US broker start-ups fall by half in 2015
20th January, 2016|Luke Jeffs
Number of new US introducing brokers fell by 47% in 2015, according to NFA
The well-documented pressure on US futures firms has beenunderlined by a trade body that said the number of brokers entering the world’slargest derivatives market fell by almost a half last year.
The National Futures Association, a self-regulatoryorganisation that helps US firms with compliance, said in a note 80 firmsregistered as introducing brokers last year, down 47% on 2014.
The NFA said: “This continues a recent downward trend – in 2014there were 153, and 2013 saw 185 new introducing brokers created.”
An introducing broker is an individual or firm that handlesorders to buy or sell futures contracts, forex, commodity options or swaps butdoes not accept money or assets from clients to support such orders, according tothe NFA.
The association said the 80 firms registering last yearcompares to some 623 new introducing brokers in 1985 and the 2015 total is thefirst time the number of registrants has fallen below 100 for a single year ina generation.
The NFA said at the end of 2015 there were about 1250 US introducingbrokers which is the lowest level in decades but only slightly down compared tothe previous year.
The decline in introducing brokers is reflected byconsolidation among US futures commission merchants, full-service brokers thatcan handle assets on behalf of and extend credit to clients.
The association said there were 61 FCMs at the end of lastyear, which compares to more than 100 five years ago and more than 200 a decadeago.
The NFA said in its note the dwindling broker numbers werepartly due to the increasing cost of compliance following the introduction oftough US reforms aimed at preventing a repeat of the 2008 banking crisis.
The association cited the implementation of the Dodd-Frank reforms, which were drafted into US law in July 2010, the increased fines leviedby national regulators in recent years and the tough capital requirementsplaced on banks and brokers by global regulators such as Basel.
US futures regulator the Commodity Futures TradingCommission backed in November attempts to water-down the so-called leverageratio requirements on banks, arguing the proposals will drive more brokers out of business and impact client choice.
