FIA Defends Role of Clearing Firms in Derivatives Market

In a white paper, the FIA reviewed the role of clearing firms (i.e., futures commission merchants ("FCMs"), in the United States) in derivatives markets.

FIA described the role of such firms in: (i) offering customers a central point of access to futures exchanges and clearinghouses, (ii) maintaining checks and controls designed to protect consumers and facilitate efficient markets, (iii) guaranteeing clients' obligations to the markets, and (iv) contributing to default funds designed to mitigate the impact of losses caused by payment defaults.

FIA concluded that these firms are stable entities with a low risk of failure, and that the market stability provided by clearing firms benefits the entire financial system, not just futures markets. FIA also highlighted that clearing firms monitor markets and police illicit activity, publish risk disclosures and provide education and training for consumers to allow them to make informed investment decisions and fully understand futures products prior to investing. FIA asserted that the current system "has stood the test of time, preserving the stability and resiliency of the global exchange traded derivatives markets for decades, even during periods of extreme volatility and financial crisis."