JPMorgan Chase & Co announced that it will no longer be trading in physical commodities. This was prompted by stricter regulations and increased capital levels. US lawmakers scrutinized Wall Street's commodity operations in the week prior to JPMorgan's announcement. They centered their inquiry on whether banks should be allowed to own warehouses and pipelines.
The first big player to retreat from the physical commodities market, JPMorgan said that it is looking into "a sale, spinoff or strategic partnership" of its commodities sector, of which it had invested billions of dollars built up in the past five years. It is currently the world's biggest commodities desk. The firm has a global team taking care of assets that include crude oil in Africa to copper in Chile.
Earlier, Barclays PLC and Deutsche Bank have also exited physical commodities trading. Whether Morgan Stanley and Goldman Sachs will do the same still remains to be seen.
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