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Bank Commodity Staff Turnover Seen Gaining as Rules Tighten

December 01, 2011

(Adds comment from Coalition in sixth paragraph.)

Nov. 25 (Bloomberg) -- 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, without giving figures. Coalition, founded in 2002, uses company announcements, its own research, media articles and information from people in the market.

JPMorgan Chase & Co. 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 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.

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.

The job-cut rate at top 10 investment banks’ commodity units is smaller than at fixed-income and currency units at the banks, Coalition said.

Volcker Rule

The Volcker rule, named for former U.S. Federal Reserve Chairman Paul Volcker, was included in the Dodd-Frank Act to limit banks taking risks with their own capital. The CFTC voted three to two on Oct. 18 to curb trading in 28 commodity futures including oil and gold.

Kieran McKenna, who traded oil for Credit Suisse Group AG and JPMorgan, started a hedge fund that will start taking money from outside investors in December, Mastic Investment Advisory AG, his new company, said this month. Former JPMorgan trader Damien Bombell, who left when the bank closed the unit that bet on commodities last year, started a hedge fund to invest in metals, grains and energy, Bombell said in October.

Commodities is a “very attractive” business, Carsten Kengeter, chief executive officer of UBS AG’s investment bank, said on Nov. 17, according to slides on the company’s website. The bank re-entered commodities last year after exiting in 2008.

Job Losses

Financial job losses this year total about 200,000 including banks, insurers and asset managers, surpassing the 174,000 losses in 2009, according to data compiled by Bloomberg. Lenders are reducing staff as the European debt crisis roils markets, crimps revenue from trading stocks and bonds, and deters companies from takeovers or stock offerings.

Commodity hedge funds attracted $7.91 billion from investors in the first 10 months, 10.2 percent more than a year ago and above the hedge-fund industry average of 2.1 percent, according to New York-based eVestment|HFN, which tracks the industry. Assets under management at commodity hedge funds increased $3.13 billion to $80.9 billion in the period, the researcher said in an e-mail.

The Standard & Poor’s GSCI Index of 24 commodities has gained 1 percent this year as the MSCI All-Country World Index of equities retreated 16 percent and Treasuries returned 9.7 percent, a Bank of America Corp. index shows.

JPMorgan Unit

JPMorgan, the biggest U.S. bank by assets, told commodity proprietary traders in August 2010 their unit would be closed. Bank of America “completely exited” proprietary trading in stocks, bonds, currencies and commodities as of June 30, the Charlotte, North Carolina-based firm said on Nov. 3.

Coalition tracks Bank of America, Barclays Capital, Citigroup Inc., Credit Suisse, Deutsche Bank AG, Goldman Sachs Group Inc., JPMorgan, Morgan Stanley, Royal Bank of Scotland Group Plc and UBS. Spokespeople for the banks declined to comment.

Coalition was formed in 2002. Trevor Foster-Black, its founder and chief executive officer, served in the Scots Guards in the British Army, retiring as a captain.

--With assistance from Todd White in Madrid; Editors: Jake Lloyd-Smith, Jarrett Banks

Stephen Voss at

To contact the reporters on this story: Chanyaporn Chanjaroen in Singapore at; Lars Paulsson in London at

To contact the editor responsible for this story: James Poole at

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