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Morgan Stanley saying ‘yes’ to commodities trading

Morgan Stanley Chief Executive James Gorman had a plan: center the firm’s focus on its thriving wealth management business and wash out most areas that accompany risk. So far, the plan has worked wonders, contributing to the bank’s 46% rise in earnings during the second quarter. But maybe now it’s time to open it up a little, take some risks and see what this thing can do.

With other competitors retreating, Morgan Stanley is planning to ramp up its commodities trading unit in the U.S., according to Reuters. The bank will look to bring on roughly a dozen traders, sales staff and other commodities pros, likely split between its New York and Houston offices.

The bank is specifically looking to unlock opportunities with retail investors looking to bet and hedge with structured products and commodity-linked derivatives, according to the report. It will also look to make more commercial loans to energy companies.

The move is a bit of an eye-opener for Morgan Stanley as the bank has taken a firm risk-averse approach over the last two years. Competitors like Deutsche Bank and Barclays, for example, are pulling out of commodities trading as client volumes continue to wane. Morgan Stanley appears to be betting that they’ll return soon.

They’re not the only one, though. Citigroup is also bucking the trend, increasing headcount within commodities by around 15%. Wells Fargo and BTG are also looking to make a bigger push into commodities trading.

We’ll have to wait and see which strategy is the right one.

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AUTHORBeecher Tuttle US Editor

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