REFILE-Banks to start trading in iron ore -FT

(Corrects spelling of "concluded" and "opportunities" in third paragraph)

LONDON May 12 (Reuters) - Three of the biggest banks in commodities plan to launch trading in iron ore, the Financial Times reported on Tuesday.

The move by Morgan Stanley (MS.N), Goldman Sachs (GS.N) and Barclays Capital (part of UK-based bank Barclays (BARC.L)) into cash-settled iron ore swaps came as mining executives acknowledge traditional talks to settle iron ore prices -- known as the benchmark -- is breaking down, the paper said.

It cited a Morgan Stanley executive as saying the bank had started trading iron ore. Espen Aaboe, managing director of freight in London for Morgan Stanley, said the bank had concluded there were opportunities for both the bank and its clients by being involved, the paper said. (Reporting by David Holmes)