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August 6, 2013

Wall St falls out of love with commodities trading

Blythe Masters was triumphant. The JPMorga Chase executive had just sealed a deal that would propel her bank to the top of Wall Street’s commodities league table.

JPMorgan paid $1.7bn and assumed $3.3bn in debt to buy the global oil, gas, coal, power and metals businesses of RBS Sempra Commodities, a trading venture. While JPMorgan was strong in commodity derivatives, Sempra was at root a physical house moving molecules through a storage and warehousing network stretching from Baltimore to Singapore.

For Ms Masters, head of global commodities, this exposure was critical.

“’Just being able to trade financial commodities is a serious limitation because financial commodities represent only a tiny fraction of the reality of the real commodity exposure picture,’ she said on the day the deal closed in July 2010. ‘We need to be active in the underlying physical commodity markets in order to understand and make prices.’”


Read full Financial Times article here

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