Wall Street Defends Banks' Commodity Trading

As regulators scrutinize investment banks' involvement in commodities, bankers say they provide vital liquidity to oil, natural gas, and other markets.

Banks including Goldman Sachs Group Inc. and JPMorgan Chase & Co., facing regulatory scrutiny of their commodity trading, provide liquidity in oil, natural gas, and other markets that can’t be easily replaced, according to a report commissioned by Wall Street’s main lobbying group.

The firms’ ability to trade physical commodities and related financial derivatives helps airlines and natural gas power plants hedge against changes in commodity prices, according to the report from IHS Inc. released today. The report, commissioned by the Securities Industry and Financial Markets Association, said efforts to curb banks’ role in commodity markets would hurt their commercial and industrial clients.

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