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 NFA.
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 generation.
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 year.
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 of the 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.