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.
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.