Broker suffers after BMO commodity losses

US commodity derivatives broker Optionable saw its shares plummet again today after Bank of Montreal, its most important customer, said it would suspend their relationship.

The bank suffered losses of between C$350 million and C$450 million last month on natural gas trading, after a sudden drop in market liquidity and volatility. It has now announced that it is "suspending all of its business relationships with the brokerage firm, Optionable, as well as all derivatives trading through that firm". The bank has also suspended two commodity traders and will tighten up oversight of the commodities desk in its BMO Capital Markets division.

Optionable, based in Valhalla, New York, saw its shares fall 60% today to $1.126. But chairman Albert Helmig said: "We are never pleased when losses dominate for one of our clients, but we do not design or help to design their strategies, nor are we financial advisers.... We believe strongly that our brokerage and execution services are and have been rendered appropriately, professionally and correctly."

In a filing with the SEC yesterday, Optionable said that "it is likely that BMO’s statement and suspension will have an adverse effect on the Company’s business". Optionable could also suffer from increased competition now that Nymex has launched electronically traded energy contracts (see Nymex launches electronically traded options on energy and base metal contracts), which could compete with contracts on Optionable's Opex trading platform.