Futures commission merchants, customer funds and capital requirements: An organizational analysis of the futures industry

摘要

We study futures commission merchants, or "FCMs," who are the important intermediaries through which institutional, corporate and retail customers conduct trading in interest rate, currency and commodity futures. We construct and examine a data base of FCM financial information including holdings of customer segregated and secured funds intended to support trading on U.S. and foreign futures exchanges over the period 1995-2018. We find significant industry consolidation including a 68% decline in the number of carrying FCMs. We also find significant structural changes including the increased dominance of bank-affiliated and dually-registered, broker-dealer FCMs, with the latter now accounting for 54% of all FCMs and 92% of customer funds held. We discuss regulatory initiatives potentially influencing the consolidation including those resulting from the 2008 financial crisis as well as from the collapse of notable FCMs due to alleged fraudulent activities and misbehavior involving customer funds. Finally, we analyze associated changes in market concentration and competitiveness.