JP Morgan slashes commodities desks

JP Morgan Chase has slashed up to 50 staff from its global commodities division and is closing down its commodity prop trading desk, sources say.

"There were cuts made yesterday across the commodities platform, of between 40 to 50 people globally," says one industry insider.

The cuts were made as a result of the $1.6 billion acquisition of RBS Sempra's commodities, global oil, metals and coal, and European power and gas businesses in July.

The bank has also decided to close its London-based commodities proprietary trading operation, confirmed a source close to JP Morgan.

The decision to shutter JP Morgan's commodities proprietary desk follows the introduction of the Volcker rule, included in the recent US Dodd-Frank Wall Street Reform and Consumer Protection Act, which bans prop trading by banks. But the source could not confirm whether the bank's proprietary operations across other franchises would follow suit.

"Under UK employment law all the traders in London that were affected by the closure had to be informed that their positions were at risk with at least 30 days' notice. Those 20 or so prop guys were told their roles were being phased out last Friday. As to whether the bank's other prop desks are going to follow suit, I have no knowledge of that," the source states.

Ray Eyles, the head of the commodities prop desk, is to move to Singapore to succeed Oral Dawe as head of commodities for the Asia-Pacific region, the bank announced.

In the past few years, the bank has been aggressively growing its commodities business, buying US investment bank Bear Stearns' Bear Energy division, UBS's Canadian energy and global agriculture businesses, UK-based carbon offset company Climate Care in 2008 and carbon off-set aggregator EcoSecurities in 2009. But the commodities business has experienced a tumultuous year so far. In June, an arbitrage trade exploiting declining coal prices in Europe relative to South African coal backfired when European demand unexpectedly surged and prices rallied. The trade cost the firm around $130 million in lost revenues.

JP Morgan declined to comment.