Goldman Sachs expands physical base metals team

Thu Jul 19, 2012 4:24am IST

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* Goldman created physicals metals desk two years ago

* Banks have built physical trading operations

* End to prop desks turned banks to physical trading

By Josephine Mason

NEW YORK, July 18 (Reuters) - Goldman Sachs has hired Jeff Romanek as a physical metals trader in New York as the U.S. bank continues to bolster its physical commodities trading business, sources told Reuters.

Romanek joined earlier in July after a brief stint at commodities warehousing company CWT Commodities, two sources familiar with the matter said.

Before joining CWT at the start of this year, he had been a trader at Trafigura in Stamford, Connecticut, for several years with a focus on zinc and copper.

He is the fourth member of the U.S. bank's physical metals team and the second from Trafigura. The bank hired David Freeland to join the physical metals team from the Swiss trading house in November.

A Goldman spokesman declined to comment on the appointment on Wednesday.

His appointment comes two years after the bank set up a physical metals trading desk just months after buying its metals warehousing business Metro.

It has also expanded its physical commodities reach last month with the purchase through its Colombian Natural Resources unit of Vale's coal assets in Colombia for $407 million in cash.

Goldman and other banks have sought to build physical metals trading businesses in a bid to offset the loss of income from the forced closure of proprietary trading desks due to stricter regulatory reforms.

Some though have had to divest assets to comply with regulations. JPMorgan Chase & Co offloaded its U.S. metals and concentrates trading arm earlier this year in order to comply with Federal Reserve regulations.

While the Fed has over the past decade allowed a dozen banks to freely trade physical commodities such as crude oil, wheat and copper, it has drawn a line at allowing regulated banks to own and operate hard assets, unless they do so at arm's length under merchant banking terms.

Goldman Sachs was given five years to comply with regulations after converting to holding company status during the 2008 financial crisis.

But JP Morgan had a tighter time frame after its $1.7 billion acquisition of RBS Sempra's global metals and oil business in July 2010.

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