Growth of retail creating ‘tension’ with traditional futures users – FIA chief

Speaking on Tuesday at the FIA IDX conference in London, Walt Lukken, the chief executive and president of the trade body, said retail is a huge growth opportunity for the industry but these clients trade for different reasons to more established derivatives users.

Lukken told a press conference: “It is fundamentally a different type of product. Our products are about price discovery and hedging whereas retail is more akin to investing on the securities side.”

He added: “We think it’s a growth area that some firms will embrace and some firms will not but we don’t want it to happen at the expense of the traditional markets. Ultimately, the public purpose of derivatives markets is to allow people to risk-manage and discover prices, to be able to find and benchmark a price in a way that helps commerce outside of the marketplace.”

Lukken went on say “there is room in the tent” for the retail community, adding: “We don’t want retail to overwhelm, there is a tension there that we as an industry have to deal with.”

US exchanges such as CME Group and Cboe Global Markets have in recent years launched various smaller-sized contracts to satisfy growing demand from US retail traders.

CME Group's chief commercial officer said last week the US group’s focus on the growing global retail trading community is the culmination of decades' work.

“This is a business that has been evolving for decades at CME Group,” Julie Winkler said in an interview. “What we are seeing now is a confluence of factors that have really accelerated growth and the relative importance of retail flow.”

CME listed its first micro E-mini S&P 500 futures in 2019 and passed the one billion contract mark for the retail-focused product four years later.

Since then, the US group has expanded its coverage of smaller-sized products, culminating in the last series of commodity contracts in February.