Commodities: JP Morgan gaining on Goldman Sachs, Morgan Stanley

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We are accustomed to thinking of commodities trading as a small contributor to overall profits. But at the likes of Goldman Sachs and Morgan Stanley, traditionally the twin powers in this market, commodities trading can account for up to 10 percent of profits, notes Reuters.

Reuters takes a look at the second quarter malaise that seems to have beset both firms, just as JP Morgan starts to gain momentum after some embarrassing setbacks in recent years. At Goldman Sachs, commodities trading suffered along with all FICC-oriented trading. At Morgan Stanley, the FICC picture as a whole wasn't as bad, though the commodities trading contribution was hardly anything to smile about. The same trends that have prodded hedge funds to go with multiple prime brokers may be at work here.

Big commodities traders do not necessarily want to trade though a single firm, especially if that firm runs a big proprietary book itself. While those are big issues for the big two, they also have to worry about the rise of JP Morgan Chase. The bank has certainly taken some lumps in its quest to become a commodities powerhouse on equal par with the other two. But it seems to be on the right path. It has built an enviable energy trading franchise, and made some big purchases, including RBS Sempra. In the second quarter, it seemed to fare well as its overall FICC-related trading revenue was strong.

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