Barclays Latest To Exit Commodity Trading, Layoff Several Thousand Staff

Tyler Durden's picture

With JPMorgan and Deutsche Bank having exited the commodities business (and numerous other banks discussing it ahead of the Fed and regulators' decisions over banking rules of ownership), it appears a few short months of regulatory scrutiny is enough to warrant more broad-based cuts across bulge-bracket banks historically most manipulated and profitable business units. As The FT reports, Barclays, one of the world’s biggest commodities traders, is planning to exit large parts of its metals, agricultural and energy business in a move expected to be announced this week. This comes on the heels of Barclays shuttering its power-trading operations (after refusing to pay $470mm in fines) with CEO Jenkins expected to announce several thousand layoffs.


As The FT reports, the regulatory uncertainty appears a major hurdle...

Regulators, including the US Federal Reserve, are reviewing whether to curb banks’ commodities trading operations after they were accused of manipulating markets for electricity, aluminium and other materials for their own profit.

And Barclays has already run afowl of regulators...

Barclays closed its US and European power trading operations in February after it was fined a record $470m for allegedly manipulating power prices by the US Federal Energy Regulatory Commission. Barclays has refused to pay the fine, shifting the dispute to a federal court.

So the decision to shut its commodity business should not be a total surprise...

Barclays, one of the world’s biggest commodities traders, is planning to exit large parts of its metals, agricultural and energy business in a move expected to be announced this week.


The shake-up comes as commodity trading suffers a sharp slide in revenues and attracts greater scrutiny from regulators, which has already led to the withdrawal of several big banks from the area.




Chief executive Antony Jenkins is preparing a strategic update for investors on May 8 and is expected to slash several thousand jobs by cutting Barclays’ exposure to areas that do not generate returns above their cost of capital. These are likely to be moved into an internal “bad bank” and either sold or closed down.




The retreat is being driven by tighter regulation, fresh capital constraints and lower profitability due to stable prices for oil and other commodities. Coalition, a consultancy, estimates the revenues of the top 10 banks in commodities fell last year to $4.5bn from a record $14.1bn in 2008.




Precious metals trading is likely to move into the bank’s foreign exchange trading business. There are expected to be heavy job cuts among the 160 staff in its global commodities trading, sales and research operations, many of them in London.

The base of manipulating banks is shrinking...

Barclays is one of the top five banks in commodities – which together controlled about 70 per cent of the commodities trading pot last year. But several are shrinking or disposing of these businesses, including Morgan Stanley, Deutsche Bank, UBS and Royal Bank of Scotland.

and becoming ever more concentrated with Goldman, Mercuria (ex-JPM), and Glencore to run the commodities world.

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philipat's picture

Shame they aren't all getting out of PM trading also. The Fed still needs them  to be able to manipulate PM trading by any chance?

Sudden Debt's picture

there 's a time to build new great things and this time is now!

now here's a cardboard box, you've got 10 minutes to empty your desk and 11 to get out.

Sudden Debt's picture

so the derivatives market is about to blow up.Bankers know when shit is going to happen 12 months in advance.
The question is, will shit happen in 12 months from now or did they wait untill there was no more time left to glue this shit together?

seek's picture

You're looking in the wrong direction regarding time. It's not shit happening 12 months from now, or waiting until there was no time left.

It's what happened 6-12 months ago that made them decide to change things.

Remember, 12 months ago we saw quite the reset on gold prices. I think it's a certainty that it's connected to the current market adjustments. People with deep internal connections and enough power to change everything saw something that scared the hell out of them for them to walk away from these cash cows.

Sudden Debt's picture

You're right in a certain way. The closure of the HFT way is what's going to destroy volume and volume may not seem like something that matters but volume in the stockmarket is also how value is calculated.
So when they close that window a lot of "wealth" that was never there will also be noticed as not being there.
And people think of HFT to be something that goes on in stocks, but it is also happening in the options trading.
And there it gets interesting.

Just look at the momentum stocks where on a daily basis, 20 to 25% of all stocks seem to be traded!
An on days where it drops to 15%, the stocks drop 5%.
So what will happen when it drops to 1 or 2%?

Notsobadwlad's picture

If people want to stay in equities, they might want to choose those stocks that have a profit stream and pay a good dividend. They also might want to have stock certificates issued, because when the shit hits the fan, there will be a lot of beneficiaries of stock ownership whose stock has been pledged to someone else... or simply does not exist.

Who owns Cede and Co.? Who owns the stock that people are beneficiaries of? Right!

