CFTC Commissioner Giancarlo Discusses Risks of FCM Consolidation (with Delta Strategy Group Summary)

The CFTC held its Market Risk Advisory Committee ("MRAC") Meeting, where members discussed (i) cybersecurity, and (ii) the effect of the concentration of futures commission merchants ("FCMs") and other factors on market liquidity.

Commissioner Sharon Bowen, who serves as the sponsor of MRAC, delivered opening remarks at the meeting, setting out the agenda for the panel discussions. Commissioner J. Christopher Giancarlo also delivered prepared remarks for the meeting, discussing the endangerment of FCMs in the United States.

According to Commissioner Giancarlo, there are far fewer FCMs than there used to be. He maintains that this is due to "a combination of mismanagement by a few, U.S. monetary policy and over-regulation." He explained that as FCMs have dwindled, systemic risk has increased. He noted that the five largest firms, and customer assets held by all FCMs, has grown from $169.5 billion in December 2007 to $245.7 billion in March 2015.

Commissioner Giancarlo stated that if regulators are not careful about FCMs, "America's rural producers will soon be left with few places to protect against business risk." He encouraged MRAC to analyze and consider the heightened systemic risk arising from FCM consolidation.

Click here to view a summary of the MRAC meeting, prepared by Delta Strategy Group.

See: Commissioner Bowen's Remarks; Commissioner Giancarlo's Remarks.
Related news: CFTC Announces Agenda for Upcoming Market Risk Advisory Committee Meeting (May 19, 2015).