Indiana Grain Company, LLC

Posted: 11/27/11

By: tomgrisafi

Lots of commodity traders are leaving the business.

And not just those who were long all of last week.

According to an eye-opening report from Bloomberg on Sunday, the world’s biggest investment banks have greater staff turnover in commodities than in fixed-income and currencies because of tightening regulations on trading, according to Coalition, a London-based research company.

That reflects “general market confidence and demand from non-banking competitors including trading firms, which do not have the same levels of regulatory constraints,” Coalition said in an e-mail to Bloomberg. Coalition, founded in 2002, uses company announcements, its own research, media articles and information from people in the market.

"JPMorgan Chase & Co. (JPM) and Bank of America Corp. are among banks that shut units trading the banks’ money in commodities before the implementation of the Volcker rule in 2012 that will limit such practices," the report says. The Commodity Futures Trading Commission is curbing the size of positions any one party can take in U.S. raw-material derivatives. Revenue from banks’ commodity units is still growing faster than overall sales, Coalition said.

“A lot of banks are going to struggle to retain their top traders over the next few years,” said Justin Pearson, the London-based managing director of Human Capital, which helps to recruit more than 100 commodity and energy traders a year.

Source: Bloomberg Revenues generated by the 10 largest banks’ commodity units advanced almost 16 percent to a combined $5.49 billion in the first nine months from a year earlier, Coalition said. Overall revenue at the banks contracted 12 percent.

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