The recent takeover of JP Morgan's physical commodities business by Swiss trading house Mercuria (founded by two former Goldman Sachs traders, or more specifically Goldman Sachs J Aron unit, after spending time at Cargill) for $3.5 billion, is an ambitious move for the relatively new commodities trader, starting out as a ten-person team supplying oil to Polish refineries. It now employs over a thousand people, with revenues topping over $100bn last year. Analysts remark that the remarkable fact about Mercuria is its aggressive efforts to scale the business. How would Mercuria be able to succeed where JP Morgan could not? One answer lies in regulation.
As Mercuria is not a bank in the sense that it does not take deposits from customers, regulation is different than for a deposit-taking institution. Further, it falls under Swiss regulation rather than North American legislation. JP Morgan's exit is prompted by capital constraints and increasing regulatory scrutiny, particularly on US banks that have been the subject of controversial bailouts. So uneven regulation is one source of competitive advantage that Mercuria has over JP Morgan.
It should be emphasised that the duo who built Mercuria, Marco Dunand and Daniel Jaeggi, came from a banking background, and it is remarkable that they have found a way to leverage that while succeeding in a way that banks have failed.
As Mercuria is not a bank in the sense that it does not take deposits from customers, regulation is different than for a deposit-taking institution. Further, it falls under Swiss regulation rather than North American legislation. JP Morgan's exit is prompted by capital constraints and increasing regulatory scrutiny, particularly on US banks that have been the subject of controversial bailouts. So uneven regulation is one source of competitive advantage that Mercuria has over JP Morgan.
It should be emphasised that the duo who built Mercuria, Marco Dunand and Daniel Jaeggi, came from a banking background, and it is remarkable that they have found a way to leverage that while succeeding in a way that banks have failed.
No comments:
Post a Comment