds four to growing commodities roster

Suzi Ring

02 Jul 2013

Citigroup”>Citigroup has made four hires to its London power and gas sales team, as the US investment bank continues to build its commodities arm while its peers scale back in the sector, Financial News has learnt.

Citi adds four to growing commodities roster

Branko Pribicevic will join Citi in September from energy trading company Vitol to take up the role of head of European power and gas sales and origination, according to two people familiar with the situation. He has been at Vitol since 2009, prior to which he was at Morgan Stanley, according to his LinkedIn profile. Pribicevic did not respond to a LinkedIn request for comment.

Colin March is set to join Citi from Morgan Stanley. According to the UK’s Financial Services Register he had been at Morgan Stanley since 2007 but left the bank last month. March could not be reached for comment.

Former Goldman Sachs executive director Diana Beverly and Benjamin Davis from Macquarie Bank will also join Citi’s power and gas group in the coming months. Beverly was at Goldman Sachs for six years until 2012, according to one person familiar with the situation. Davis has been at Macquarie since 2009, according to the Financial Services Register.

Beverly did not respond to a LinkedIn request for comment. There were no contact details available for Davis.


Citi has been taking steps to grow its commodities arm at a time when other investment banks have been doing the opposite due to increased capital requirements and tighter restrictions around proprietary trading. The Wall Street Journal reported last month that Morgan Stanley plans to cut 10% of the staff in its commodities unit, or about 30 jobs.

Deutsche Bank has also been scaling back its commodities business in some areas. This year the bank has put parts of its European physical gas and power books up for sale, which has led to about 10 traders being cut this year, according to a person familiar with the plans.

Other departures from the bank’s commodities business in recent months include David Silbert, global head of commodities; Ray Key, global head of metals trading; and John Redpath, global head of oil products and agricultural trading.

In contrast, Citi recently hired a senior metals duo from UBS to lead its global metals sales and base metals trading divisions – moves first revealed by Financial News. Rick McIntire will join Citi from UBS as global head of metals sales this month, while Dylan Morgan joined the bank from UBS as co-head of base metals trading in May.


Other notable hires include Jose Cogolludo, the former BNP Paribas global head of sales and marketing for commodity derivatives, who joined Citi as global head of commodities sales at the close of last year; and Kris Van Broekhoven, who joined from Deutsche Bank as global head of commodity finance in September.

According to research firm Coalition, Citi was ranked as a “tier three” investment bank commodities sales and trading in its 2012 investment bank league table. Tier three means the bank ranks between seventh and tenth among the top ten investment banks for sales and trading revenue.

Just three of 10 of the largest investment banks in commodities trading increased revenues from this business last year, according to a JP Morgan report published in April. Goldman Sachs, Morgan Stanley, Macquarie Group, Deutsche Bank, Barclays, Standard Chartered, Credit Suisse, RBC Capital Markets, BNP Paribas and UBS shared total commodities trading revenues of $6.74bn last year, down from $7.04bn during the previous 12 months. Of these, only Macquarie, Barclays and RBC saw figures increase.

JP Morgan did not include itself or Citi in the April report.

Thomson Reuters launches European power analytics tool

Thomson Reuters launches European power analytics tool

Thomson Reuters launched a tool designed to help traders predict prices in European power markets.

London/New York Thomson Reuters launched a new analytics tool on its flagship Eikon product to help commodities traders and analysts predict prices in major European power markets.

The new tool, Power Curve, uses visualisation techniques to enable traders and analysts to obtain real-time, fundamental fair value assessments of the Nordic and German power markets, two of the most liquid power markets in the world.

Thomson Reuters said Power Curve combines power supply data available under REMIT, or Regulation on Energy Market Integrity and Transparency, with real-time fuel prices, weather, available capacity information and Thomson Reuters proprietary supply and demand models.

