It is becoming increasingly clear that the Fed really does not want banks in the physical commodity business. Vice Chairman Yellen has argued that there is systemic risk to banks form their commodity activity. The Fed is having a "comprehensive review" which usually means that they want to figure how to regulated banks out of the business. If you increase capital charges on these activities, the Fed can make commodities unprofitable for the banks. Profitability on commodity trading has declined this year, so there is all the more reason for banks to think how to exit this business.
This is going to have a major change in the commodity markets because one of the biggest players will not be providing liquidity. This may be a great time to get more involved in commodities.
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