| LAUSANNE, April 1
LAUSANNE, April 1 The world's regulators should
stop worrying whether trading houses are "too big to fail" and
focus instead on ensuring that new rules are not forcing far too
many deals through clearing houses, major commodity traders said
Some policymakers question whether the largest commodities
firms, which handle almost a trillion dollars a year in energy,
metals and grains deals, could pose a risk to the wider economy.
They draw comparisons with the huge banks that, following
the 2008 collapse of Lehman Brothers, had to be rescued by
governments as their failure would have caused economic chaos.
But traders pointed to regulations, aimed at increasing the
transparency of complex financial deals, that have forced many
trades onto exchanges and through clearing houses.
Some fear these could be stoking up future problems.
"I don't see systemic risks in the commodities space, but I
do have a lingering concern around whether we are concentrating
masses of risks now into the clearing houses," Paul Reed, chief
executive of oil major BP's trading arm, told the
Financial Times Commodities Summit.
"There are very few clearing houses and all the regulators
are pushing more and more activity into cleared trade. If anyone
is too big to fail, it is a clearing house," he said.
The head of the world's largest oil trading house, Vitol,
agreed: "We (traders) are not too big to fail. This is a
ridiculous notion," Ian Taylor told the conference.
Christopher Delbruck, chief executive of E.ON
Global Commodities, also said that he believed the issue of
clearing houses was often overlooked.
"Suddenly all the traders have come to clearing houses and
have incredible exposure...I think clustering risks and
spreading risks is not necessarily appropriate," he said.
Reed at BP said some of his biggest worries were about
clearing discouraging hedging.
As an example, Reed said, if a major pipeline outage were to
cause a spike in the price of gasoline and diesel, anyone who
hedged oil products prices and cleared the transaction could
face an immediate margin call.
"Sometimes it means you have to come up with hundreds of
millions of dollars the same day," Reed said, adding that if the
transaction were not cleared, the two counterparties could
address the issue later, when prices would probably have
Some traders said the way forward was to work with
regulators to design a new framework for the oversight of
trading houses, which would be lighter than for banks.
The chief executive of trading house Mercuria, Marco Dunand,
said he was in discussions with Britain's Financial Conduct
Authority (FCA) on disclosing more information.
"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 Anthony Barker)