“Power markets are increasingly complex and news and price data alone are no longer adequate for traders to assess the fair value of power markets today. Understanding the impact of event-driven data such as weather, supply and demand changes and capacity information on power contracts is critical but also very time consuming,” said Stefan Reichenbach, head of commodities research and forecasts at Thomson Reuters.

“By adding event-driven market simulation models into Thomson Reuters Eikon, we are bringing together data from multiple sources, including data made available by REMIT, and providing energy professionals with a comprehensive visualisation of how such events drive market outcomes,” he said.

Reichenbach added: “Recently when a German nuclear power plant came back on-stream earlier than anticipated, Power Curve visually illustrated how demand would be met by plants with lower marginal cost and correctly anticipated the €2 drop in power prices.”

The Commodity Research and Forecasts service in Eikon provides weather, metals, agriculture and energy insight from a team of analysts from Thomson Reuters GFMS, Thomson Reuters Lanworth, Thomson Reuters Point Carbon and Thomson Reuters Weather Insight.

HKEx, the London Metal Exchange and Bank of China signed an MOU to collaborate on clearing of renminbi commodity products

HKEx, the London Metal Exchange and Bank of China signed an MOU to collaborate on clearing of renminbi commodity products–lme-and-boc-sign-mou

Hong Kong Exchanges and Clearing Limited, The London Metal Exchange and Bank of China Limited have signed a memorandum of understanding on cooperation and the exchange of information regarding the clearing of renminbi (RMB) commodity products.

The MOU was signed by HKEx’s Head of Global Clearing Gerald Greiner, HKEx’s Co-head of Global Markets and LME Chief Executive Martin Abbott and BOC’s Risk Managing Director Shi Wei. The signing ceremony was held in Hong Kong and was witnessed by HKEx Chief Executive Charles Li and BOC Executive Vice President Chen Siqing. Other senior representatives of HKEx, LME and BOC also attended the ceremony. HKEx acquired the LME last year.

“The MOU entered into today marks the beginning of our collaboration to examine the feasibility of LME contracts to be cleared in RMB and potential development of RMB-denominated commodity products in the HKEx Group platforms,” said Mr Li. “This collaboration also demonstrates our commitment to expanding the membership base of the LME and reaching out to users of the LME in different markets.”

“BOCI Global Commodities (UK) Limited, a wholly-owned subsidiary of Bank of China Group, is a clearing member of the LME. It is not only the first Chinese clearing member since LME was founded 135 years ago, but also the first Chinese institution offering direct trading and clearing services in the Exchange,” said Mr Chen. “I believe the signing of the MOU regarding strategic cooperation among HKEx, LME and BOC marks the new milestone for the overall cooperation in the future.”

Charles Li, chief executive, HKEx

Charles Li, chief executive, HKEx

“This collaboration also demonstrates our commitment to expanding the membership base of the LME and reaching out to users of the LME in different markets.”

Brady CTRM selected by Agrifert SA for Soft Commodities Trading and Risk Management

Brady plc (BRY.

via Pocket June 20, 2013 at 06:45PM

Thomson Reuters acquires Pricing Partners

Thomson Reuters acquires Pricing Partners

Thomson Reuters acquires OTC derivatives pricing analytics provider, Pricing Partners

Paris – Thomson Reuters has acquired Pricing Partners SAS, the software developer and provider of OTC (over-the-counter) derivative pricing analytics and services.

The acquisition of Pricing Partners is intended to enhance Thomson Reuters Pricing Service (TRPS) pricing abilities for structured notes, interest-rate, equity, credit, commodities and FX derivatives, as well as hybrid products, adding derivative products valuation, pricing tools and risk analytics to TRPS.

“In today’s economic environment, regulatory requirements and continued economic recovery pressures are driving demand for independent and transparent evaluated pricing services that are specialized to offer local market expertise,” said Debra Walton, managing director and head of Enterprise Content at Thomson Reuters. “The acquisition of Pricing Partners strongly positions Thomson Reuters to meet the changing needs of our European and global client base.”

