In a low interest rate environment with regulatory hurdles, capital requirements, and technological complexities, how do firms in the futures industry thrive?
We gathered one seasoned fin tech reporter, Jim Kharouf from John Lothian News, and representatives from an FCM, an ISV, a prop firm/market maker, and a bank – to join us at a busy Chicago steakhouse, for a candid discussion about the state of the futures industry.
The contributors unanimously agreed that the current business environment remains challenging. Amongst the obstacles mentioned by FCM representatives were increased capital requirements, the additional liability carried on behalf of their customers (recently exemplified by Advantage Futures settlement with the CFTC on rules 1.73 and 1.11), account for clearing costs in their business models, and cope with risk models that are not perceived Furthermore, banks’ withdrawal from markets has resulted in fleeting liquidity.
Interestingly, in spite of headwinds, all participants are finding ways to grow their business. As the FCM segment contracts, larger firms have the opportunity to consolidate business. There was a consensus in the group that it was increasingly important to leverage core competencies and focus resources in niche areas. Likewise, trading firms with adequate capital and technology capacity have an opportunity to fill some of the void left by banks–a number are also exploring diversification strategies.
Industry participants are increasingly leveraging third-party technology to offset cost and complexity. The challenge remains finding vendors with the longevity and market knowledge to be partners, and solutions that allow participants to focus on core business drivers. One participant commented that sometimes vended solutions look good on paper, and may perform to specifications, but that his main concern was around all aspects, including operational, which may not be up to scratch to make a purchase worthwhile.
Speaking of the coming years, the group opined that cost and regulatory hurdles are so high in the current environment that few new entrants are expected. For incumbents that are able to focus on their core competencies, and remain differentiated from their competition, new opportunities will be found now and going forward.
To read the full report from John Lothian News, please click here
Video Troels Jensen, Executive Vice President and COO of Itiviti, delves into the company’s product vision: a full spectrum platform for the sell-side industry. March 29, 2017
Video In February 2016, Itiviti was born out of the merger between market leaders Orc, Tbricks and CameronTec. One year on, Lee Griggs – President EMEA at Itiviti – explains how far the company has come and the positive reaction seen from the market in response to Itiviti’s expanded offering for the sell-side. March 27, 2017
Video FIX is the way the world trades, but FIX solutions come at a high cost. The answer to this dilemma? Itiviti Managed FIX: a transparent, robust, enterprise-enabled solution that will lower your cost of ownership while keeping you in control over your connectivity. Itiviti Managed FIX: the way the world connects. March 23, 2017