JP Morgan is set to become the latest investment bank to sell its physical commodities trading business after entering into exclusive talks with Mercuria on a deal.
According to the Financial Times, the move would see JP Morgan’s presence in the oil, coal and natural gas markets reduced hugely. Deutsche Bank has signalled its intent to leave the commodities market, while Morgan Stanley has also been reducing its footprint in the oil market.
Higher regulatory capital requirements are cited as one factor behind the banks’ looking for the exit, while JP Morgan has fallen foul of regulators and agreed to pay over $400 million to settle claims it manipulated energy markets.
Mercuria, which is based in Geneva, was founded by two former Goldman Sachs traders and after starting out in oil, it has branched out into a number of physical commodities.