Commodities Traders Look to Dampen Market Risk

Reuters/Brendan McDermid

Rebecca Hampson writes in today’s Financial News that positive news in the commodities markets has been sparse over the past six months. A raft of banks have scaled back their trading desks, while others, including Crédit Agricole, Santander and BBVA, have closed their commodity divisions altogether.

Amid this downsizing, however, pockets of opportunity remain. With a wider regulatory focus on risk mitigation, an increasing need for banks to differentiate their trading operations in a more concentrated market and a shift to automated execution, specialist risk management and technology vendors are reaping the rewards.

Spencer Johnson, a risk management associate at commodity trading firm INTL FC Stone, said: “Commodity risk management is now even more necessary in a number of markets where it was previously not considered. Commodity traders are looking to better mitigate the impact of price risk and counterparty risk.”

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