Clearing House Calculus: Membership Approaching Disintermediation
Exchanges and clearinghouses are taking advantage of the results of OTC market structure changes and the numerous rules and regulations that were implemented as a result of the financial crisis. Dodd Frank, Basel III, MiFID II, and others are all putting capital pressure on the big banks who used to be the backbone of the futures markets. In some cases, these FCMs have decided that the business is no longer profitable when you add up all the expenses including the cost of capital. As a result, the population of FCMs has decreased dramatically causing some concern around concentration risk.
Protection of the client and their assets has always been at the forefront of futures business and this continues to be the case. Clients have also always viewed their FCM as a valued partner in terms providing solutions and working with exchanges. With less FCMs, for-profit exchanges and affiliated clearing house have taken note and have identified ways where they can step in and provide the buy side with services that are traditionally provided by FCMs.