Report on commodity trading backfires Commodity trading houses are not "too big to fail," says a report commissioned by the banking industry's top lobby group, which had hoped it would conclude the opposite. The Global Financial Markets Association, which commissioned the report from a leading academic on commodity markets, had hoped to use it to persuade watchdogs to regulate their rivals. GFMA members such as Goldman Sachs and JPMorgan Chase compete directly with commodity trading houses in some areas. But the report said that trading companies "pose less systemic risks" than big banks. Although the banking lobby group discussed a draft of the report with regulators, it decided not to finalise it or publish it, said people familiar with the discussions. The report comes amid a debate about whether trading houses such as Glencore , Vitol or Cargill are "too big to fail" - the concept that a company is so large and embedded in the economy and financial system that policy makers cannot let it collapse. The GFMA, which is chaired by Blythe Masters, head of commodities at JPMorgan, planned to use the report to argue that trading houses ought to be regulated in a similar manner to banks, according to people briefed on the efforts. The lobby effort would have focused on several central banks, national regulators and the Financial Stability Board, the Basel-based body that co-ordinates financial watchdogs. However, the report was never completed and remained in a "draft" status, after its conclusions went against the interest of the lobby group, three people familiar with the matter said. GFMA said in a statement it "often commissions research which is shared with the regulatory community and not published more widely." The report, seen by the Financial Times, states that "it is unlikely that a large loss suffered by a single global commodity trading firm . . . poses a systemic threat to the broader financial system." It adds that "the nature of commodity trading, and the structure and capital structures of commodity trading firms makes them substantially more robust to [a financial crisis] than systemically important financial institutions," like Wall Street banks or big insurance companies. The report, nonetheless, warns that commodity trading houses "are closely connected to the broader financial system," adding: "As a result, it is advisable to monitor, and to understand better, the systemic importance of these firms. Craig Pirrong, author of the GFMA report and a respected commodities specialist at the University of Houston, wrote on his personal blog earlier this month that "as the result of personal experience" he knew "that major banks involved in commodity markets are chafing under the restrictions imposed on them, and resent the fact that commodity [trading] firms . . . are not subject to the same restrictions." Mr Pirrong added on his blog: "I know they [big banks] have been importuning the FSB to identify commodity [trading] firms as systemically important, and to impose bank-like disclosure and capital requirements on them." On Friday, he declined further comment citing a confidentially agreement. The debate about whether commodity trading houses pose a systemic risk to the global economy comes amid a boom in profits for the sector. The world's top-20 commodities traders have pocketed nearly $250bn over the past decade, making the sector a big beneficiary of the rise of China and other emerging countries, according to an investigation by the Financial Times. The investigation shed light on an era of remarkable growth for the sector that began in 2000 - when it made just $2.1bn in profit - and peaked in 2008 when annual profits were at $36.5bn. The cumulative net income of the largest trading houses since 2003 surpasses that of Goldman Sachs, JPMorgan Chase and Morgan Stanley combined.