"... in true trader style, what upset Swiss-based dealers most about the currency jump
seemed to be the missed opportunity of not being able to take advantage
of the government’s decision."
Commodities, Geneva and the Swiss franc - FT.com
Bunge,
the international agricultural trader, is closing its sugar and ethanol
operations in London and moving them to Geneva, the home of its grain
trading hub.
the international agricultural trader, is closing its sugar and ethanol
operations in London and moving them to Geneva, the home of its grain
trading hub.
Its decision is counterintuitive, especially at a time when the jump in the currency after the Swiss ditched their franc cap has pushed costs up dramatically.
says the move will “improve efficiency and further integrate with our
core trading businesses”, and there are worse places in the world to
work.
Commodities traders have a long history in Switzerland,
especially in Geneva. Easy access to finance, low taxes and relatively
light regulation have made it a good place to do business.
According
to the Swiss Trading and Shipping Association, the country’s commodity
sector consists of about 500 companies which account for SFr20bn, or 3.5
per cent, of the country’s GDP. The industry employs between 10,000 and
12,000 people.
As such, few expect trading houses to up sticks
and move from Switzerland because of the soaring currency. The country
still has a lot going for it: It’s a good timezone for trading,
straddling the business day in the east and west, it is politically
stable and boasts access to a skilled labour pool and financiers.
That said, uncertainty
around corporate tax rates and immigration laws, and now also the
currency turmoil, is reducing the attractiveness of Switzerland as a
commodities trading centre. If you were thinking of starting a
commodities trading business now, you probably wouldn’t choose the
country. And when it comes to new investment in existing operations, it
is likely to go elsewhere — especially middle and back office
operations.
around corporate tax rates and immigration laws, and now also the
currency turmoil, is reducing the attractiveness of Switzerland as a
commodities trading centre. If you were thinking of starting a
commodities trading business now, you probably wouldn’t choose the
country. And when it comes to new investment in existing operations, it
is likely to go elsewhere — especially middle and back office
operations.
For smaller-scale commodities
traders where the main costs are in Swiss francs and revenues in
dollars, the pain is likely to be more acute than larger-scale traders
with multi-regional trading hubs.
traders where the main costs are in Swiss francs and revenues in
dollars, the pain is likely to be more acute than larger-scale traders
with multi-regional trading hubs.
“People are where they need to
be from a business perspective, and the currency isn’t really a deal
breaker,” says one leading trading house.
Nevertheless, staff at
large commodities traders — those working in a city where costs are
already high and have just risen further — are uneasy.
“Earning
in dollars and having costs in Swiss francs is not a great scenario,”
says one person at a Geneva-based commodities trader. “Everybody is
worried, regardless of the sector.”
But in true trader style, what upset Swiss-based dealers most about the currency jump
seemed to be the missed opportunity of not being able to take advantage
of the government’s decision. Some traders were more frustrated about
the limited ability to profit from the volatility, says a member of
staff at one Geneva-based oil trader.
seemed to be the missed opportunity of not being able to take advantage
of the government’s decision. Some traders were more frustrated about
the limited ability to profit from the volatility, says a member of
staff at one Geneva-based oil trader.
Additional reporting by Gregory Meyer in New York
The Commodities Note is an online commentary on the industry from the Financial Times
Copyright The Financial Times Limited 2015.
Commodities, Geneva and the Swiss franc - FT.com
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