“Pricing Partners has built a strong brand with an impressive offering and client base in Europe with a growing presence in Asia,” said Neil Masterson, managing director and head of Investors at Thomson Reuters. “This acquisition builds on our commitment to providing our clients with the independent, neutral pricing services they need and represents another step forward in our vision to connect and power the global financial community.”

Thomson Reuters and Pricing Partners already have an established and successful working relationship under which Thomson Reuters has used Pricing Partners Price-it®, a proprietary financial library covering all major asset classes: interest rates, equity, inflation, credit, foreign exchange, commodities, life insurance and hybrid products, to provide pricing services through its proprietary delivery platform, Thomson Reuters DataScope, reaching over 2300 clients worldwide on a daily basis.

“Pricing Partners is delighted to have found a strong industry leader in Thomson Reuters who will use our critical talent and expertise to grow and serve our customer base,” said Eric Benhamou, CEO, Pricing Partners. “Thomson Reuters is a proven partner and shares our vision of the growth opportunities that exist in the evaluated pricing space.”

Object Trading joins DGCX as Independent Software Vendor

First Published 3rd June 2013

Object Trading’s FrontRunner direct market access suite increases Middle East coverage

Object Trading, an independent provider of direct market access, has joined the Dubai Gold and Commodities Exchange as an Independent Software Vendor (ISV). Object Trading’s DMA suite FrontRunner is now live with clients connected to DGCX, and is available to provide direct market data and risk-managed trade execution.

FrontRunner provides normalized exchange connectivity, real-time market data, and order execution with in-line pre-trade risk constraints to sell-side and buy-side firms across multiple asset classes.

Gary Anderson, CEO of DGCX said: “We are very happy to welcome Object Trading, a leading independent provider of global direct market access, to the DGCX community. As DGCX widens its global footprint, enhanced connectivity to the Exchange will be a critical enabler for our growth. We look forward to working with Object Trading to make it easier and more cost effective for traders to connect and trade on DGCX.”

Steve Woodyatt, CEO of Object Trading said: “Our clients look to us to remove the limitations of their current reach by providing exchange access where and when new opportunities arise. Building direct market access to the largest commodities exchange in the Middle East was driven by brokerages needing to enable their clients to trade DGCX products. DGCX has seen tremendous growth in trading volumes in 2013, so we see this as a significant enhancement to our global offering.”



Dilip Bhatia, CEO, Ace Derivatives and Commodity Exchange

Ace Derivatives and Commodity Exchange Limited (“Ace”), a Kotak Mahindra Group anchored commodity exchange in India signed a Memorandum of Understanding (MoU) with CLFMA of India.

By virtue of the MoU, feed manufacturers, who are members of CLFMA of India, will receive price information for Soymeal which is an important input & output component for the association and also accounts for 30-40% of the total cost of its feed. Both Ace & CLFMA will endeavour to work in the interest of members of the association to participate as hedgers in futures contract and thus, protect their business margin.
Ace will get the opportunity to interact directly with players who trade in feed, poultry, fish and prawns, as well as other livestock across India, as many of them are members of CLFMA.

Speaking on the development Mr. Dilip Bhatia, CEO, Ace Derivatives and Commodity Exchange Limited said “We are confident that this partnership will help the members of CLFMA to protect themselves against price volatility by hedging on Ace, thereby also giving boost to futures trading. Ace, being a leading national exchange has always strived to achieve uniqueness and alignment with the market need in terms of their products, technology and distribution and will continue to do so.”
Dr. Dinesh Bhosale, Chairman, CLFMA of India, stated, “We are extremely happy to be associated with Ace Commodity Exchange. This association has given feed members of CLFMA to benefit through price hedging by being better informed on tick to tick price changes in the contracts offered.”

Ace currently offers trading in 9 agri commodities viz., Refined Soy Oil, Soybean, Soybean Meal, RBD Palmolein, Cotton, Mustard Seed, Castor, Chana and Sugar.

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