Less than a week after JPMorgan, the largest US bank, announced it was leaving its physical commodities business, analysts say they expect banks to return to their traditional business structure.
The most likely institutions to follow are Morgan Stanley, which has been looking to sell its commodity division since last year, and Goldman Sachs, scaling back its physical operations as of late.
In the short term, the exit of JPMorgan and other banks may reduce liquidity, but experts, such as commodities trade adviser Dan Dicker, believe commodities-trading firms such as Glencore Xstrata (LON:GLEN) will replace them.
The past two weeks have seen unparalleled examination of Wall Street’s commodity trade, with the Senate questioning whether financial institutions should be allowed to own warehouses, pipelines and other commercial holdings.
Watch The Street interview to Dan Dicker below:
Comments
John VanPlantinga
The Fed only suggested that banks get out of the physical business to help Goldman profit from their shorts. The two are always in lock step: Goldman is the principle, the Fed is their agent.