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Trends in market share of derivatives clearing

Published in Automated Trader Magazine Issue 42 Q1 2017

The financial crisis led to the biggest overhaul of regulation since the Great Depression. We examine how the new rules have affected the market for derivatives clearing in the US.


Tod Skarecky

Tod Skarecky has 20 years experience in OTC derivatives technology. He is Vice President of Clarus USA. Since 2008 he has implemented FinTech solutions for the G20 mandates related to execution, reporting and clearing of OTC derivatives. Tod holds a Business degree from Emory University, Atlanta.

Regulatory changes since the financial crisis have transformed the landscape for derivatives clearing. Increased fixed costs associated with new rules have encouraged consolidation in the industry. Requirements for centralized clearing of some OTC products have helped some Clearing Brokers (FCMs) and hindered others. In this article, we analyze the trends in market share of FCMs for both exchange traded and centrally cleared OTC products.

For the analysis, we examine FCM data within the US market to investigate a number of brokers which are available to investors. We are then able to put together league tables for brokers in various categories of cleared derivatives.

Overall, we find that the cleared derivatives business has become highly concentrated within a handful of brokers and that any growth has come from a growth in cleared swaps. We also find that European firms are shrinking or not keeping up with the growth of their US counterparts.

FCM Count

We begin with a count of the registered FCMs every month since reporting began in 2002. By the end of 2016, there are only 68 FCMs, down two from June 2016, and down nearly a third off the 2004 peak of 190 firms.

Figure 01 tracks the number of FCMs by US regulatory bucket. These buckets are simply classifications of product type. The 'Seg' bucket includes domestic US listed derivatives, for example CME-listed futures and options (F&O). '30.7' includes foreign listed derivatives, for example US clients trading in Eurex-listed F&O. 'Swap' handles all cleared swaps, and 'Forex' includes OTC FX.

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