Traders or Commodity Finance Banks?

15 Pages Posted: 10 Oct 2016

Date Written: September 9, 2016


The authors demonstrate and break down the recent developments at commodity trading entities and how this ties into the global commodity supply chain. Commodity prepay arrangements exemplify the new role that commodity traders play in financial intermediation. Specifically, the authors cover three critical components to the subject: first, the new trading and finance activities commodity traders are participating in, and how these activities link to their ultra-leveraged business model and financial markets. Secondly, the authors propose a framework to evaluate the crude oil price systemic risk on the S&P 500 as a visual representation of the aforementioned point. Lastly, the authors describe where banks play a role in the process and how they have focused funding on the larger commodity traders, and ultimately how prevalent systemic risk is, not within these organizations, but the organizations themselves.

Keywords: arbitrages, transportation, rail, agriculture, grains, commodity trading, crude oil, freight, basis trading, trade finance, commodity finance, mercuria, energy trading, trafigura, glencore, commodities, cargo trading, financial risks

JEL Classification: G23, G24, G32, G3, Q40, F34

Suggested Citation

Jacques, Simon and Simondet, Arthur, Traders or Commodity Finance Banks? (September 9, 2016). Available at SSRN: or

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