SDShack's picture

Call me crazy, but I think the whole Snowden whistleblowing scared TPTB to their core. I don't think it is much about the fear of what has been revealed, but what COULD BE REVEALED. I think TPTB are planning for various contingencies based on the masses reacting to WHAT MIGHT HAPPEN. Sometimes, the threat drives more then the actual act. The world wide playbook of nexus of money, politics and power used by the West, was just handed to the East. The game is about to get on like Donkey Kong. 

GeorgeHayduke's picture

Seems like things are moving faster these days. 12 months may be too far out. We will see, but at the rate the crap pile is crumbling, the avalanche could start at any time. Of course, I've thought that for some time now, so I'm still in the I'll believe it when I see it category.

The only thing I know for certain anymore is everything we hear from government and the corporate world (and about every other large organization with an agenda) is filled with outright lies, or lies by omission. We're in a spot where we can only find any truths in hindsight and then use those old clues to guess how they are trying to screw us today and tomorrow. Still, the general trajectory is down. The slope, velocity and who hits the crap pile or splats on the concrete floor at the bottom first is what the jockeying is all about right now. Prepare, watch and adapt. It's all we can do at the moment.

Notsobadwlad's picture

Being early is being wrong. The market can turn on a dime when it is being manipulated/controlled, but a free market is robust and momentum carries it a long way.

Currently the market is being manipulated.

I read once that the powers that be do not so much control the future as much as accentuate those things that are known to happen and take advantage of them. This requires some degree of foreknowledge ... but not ncessarily control.

DollarMenu's picture

" afowl " ?

What, Barclays found chickens examining their books?

seek's picture

OK, we've got an expose' book of HFT, and within a week Goldman bails out of HFT and moves to IEX, along with many others. And investigations of HFT firms are announced.

Then over the course of the last couple month we've got everyone leaving commodities.

The fix is in.

TPTB clearly reached some sort of concensus months ago on the markets and has been implementing it.

The question is what happens next.


Fred Hayek's picture

I would suggest that, if even us proles are allowed to see that there are/were problems, then the usual kabuki theater requires token fall guys or patsies.

seek's picture

This is pretty clearly being constructed for us to see no problems other than HFT. So HFT guys are the patsies.

I wonder if them backing away from commodities will allow free(er) movement of gold. We know that legitimate price inflation is starting to happen in foodstuffs, so bailing out lets them avoid the blame-the-bankers (on the direct level, nevermind the fed.)

I also had the wild thought that maybe Snowden or someone has a bunch of smoking gun documents (the way wikleaks did on BofA before their database got sabotaged) that expose things in a really unfavorable way and they're cleaning up the mess before it comes out.

Either way, the the matrix has been changed.

HungryPorkChop's picture

Good points.  At the same time be wary that these banks may start withdrawng all their money out of the precious metal hedge funds which have been supporting all the "paper" gold (derivatives).  While this could end manipulation it could also cause the "Paper" gold price to crash big time!! After all there is upwards of 50 to 100 oz of "paper' gold to every ounce of real bullion. 

Any input?  The light at the end of the tunnel would be that gold and silver would finally get set free again from the shackles of paper manipulation. 

DoChenRollingBearing's picture

I'll chip in my $0.02.  If the freegold hypothesis is correct (and yes, I think it is), odds are that "paper gold" will go way down.  

Maybe the key "tell" for us is to try and buy some when gold is at $1000, or $500 or $400.  If all the gold disappears from the LCS's, then there is our answer.  No more gold. 

seek's picture

If that happened to paper gold, the very exchange would be deluged with delivery requests, and they'd go away. Which would kill the banks writing contracts.

Ooops, funny thing, suddenly a bunch of banks aren't writing contracts on the exchanges anymore.

One more prediction from the freegold camp coming true.

daveO's picture

I'll be buying at $1000/oz., but I won't be so foolish as to wait until $500/oz. It'll mostly all be scooped up before then, IMO.

besnook's picture

people complained about commodity speculation trading the moment it was allowed because of the market volatility it introduced to a usually slow moving market. traders do not reflect the real supply and demand dynamic that drive the market to a real present value in real time. a "true" float would be absolutely required for a commodity/currency fx system.

Notsobadwlad's picture

Well, if you believe, as some do, that we are under God's judgment and that failing a Jubilee we will be hit with a greater crisis than in 2001 or 2008 (+ 7 years is 2015).

The Harbinger?

We should ask Lloyd. He does God's work after all.

lakecity55's picture

HFT scandal will collapse the market, as planned?

