NEW YORK/WASHINGTON Jan 13 The Federal Reserve
is set to take its first formal step toward limiting major Wall
Street banks' role in physical commodities markets this week and
issue a notice to seek public comment on the topic, sources
familiar with the matter said on Monday.
The Fed will publish a so-called "advance notice of proposed
rulemaking" on Tuesday, laying out the issues it is considering,
one day before a second Senate banking committee hearing on the
matter, the sources said.
It is not clear what measures the Fed may propose. The
public is expected to have a set period of time -- typically 60
to 90 days -- in which to submit comment letters.
Over the past year, lawmakers have pressed the Fed to
examine whether Wall Street's biggest banks, including JPMorgan
Chase & Co and Goldman Sachs, should be allowed
to own assets such as metals warehouses and oil tankers, and to
trade physical commodities alongside commodity derivatives.
At a Senate hearing in July, witnesses testified that the
activities pose a risk to the financial system in the event of a
catastrophic accident. Metals consumers complained that banks'
ownership of physical storage assets enabled them to inflate
prices for commodities such as aluminum.