J.P. Morgan on Thursday bet the future of commodities trading will come from a school far from the traditional trading hubs of Wall Street and Chicago.
The bank, which trumped Goldman Sachs and Morgan Stanley in commodities revenue last year, donated $5.5 million to the University of Colorado Denver Business School to support what the school says is the "academic world's first comprehensive center for commodities." It will teach students about trading, risk management and regulations in commodities markets.
The donation was "an investment to better prepare our future and existing talent," said Blythe Masters, J.P. Morgan's global head of commodities.
It is the latest move to expand the firm's commodities presence by Masters, who steered the division to record revenues exceeding $2.8 billion in 2011.
Last year, commodities revenues made up more than a quarter of J.P. Morgan's total "principal transactions", up from around a tenth in previous years. On average its metals operation generates $75 million, or $600 per trade, in revenue per quarter; energy generates $250 million, or $5,000 per trade.
Masters chose to support the center because Colorado is linked to a range of commodities, including agriculture and energy. By contrast, a city like Houston is focused on oil and gas.
Tulane University in New Orleans runs a rival trading education program centered only on energy. It did not immediately return a request for comment.
"There is no center that exists like this," said Robert Engel, president and chief executive of CoBank, an $85 billion cooperative bank serving U.S. farmers and agribusiness that donated $2.5 million to the project.
He applauded J.P Morgan's interest in commodities, saying he was "just thrilled that some more people are going to be thinking about this and putting some resources into it."
The center, named the J.P Morgan Center for Commodities, will feature a state-of-the-art lab that uses industry-standard financial software and technology tools from CQG and other technology companies.
Kathleen Merrigan, deputy secretary of the U.S. Department of Agriculture, called the center a "stroke of genius."
"The whole area of commodities and finance and trade and all of that is really so significant and its only going to become more so," she told Reuters.