A decision by J.P. Morgan to exit its physical commodities business would temporarily reduce market liquidity before other companies quickly take its place, according to analysts and traders.
The statement came three days after a congressional hearing investigated whether deposit-taking banks should be allowed to trade raw materials such as oil and industrial metals.
JPMorgan owns and trades financial and physical commodities including crude oil, natural gas and power, and describes itself as 'one of the world’s leading energy market makers.' The bank may be the first to exit physical commodities, though others may follow if regulations are changed, as suggested by Senator Sherrod Brown, an Ohio Democrat whose subcommittee of the Senate Banking Committee held the July 23 hearing.
'It looks like they want to get ahead of what appears to be a new wave of regulation that will limit the activities of the banks in the commodities sphere,' said John Kilduff, a partner at Again Capital LLC, a New York hedge fund that focuses on energy.
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