Notsobadwlad's picture

Maybe the market will collapse and maybe the HFT "scandal" will be blamed ... but just as a cover.

As always, they will say that it was completely unforeseen. They had no idea how far out of hand it had gotten. Nothing could have been done and that the benefits of fixing the system far outweight costs (to them maybe, but not to the near-retirees who will be getting it up the pai goo).

Blah, blah, blah ... they LIE (and cheat and steal)!

Oldwood's picture

Every failure is met with greater demands for more government "regulation". The more our "system" of centralized control fails and destroys, the larger and more destructive it becomes.

daveO's picture

60 Minutes, 2 wks ago. HFT will be the scapegoat for Tapering induced crash.

Quinvarius's picture

I can think of a few scenerios.  But since they all seem to be doing it, I would agree that they all are operating according to a plan.  Maybe they are planning to pull the plug on the stock market and don't want any counterparty risk anywhere ala MF Global.  The reality is, that stock market is going to implode the minute they all agree to stop holding it up.

laboratorymike's picture

Good thing I got out of stocks. Seems just like the time I panicked and sold in the summer of 2008 and just dodged that 50% drop. Maybe I should focus on rebuilding what I lost on the fateful boating trip I took that summer also.

Gooseone's picture

I have a hunch, the new Dodd Frank regulation for OTC derivatives with it's Swap Execution Facilities becoming the new HFT playground.

Looking at the recent and not so recent hassles over regulation implementation:

This could pose a fine platform for them to play in, some major lawsuits should be able to divert attention when these rules, which are to protect the avarage

citizen of course, are being implemented:


But hej i'm just an unintelligible conspiracy theorist, i'll bet there are plenty of people here who can investigate if the above holds any merit.

Fred Hayek's picture

Gee, that's funny. Barclays is still going to fvck around with precious metals, only with their foreign exchange trading business. Is that appropriate? I mean, are gold and silver actually . . money or something?

FieldingMellish's picture

The economy is doing so well that the banks are laying off thousands.

Sudden Debt's picture

you've been replaced by a calculator.

Never One Roach's picture

Not to worry. Barry has lots of 'shovel-ready jobs' lined up for ya.

Everybodys All American's picture

Plenty of shovels needed for his bs.

Theosebes Goodfellow's picture

~"Regulators, including the US Federal Reserve, are reviewing whether to curb banks’ commodities trading operations after they were accused of manipulating markets for electricity, aluminium and other materials for their own profit."~

Curb?!? CURB!?! How about arrests, prosecutions and lengthy jail sentences? But don't expect that sort of "digging" from "no account" Holder or 'Silent @ the scene of the crime" Yellin.

So Cliven Bundy is said to owe the Feds a million dollars in "grazing fees". He gets armed BLM storm troopers right in his wheelhouse. Barclay's Jenkins refuses to pay $470 MILLION in fines and he gets... "review as to whether to curb the bank's commodities trading".

Now ain't THAT some shit?!?

BTW, where the hell is Harry Reid telling us "this isn't over"? Oh, that's right, his son ain't got no dog in this hunt.

John McCloy's picture

10K Plus is the number I was getting from friends this weekend over at Barclay's. 

toadold's picture

 Is it time to go long on the manufacturers of nail guns?

kill switch's picture

And reap the rewards of the diminishing commodities market manipulators as these fuckers go down...

Notsobadwlad's picture

Now if only they would exit the equity markets as well.

aka_ces's picture

Sales indicating looming disclosure of massive paper multipliers over real assets, banks unloading hidden liabilities onto the buyers ?

Unknown Poster's picture

If they are able to sell it, they could use the proceeds to fund their flagging dividends.

rsnoble's picture

Oh great, severl thousand more ebay trinket sellers to contend with. LOL.

starman's picture

They gonna rebuild Amerikka one bank at a time! 

Quinvarius's picture

If you needed any confirmation that the lows are in for commodities, and the breakouts across the board are real, all the bankers are throwing in the towell. 

q99x2's picture

You can do it. Don't be afraid. Jump banker Jump.

thewayitis's picture


  This definately means LESS manipulation in the Metals Markets.  GOLD and SILVER anyone?  Now if we could just get rid of Goldy.


williambanzai7's picture

Once again the same plan, fuck the herd then exit stage left...

f16hoser's picture
Layoff Several Thousand Staff!

WOW! That Sucks!!!

Joebloinvestor's picture

I pity the industry those assholes flee to.

Peter Pan's picture

Nail gun sales should be rising soon.