Calm Your Fears About Risks to U.S. Futures Market, UBS Says

If you’re concerned that regulations will drain volume from U.S. futures markets, a UBS Group AG analyst says your worries are premature.

Investors are asking whether increased capital costs will cause banks to raise prices for customers, or whether the disappearance of futures brokers will harm the industry, said Alex Kramm of UBS.

“While there are certainly pressures, our analysis so far suggests that the exchanges aren’t overly at risk,” the analyst said in a Tuesday phone interview, a day after publishing a report on the topic. “We don’t see a significantly negative impact at this point.”

There was no sign of trouble in 2014, when a record 3.1 billion futures contracts traded in the U.S., according to data compiled by research firm Tabb Group LLC.

Volume has increased even as the number of brokers known as futures commission merchants, or FCMs, has dwindled. J. Christopher Giancarlo of the Commodity Futures Trading Commission noted this week that there are only 57 active FCMs in the U.S., down from 154 before the 2008 financial crisis and 400 in the 1970s.

“Federal government policies are making America’s Futures Commission Merchants (FCMs) an endangered species,” Giancarlo said in a statement Monday. New regulatory rules have hurt smaller brokers and increased the record-keeping requirements for all market participants, the CFTC commissioner said. “While many new rules contain plausible protections, regulators have lost sight of the increased costs,” he added.

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