Fed Mulls Limits on Physical Commodity Trading by Wall Street Banks

The U.S. Federal Reserve on Tuesday took a first formal step toward limiting the role of Wall Street banks in physical commodities markets, asking for public input on whether such activity endangers financial markets and whether additional capital requirements are necessary.

The Fed board voted 6-0 to seek comment through an "advance notice of proposed rulemaking".

"The Board is considering whether additional restrictions would help ensure that physical commodities activities authorized for financial holding companies are conducted in a safe and sound manner and do not pose a threat of financial stability," the Fed said in a release.

The Fed said it is asking for comment about the financial risks that physical commodity activities could pose, the potential conflicts of interest for banks, and the risks and benefits of additional capital requirements or other restrictions.

The Fed is seeking comments through March 15.