The Chicago Brokerage Chasing Clients Wall Street Left Behind

(Bloomberg) -- R.J. O’Brien & Associates LLC is adding staff in offices from Houston to London, in a bid to expand its energy offerings even as major players retreat from commodities amid lackluster profits and increased oversight.

The Chicago-based firm, one of the oldest and largest independent futures brokerages and clearing firms in the United States, is leaning on Joe Raia to grow its energy portfolio. The former head of global commodity futures sales at Goldman Sachs Group Inc. has already hired a couple of people for the energy team, composed of roughly 20 people across New York, Houston, London and Dubai. More hiring is to come, Raia said, without providing numbers.

RJO’s growth is a sharp contrast to other financial firms that have shrunk or exited the commodities sector in recent years. Societe Generale SA became the latest to take a step back from the space, shutting its over-the-counter commodities business earlier this month amid a slump in trading profits. BNP Paribas SA also shut a commodities desk this year, following energy-trading exits by Barclays Plc, Deutsche Bank AG and Credit Suisse Group AG.

Opportunities Abound

For those who remain, Raia said, there are opportunities -- especially among smaller companies ignored by many larger clearing brokers, like Wall Street banks, looking for higher-margin clients.

"We believe that the middle to smaller firms are certainly not focused on as much by the large firms, so we feel like there’s opportunity to build relationships," Raia said in an interview.

While the firm does not currently do any over-the-counter energy business, it has relationships with players in that space. Raia said he believes there may be a point when those firms move to trade and clear listed products.

"Brokering is not just picking up the phone and matching a buyer and seller," said Raia. "There is a lot more to it." Clients "want feedback on what’s going on in the marketplace," he said.

Within energy, he said, opportunities abound. Natural gas trading volumes are surging, for instance, as exports of liquefied natural gas pick up steam.

There are reasons to be optimistic about crude, as well. While open interest in U.S. benchmark oil fell to a late-2016 low in the first quarter -- indicating to some a lull in trading -- Raia characterized the dip as an adjustment period.

The market is "becoming more comfortable" trading and hedging with non-benchmark contracts like those recently introduced in the Gulf Coast, he said. "The marketplace is more active than people think, especially for crude."

To contact the reporters on this story: Catherine Ngai in New York at cngai16@bloomberg.net;Cristiane Lucchesi in Sao Paulo at clucchesi5@bloomberg.net

To contact the editors responsible for this story: David Marino at dmarino4@bloomberg.net, Catherine Traywick

©2019 Bloomberg L.P.