Commodities Compliance - Market Update & Movers 2024

Commodities Sector Heats Up Amid Market Uncertainty

The compliance market has faced a turbulent year, marked by frequent hiring freezes, layoffs, and sporadic recruitment, leaving the industry in a state of flux. Despite this uncertainty, the commodities sector has emerged as a standout, driving significant activity within the broader financial services landscape. While hiring has been robust, the focus has primarily been on team members rather than high-level leadership roles, a shift following last year’s senior changes.

Metals Trading Surge

Metals trading has become a particularly hot area, with the London Metal Exchange seeing trading volumes surge and profits for the commodities unit increasing by 82% year-on-year. Trading houses that recorded substantial profits in energy during the last two years of volatility are now expanding into metals.

High-Profile Hires in Base Metals Trading

Several trading houses have made notable hires in the base metals sector, positioning themselves to challenge industry heavyweights like Glencore and Trafigura:

• Gunvor hired Ivan Petev as Global Head of Base Metals (formerly of VTB Capital and Castleton Commodities).
• Mercuria brought on Kostas Bintas (Co-Head of Metals & Minerals) from Trafigura and Xavier-Alexandre Ortiz (Global Head of Zinc & Lead) from IMX.
• Vitol recruited Benjamin Seaford and William Gayner, both former Co-Heads of Base Metals at Mercuria.

These moves reflect an expansion into metals trading rather than a shift away from energy trading.

Energy Sector Developments

The energy sector remains active with key players like Gunvor expanding their oil and gas business, boosting volumes by 42% year-on-year. Uniper is setting up a new energy desk in London, while Mitsui Bussan Commodities has acquired a physical energy business. Engelhart is also growing its power and gas trading platform with the acquisition of Trailstone, reflecting ongoing momentum in energy trading despite lower oil and gas price volatility.

Agricultural/Softs Market

Meanwhile, the agricultural market in London remains quiet. The dominant ABCD firms are all headquartered outside the UK, with most of their compliance and risk functions based in Europe and the US. However, some trading houses and hedge funds are exploring the idea of physical delivery in agriculture, moving beyond their current derivatives trading. Globally, Hartree is in talks to acquire ED&F Man’s Coffee, Sugar, and Liquid Products businesses. As Hartree and Engelhart expand, it remains to be seen whether governance functions will merge or talent will shift.

Recruitment Trends

New trading desks and front-office hires have triggered a wave of recruitment in compliance, risk, and legal roles. However, the smaller talent pool in metals compared to oil & gas has led to fierce competition for qualified candidates. This situation has been exacerbated by hedge funds and trading houses offering competitive packages and compelling bonus schemes, which commodities brokerages, investment banks, and exchanges struggle to match. Whether bonuses will hold up among reports of lower earnings and reduced volatility for the first half of 2024 remains to be seen.

In-Demand Roles

Compliance advisory and trade surveillance roles have been the most in-demand from a growth perspective. Surveillance roles at the junior to mid-level have increasingly favoured candidates with Python experience, particularly for firms using proprietary in-house surveillance systems. These roles are evolving beyond BAU surveillance, with a greater emphasis on enhancements and optimisation. Advisory roles in commodities remain challenging to fill, with teams often consisting of just one or two advisory officers per firm, except for industry giants like BP and Shell. The scarcity of junior talent in this senior-heavy space is also a growing concern, with few associates or AVPs progressing through the ranks, especially since the banks have largely exited commodities.

Market Moves