PFGBEST announced yesterday that it is purchasing the customer assets of non-clearing futures commission merchant Alaron Trading Corporation.
This will further shrink the ranks of independent futures brokers, which had been thinning for several years due to industry consolidation.
“There are so many synergies, and we believe there will be significant benefits to Alaron customers,” said PFGBEST President and Chief Operating Officer Russ Wasendorf, Jr. in a release announcing the acquisition.
Alaron, which had been a clearing member of the Chicago Board of Trade and Chicago Mercantile Exchange, transitioned to a non-clearing FCM last December, transferring customer accounts to Penson GHCO.
The credit crisis has taken a toll on futures trading volume. Even though the futures industry’s regulatory model has held up during the recent economic crisis and the damage that was done to credit markets was done primarily by the large investment banks, the resultant deleveraging has hurt futures volumes and many people believe that the expected regulatory backlash will make life difficult for the smaller players.
Russ Wasendorf Sr. has commented to Futures that it is unfair that retail forex brokers are being required to hold more funds in reserve as part of a regulatory reform. He has pointed out that many of the regulatory fixes being initiated favor the larger institutions who were most responsible for the breakdown in credit markets in the first place.
Another headwind for the independents is that many retail futures brokers rely on the interest earned from customers deposits to be profitable. Earnings from interest (the float) has been reduced sharply in the current environment.