JPMorgan to settle over power rigging charge.

JPMorgan Chase was expected to announce a settlement with the Federal
Energy Regulatory Commission as early as Tuesday after being formally
charged with rigging power markets in California and the Midwest.
Ferc said on Monday that the bank's traders had engaged in eight
"manipulative bidding strategies" that generated "tens of millions of
dollars at rates far above market prices" in 2010 and 2011.
In one allegation, the bank was accused of making false bids to
collect payments covering the cost of selling wholesale electricity in
California.
The accusations, which echo the electricity-market manipulation
schemes perpetrated by Enron, the bankrupt energy company, will lead
to a settlement of about $400m as early as Tuesday, according to one
person familiar with the situation. JPMorgan and Ferc declined to
comment.
The settlement would follow a $470m fine levied against Barclays this
month when Ferc found the British bank had manipulated electricity
markets. Barclays said it would "vigorously defend" itself in court.
The bank's commodity business, run by Blythe Masters, has come under a
barrage of regulatory pressure in the last year. The Federal Reserve
said this month it was "reviewing" banks' authority to trade physical
commodities.
A Senate committee was scheduled on Tuesday to hold its second hearing
on the subject of bank ownership of physical commodities. Last Friday,
JPMorgan announced it was putting its physical commodities business up
for sale.
One potential suitor emerged on Monday when Jeff Welch, head of North
American gas, at EDF Trading told the Financial Times his company
"would be very interested in examining all aspects of the JPMorgan
portfolio in the physical commodities space for which EDFT had an
active presence and a desire to grow".
EDF Trading, a subsidiary of the French utility, earlier bought Lehman
Brothers' energy trading group out of bankruptcy court in 2008.
EDF was North America's sixth-largest natural gas marketer in the
first quarter of 2013, according to Natural Gas Intelligence. JPMorgan
ranked ninth. Their combined volumes would meet about 16 per cent of
daily North American gas demand.
JPMorgan's move to exit physical commodities is a U-turn. JPMorgan in
2010 spent $1.6bn for the bulk of RBS Sempra Commodities, a physical
merchant, and another $220m for the joint venture's North American gas
and power book. It previously acquired electricity plants and energy
trading operations when it took over Bear Stearns in 2008.
With contracts that extend years into the future and other US banks
also facing pressure from the Fed, it is unclear how many buyers there
are for a physical commodities business. Morgan Stanley has so far
failed to sell stakes in its sprawling commodities business after
talks with potential partners began last year. JPMorgan also plans to
maintain its commodity derivatives group.
However, non-US banks, under less public pressure over their
commodities business, could be interested. Macquarie and Deutsche
Bank, two leading non-US banks in commodities, are both likely to
consider bidding for some or all of the business, people familiar with
the situation said.

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