The well-documented pressure on US futures
firms has been underlined by a trade body that said the number
of brokers entering the world’s largest
derivatives market fell by almost a half last year.
The National Futures Association, a
self-regulatory organisation that helps US firms with
compliance, said in a note 80 firms registered as introducing
brokers last year, down 47% on 2014.
The NFA said: "This continues a recent
downward trend – in 2014 there were 153, and 2013 saw
185 new introducing brokers created."
An introducing broker is an individual or
firm that handles orders to buy or sell futures contracts,
forex, commodity options or swaps but does not accept money or
assets from clients to support such orders, according to the
The association said the 80 firms
registering last year compares to some 623 new introducing
brokers in 1985 and the 2015 total is the first time the number
of registrants has fallen below 100 for a single year in a
The NFA said at the end of 2015 there were
about 1250 US introducing brokers which is the lowest level in
decades but only slightly down compared to the previous
The decline in introducing brokers is
reflected by consolidation among US futures commission
merchants, full-service brokers that can handle assets on
behalf of and extend credit to clients.
The association said there were 61 FCMs at
the end of last year, which compares to more than 100 five
years ago and more than 200 a decade ago.
The NFA said in its note the dwindling
broker numbers were partly due to the increasing cost of
compliance following the introduction of tough US reforms aimed
at preventing a repeat of the 2008 banking crisis.
The association cited the implementation
Dodd-Frank reforms, which were drafted into US law in July
2010, the increased fines levied by national regulators in
recent years and the tough capital requirements placed on banks
and brokers by global regulators such as Basel.
US futures regulator the Commodity Futures
Trading Commission backed in November attempts to water-down
the so-called leverage ratio requirements on banks,
arguing the proposals will drive more brokers out of business
and impact client choice.