_800x533_L_1412520412.jpg)
NEW YORK (Reuters) - Cargill Inc. (CARG.UL) plans to apply for Category 2 membership of the London Metal Exchange, it said on Wednesday, as the agricultural merchant makes its first foray into base metals derivatives sales as European banks retreat.
Privately held Cargill's push into trading structured products and derivatives comes as Barclays PLC (L:BARC) and Deutsche Bank (DE:DBKGn) exited the fiercely competitive commodities derivatives market as tighter regulation squeezes margins.
Fee increases planned by the LME, the world's largest and oldest metals exchange, for next year will also increase the costs of transacting in the open outcry pit and electronic platform, brokers have warned.
To lead the push, the company has hired metals veteran Mike Frawley as managing director of global metals.
"Given the increasing market volatility in metals, we believe there is substantial opportunity to provide companies with risk management tools to stabilise pricing and ultimately expand or defend market share," said Mike LeSage, who heads Cargill's risk management business unit.
The membership will be through Cargill Financial Services Europe Limited. Category 2 members of the world's oldest and biggest metals exchange are allowed to trade electronically and over the phone.
Cargill International SA is already an associate trade Category 5 member.
Frawley is no stranger to running a metals derivatives desk. As global metals chief at Jefferies Bache between June 2012 and November last year, he oversaw the U.S. investment bank's push into open outcry trading in the LME ring.
It downgraded its membership to Category 2 after just 14 months as the bank battles with lower prices and higher fees.
Prior to Jefferies, he was in charge of metals brokerage at LME ring dealer Newedge and its previous guises as Carr Futures and Calyon Financial for at least 10 years.
For Cargill, the move also comes about six months after the company closed its European coal, gas and power trading business, the first traditional commodities trading firm to step away from a sector hard-hit by falling margins.
(Reporting by Josephine Mason and Melanie Burton; Editing by Chris Reese and Gunna Dickson)