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JP Morgan buys OTC commodity derivatives business from UBS
August 6, 2013 / 2:36 PM / 4 years ago

JP Morgan buys OTC commodity derivatives business from UBS

* Deal excludes precious metals, index trades

* UBS has exited most commodities, slims down investment bank

* JPM seeking alternatives for physical commodity business

LONDON, Aug 6 (Reuters) - U.S. bank JP Morgan Chase & Co , which plans to stop trading in physical commodities, has bought the over-the-counter business in commodity derivatives of Switzerland’s UBS AG, the banks said on Tuesday.

The deal excluded precious metals and index-based trades, but included hedge positions on financial exchanges, UBS said in a statement. No financial details were released.

Zurich-based UBS said in October it was closing the majority of its commodities “flow” trading business involving raw materials and financial derivatives as part of a slimming down last year, in which it withdrew from large parts of fixed income and laid off 10,000 employees.

The bank retained, however, its precious metals and commodities index business as part of a strategy that put increased emphasis on global asset management and wealth management.

UBS also remains active in commodity trade finance and has expanded by hiring 10 bankers in Geneva in the sector since the start of the year.

Tuesday’s UBS statement said: “Risk on the portfolio has been assumed by J.P. Morgan and they (the two banks) will work together in the coming months with their clients to fully assign contracts for individual trades to J.P. Morgan.”

“This transaction is a further step for UBS in executing its strategic plan to refocus and simplify the investment bank”.

JP Morgan confirmed the purchase but offered no further comment or details.

Last month, JP Morgan announced plans to exit physical commodities trading and pursue “strategic alternatives”, but said it would continue to trade in financial commodities such as derivatives and precious metals.

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