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Morgan Stanley loses two leading oil traders in Europe

The headquarters of Morgan Stanley is pictured in New York January 9, 2013. REUTERS/Shannon Stapleton
The headquarters of Morgan Stanley is pictured in New York January 9, 2013. REUTERS/Shannon Stapleton

By Jonathan Leff and Dmitry Zhdannikov

LONDON (Reuters) - Two high-profile oil traders have left Morgan Stanley's European desk, trading sources said on Tuesday, as Wall Street banks struggle to retain talent amid increased regulator scrutiny and a decline in revenues.

A source close to the bank said Morgan Stanley, which plans to exit trading in some commodities market, remained committed to oil trading and had no plans to downsize its oil trading operations, one of the largest among banks.

Three trading sources said North Sea oil derivatives traders, Pasi Siitonen and Simon Hutchinson, who have worked for Morgan Stanley for several years, have left the bank in the last few days.

Reuters could not reach the two traders for comment. Morgan Stanley declined to comment. It was not immediately possible to establish whether the traders had joined a new firm.

"They were some of the most professional guys in Brent paper," said one trader who regularly hedged his risks by buying Brent derivatives from Morgan Stanley.

In June, Morgan Stanley said it will exit trading of agricultural products, freight and some European power and gas due to a poor outlook for the sectors while oil trading and North American power and gas businesses remained a priority.

However, the bank has lost some major talent in its priority areas over the past year including several gasoline traders and a highly-regarded liquefied natural gas (LNG) team, which left for trading house Glencore.

The bank, together with other leading Wall Street players in commodities, Goldman Sachs and JP Morgan , has seen a steep fall in revenues due to low market volatility, increased regulatory compliance and capital costs.

An internal memorandum from Morgan Stanley said last month it estimated that the commodities revenue pool available to banks has fallen by 50 percent from the peak years of 2007-2009. The bank added it expected the cycle to turn in its favor again in the future.

The regulation scrutiny is expected to only tighten in the future with the U.S. Federal Reserve reviewing a landmark 2003 decision that first allowed regulated banks to trade in physical commodity markets.

Last week, Morgan Stanley said its commodities business recovered in the three months to June from two previous dismal quarters, helped by higher client activity in power and gas and swings in precious metals prices.

But it said that the oil liquids market, which has traditionally been the most important driver of its commodities business, continued to operate at historically low levels.

(Additional reporting by Alex Lawler, editing by William Hardy)

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