Futures Commission Merchants have not had an easy time of it in the years since the 2008 Financial Crisis and the subsequent regulatory and interest rate avalanche.

For many firms, it’s been a perfect storm of financial crisis, low to no interest rates and volatility, and an ongoing crush of new rules and regulations from U.S. and European regulators. For some firms, the combination has been stifling, while others have shut down or sold out to other, stronger players. In January, the number of FCMs stood at around 60, down from 139 in 2008, according to data from the National Futures Association, one barometer of just how hard it is to make it in the harsh environment.  

Yet, amid this backdrop, there are some green shoots that have popped up with new FCM businesses. Others have found niches within the current environment by picking up new business that is being abandonedTotal US Futures Seg Funds chart by banks, or expanding the current pie, drawing current non-futures customers into the asset class.

There is some evidence that the futures industry is beginning to heal. In the latest CFTC report from FCMs, the amount of segregated funds under management showed an increase for the first time in almost 2 ½ years. Total US seg funds, or the customer money held by FCMs, was $163.8 billion as of March 2016, up from $159.6 billion at the end of 2015, according to CFTC data. Given the market conditions, and the fact that total customer seg funds have been essentially flat the past two years, it is a small sign that more business is flowing through futures brokers.

OptionsHouse, for one, launched its FCM business just a week ago to complement its stock and equities options brokerage. It hopes to follow the trend that other traditional retail stock brokers such as TD Ameritrade established, which is taking existing stock traders and bringing them into the options and futures space. TD Ameritrade says about 45 percent of all trades from its customers are in derivatives. In just over four years, TD Ameritrade’s customer seg funds from its FCM business have grown 97 percent from $145 million in 2012 to more than $286 million, as of March 2016.

Meanwhile, well-established firms have also seen some sizable growth. GH Financials, Top FCMs chartestablished in 1993, opened a Chicago office in 2012 and one in Hong Kong in 2013 and has found innovative ways to pick up new business. (See our interview with Mark Ibbotson, the group CEO of G.H. Financials.)

And Societe Generale overhauled its business unit after purchasing Newedge and folded multiple business lines into one group, the renamed SG Prime Services. It too is seeing some solid growth as SG Prime Services continues to pick up business from other competitors, as well as bring existing clients into the futures space. The redesign of the business unit has been outpacing its initial targets. 

Indeed, several of the traditional top FCM banks have trimmed back or shifted out of the business. Deutsche Bank, a longtime top four player in futures, posted a 64 percent drop in US customer seg funds in the first quarter of 2016 from the end of 2015, as the bank shut down business units and plans to slash 35,000 staff and contractor positions by 2020. As part of that, it is cutting its global markets and investment banking clients by half. Firms like SG Prime Services and others are happy to pick up some of those clients.

If the central bank grip on the US, European and Asian economies begins to return to pre-crisis levels and regulations become more manageable, FCMs may indeed be seeing some solid growth in the coming months and beyond.


Here are the links to our stories on innovative FCMs:

Singularity: G. H. Financials’ Mark Ibbotson on FCM Efficiency

We Can Rebuild It: SocGen Prime Services Group Reengineered And Growing

Full house: OptionsHouse Set To Grow Futures Business

Bite Sized: TD Ameritrade’s FCM Looks for Bigger Slice of Retail Pie

Shipbuilding: RJ O’Brien Building Business in Tough Times

**Editor’s Note: This series aims to show how some FCMs — new, retail focused, non-bank and bank owned — have been able to grow and innovate during one of the most difficult times in recent history. There are other firms that have done well during this period through innovation. As we continue this series, we will add more profiles on such firms.

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