So even though the rationale for JPMorgan Chase buying the
over-the-counter commodities derivatives business of UBS remains
mysterious, you can safely surmise this is regulatory arbitrage. Most
likely, it’s got to do with capital requirements.
Umm maybe? I don’t know, this question seems a little
over-determined; the thing is that pretty much everyone thinks that (1)
JPMorgan is pretty good at running an investment bank, the
occasional hiccup aside, and that (2) UBS is
pretty crap
at doing so. So are US regulators relatively more comfortable with JPM
managing this portfolio than Swiss regulators are with UBS doing so?
Sure, probably, but probably so are the respective shareholders, and
counterparties, and
senior managements, and anyone else you might ask. Really moving any portfolio of anything from UBS to JPMorgan is probably Pareto optimal.
The light irony comes from – well here is
Bloomberg’s first sentence:
JPMorgan Chase & Co., which said last month it plans
to get out of the business of owning and trading physical commodities
from metals to oil, bought the over-the-counter commodity derivatives
portfolio of UBS AG, which is exiting most of its raw-materials trading.
Hahaha you’re buying all these commodity derivatives at the same time
you’re getting out of the physical commodities business, jerks.
Banksters up to old tricks etc. But it’s interesting to think about why a
commodities business that is after all
run by the inventor of synthetic CDOs might be perfectly happy to expand its derivatives business at the same time it’s running away from physical commodities.
Regulatory pressures, sure, but also a certain compatibility of mindset....
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