BofA-Merrill Lynch shuts European power and gas trading desk

Tue Jan 7, 2014 9:49am EST
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By Karolin Schaps and David Sheppard

LONDON (Reuters) - Bank of America-Merrill Lynch shut its European power and gas sales and trading operation on Tuesday, the fourth major player to close parts of its commodities business as tighter regulation and fewer arbitrage opportunities erode profits.

Last month Morgan Stanley (MS.N: Quote) sold its main physical oil trading unit to Russian state-run oil major Rosneft, and Deutsche Bank said it was largely exiting commodities trading. In July, JPMorgan (JPM.N: Quote) put its physical trading operations up for sale.

The sector is now dominated by commodities trading houses and utilities, with Barclays, Citi and Goldman Sachs among the only remaining large banks with a significant presence.

Difficulties around speculative trading in the growing renewables market has also dented profitability, traders say.

BofA-ML had been scaling back its trading presence in the European power and gas market over the past few months, a trading source, who has done business with the firm, said.

The group had not been a big player in the markets since Bank of America took over Merrill Lynch in 2008, the source said.

"The decision follows a recent review of its broader commodities activities and reflects the combined impact of lower client demand for European power and gas hedging and recent regulatory changes," a BoA-ML spokesperson said in a statement.

The bank's European carbon trading desk will also be reduced but will not be shut entirely, a source familiar with the matter said.   Continued...

The company logo of the Bank of America and Merrill Lynch is displayed at its office in Hong Kong March 8, 2013. REUTERS/Bobby Yip