NEW YORK/PARIS (Reuters) - French bank Natixis said it plans to close its commodities brokerage division, as oneof the oldest ringdealing members of the London Metal Exchangebecomes the latest victim of the European debt crisis. The bank decided to wind up the brokerage activities of NatixisCommodities Markets (NCM), which offers derivatives on a range ofmetals, fuels and commodities, the bank said. Over-the-counter activities will continue and operate incooperation with the bank's structured finance operations, whichalso offers commodities trade finance. "This is part of our reduction plan because it is a business whichconsumes a lot of liquidity," Natixis CEO Laurent Mignon toldanalysts in a conference call on Thursday. |
"We consider that we really don't have the critical size in thisbusiness," he added. The future of NCM, which has been in metals broking under severalowners for almost 35 years, has been uncertain since managementsaid in January it was considering selling the business. The bank wanted to scale back its exposure to the capital-intensivecommodities business. Henrik Wareborn was hired in September tohead up the operation. The 120-strong team in London was told by management of thedecision to wind down the brokerage on Wednesday afternoon, atrader who had spoken to an NCM trader told Reuters.
"They were told it's over. The business will be liquidated in anorderly fashion," the trade source said. The move will effectively dismantle the ringdealing team on theLondon Metal Exchange trading floor and will start the process ofliquidating customers' accounts. Closing accounts is expected to take until the end of the year, thesource said.
Natixis is not the only French bank to adjust its business model. In the last six months, Credit Agricole , BNP Paribas and Societe Generale have all taken measures to cut their exposureto dollar financing, reduce debt and boost their capital ratiosamid concern about the euro-zone debt crisis. The bank could be hoping for rich proceeds from its Category Iringdealing LME membership, which is worth $17 million based onrecent sales. The LME, the world's last member-owned exchange, is consideringbids from four of the world's major exchanges, which are said to bein fierce competition to buy the 135-year old exchange.
LONG HISTORY Removing NCM will cut the number of brokers, dealers and banksparticipating in open-outcry trading in the LME ring to 11. It will be the first closure of a Category I seat for severalyears, with most memberships typically changing hands as a resultof a takeover or a merger. The newest member, INTL FCStone Inc, bought its seat from theliquidator of collapsed MF Global and JPMorgan Chase secured itsmembership as part of its acquisition of the RBS Sempra commoditiesbusiness in 2010. NCM's roots go back more than 30 years when it was owned by SogeminMetals, the London brokerage unit of the Union Minière Group(now Umicore SA ), which mined for copper in what is now theDemocratic Republic of Congo more than a century ago.
Union Minière only broke ties with Sogemin in 2000 when itsold the company to Natexis Banques Populaires, a unit of theBanques Populaires group. The business was renamed NatixisCommodity Markets when it merged with IXIS in 2006. The NCM ring team is relatively new by LME standards - some keymembers, including Stuart Neville, left to join ED&F Man in2007. But many of the back office staff, including account executives,have been with the company since the Sogemin days.
ED&F alsohired Udo Klein and Aaron Begner in New York from the broker at theend of March. Some high-profile senior members of the metals industry have workedfor the broker in its various guises, including LME chief executiveMartin Abbott and Triland chief Martin Pratt. Thomson Reuters 2012 All rights reserved SUBSCRIBE to Mineweb.com's free daily newsletter now.
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