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sylvester

The end of commodity trading for big banks?

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http://au.businessinsider.com/senate-banking-on-wall-st-commodities-2013-7

 

"Back in 2003 the Federal Reserve decided to temporarily allow banks to purchase commodities directly. That means oil, power, copper, aluminium etc. This September, that temporary regulatory relaxation is set to expire, and if it does, a big chunk of Wall Street’s business will expire with it.

And now that the ruling is up for discussion, Congress gets to weigh in. Wall Street be warned, if this hearing was any indication, the Senate is coming down on the side of culling the commodities business."

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Interesting.

 

I invested some years of my time in the early phase of that experiment.

 

And looking back, I can see some successes and some failures in it.

 

If the banks exit, some commodity prices might go lower since there would be less capital to hold inventories,

but prices might then become more volatile, as the "buffer stocks" held by banks disappear.

 

I think that there may be better alternatives than a complete exit.

 

=====

 

Here are the names of some of the pioneers : http://www.risk.net/...pioneer-traders

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