Mercuria in talks with regulators as JPMorgan deal changes model

LAUSANNE, Switzerland, April 1 Tue Apr 1, 2014 12:54pm EDT

LAUSANNE, Switzerland, April 1 (Reuters) - Trading house Mercuria has began discussions with British regulators on whether it should be the subject of regulatory oversight as it is closing a deal to buy Wall Street bank JPMorgan's commodities trading business.

The move, one of the first in the industry, highlights the deep transformations through which trading houses are currently going as after decades of little disclosure they begin to report much more on who owns them, what they do and what they earn.

There is also an intense debate in the industry over how it should be regulated amid questions from politicians whether some merchants have become "too big to fail" and should be regulated like banks.

"It is early stages but as our business model changes we need to actively analyse our role," Mercuria's head of compliance Victoria Attwood Scott told Reuters on the sidelines of the FT Commodities Summit.

Scott, who previously worked at Goldman Sachs, said preliminary discussions were being held with Britain's Financial Conduct Authority (FCA).

JPMorgan agreed to sell last month its physical commodities business to Mercuria for $3.5 billion sweeping the fast-growing Swiss trading house into the top league of commodities traders.

Mercuria's co-owner Marco Dunand said at the time the deal placed Mercuria's model in between traditional merchants and the banking trading model.

"What we don't want to do is to step in the regulatory territory without regulatory authority. We need to understand whether we might be subject to oversight. And we are open minded," said Attwood Scott.

Dunand also said earlier on Tuesday discussions with regulators were ongoing: "But you don't want to be regulated like a bank ... we don't take deposits from customers," he said.

(Reporting by Dmitry Zhdannikov, editing by David Evans)

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