It has been a challenging year for futures commission merchants (FCMs). One dominated not by the usual issues of technology builds, disintermediation, transitioning to cleared over-the-counter (OTC) trading and the continuous challenges of a competitive landscape, but by a customer base weary of the very structures they have depended on and assumed were rock solid. End-user confidence in the industry took a double-barreled hit over the last year with the Peregrine Financial Group (PFG) failure occurring eight months after the MF Global debacle.
Futures invited six industry leaders representing the entire spectrum of the FCM community to talk about the state of the industry. Here is what they had to say.
Futures Magazine: Let’s start off by talking about the elephant in the room: The impact of MF Global and PFG on your business and the industry.
Gerry Corcoran: The largest impact of the MF Global and PFG disasters really surrounds the regulatory response. We have seen shock and awe in terms of a regulatory response to what occurred. In most cases the strengthening of the rules and regulations surrounding the protection of customer assets [was] good. In fact, the industry played a large role in forming and shaping the rules and regulations that came out. I personally don’t believe the industry volumes that we see that have diminished in a macro sense relate to MF Global or PFG at all.
Scott Gordon: You also have to go back to the trust issue. Those events created an issue with customers, and the concept of customer confidence is a big one.
Salomon Sredni: I agree; I don’t think the volume drop is related to that. I don’t think it helped, but the biggest issue is [that] volatility in the marketplace in general has greatly diminished. It diminished on the equity side and on the forex side. Every competitor in the business would attest to that. By the way we didn’t do any business with MG Global or PFG so we didn’t suffer ant direct losses. Those two cases were a black eye for the industry and it shook customer confidence. Before that I would hear, ‘nobody lost any money trading futures.’ Those two instances, in a short period of time, shook the confidence of prospects and customers.