Needham Consulting News

June 9, 2016

Just to keep everyone in the loop, here is some news about Needham Consulting, and me.

Effective immediately, I am putting Needham Consulting on hiatus. I have signed a full-time employment agreement with Ion Trading.

I will continue to do what I’ve done all along: work with derivative industry participants on the challenging issues that face the industry.

But now I can do that under the umbrella of the leading software vendor in the derivatives space.

I am excited about this new opportunity, and I look forward to what comes next, both for me and for Ion.

And to the clients of Needham Consulting: with a humble and grateful heart, I want to simply say thank you. I have had more fun, and more interesting work, than I ever thought possible when I started this little enterprise eight years ago. None of that would have been possible without your belief in me. I will always be thankful for that. And I look forward to maintaining those connections with you, under Ion, in the years to come.

John Needham


FCM Financial Data Reports – Feb 2016

May 9, 2016

By now everyone knows the routine:

  • CFTC publishes FCM Financial Data based on FCM 1-FR Reports and broker/dealer FOCUS Reports
  • I grab the spreadsheet version from there, sort the data by meaningful columns like Customer Segregated Funds Required (column J in this case)
  • Then I upload the updated spreadsheet here.

The February 2016 FCM Financial Data Report was just published by CFTC.

Interesting tidbits:

There were 55 FCMs that reported Customer Seg Funds required in February, 2016. That’s the same number that cleared customer business as of December 31, 2015.

Just 25 of them hold more than $1B in Customer Seg, though. Just five FCMs hold more than $10B. Those are Goldman, JP Morgan, SocGen, Morgan Stanley and Merrill Lynch.

Goldman has more than $6B more Customer Seg money than 2nd-place JP Morgan does.

More than half, or 51.62%, of Customer Seg money is held at the top-5 FCMs. Almost three-quarters, or 73.66%, is held at the top-10 FCMs.

The Customer Seg total in Feb 2016 was $157,006,070,162. That’s up roughly $9B from December 2015.

So while the Seg Funds figures continue to rise – meaning, more customers, futures-users, are clearing business at FCMs, the number of FCMs is not increasing, yet. Hopefully more firms will enter or re-enter the US futures industry.

Until then, despite increasing demand, customers’ choices will continue to be limited to the existing market participants.



2015 Year-End FCM Financial Data

February 11, 2016

Attached here is the CFTC’s Financial Data report for FCMs, sorted by Segregated Funds Required: fcm-data-2015YE-sorted-by-Seg-xls

As we’ve discussed here before, FCM consolidation (Wedbush, Crossland, Knight, etc.), executive malfeasance and criminal activity (MF Global and Peregrine), and lousy economic times (Jefferies) have led to fewer and fewer clearing members that are willing to clear FCM customer business.

We are now down to just 55 clearing firms in the U.S. that are carrying and reporting Customer Segregated Funds. The amount of Customer Seg assets held by FCMs at the end of 2015 was  $148,435,860,345.00. There were 72 FCMs registered at CFTC at the end of 2015.

By contrast, just five years ago, 71 U.S. FCMs were clearing customer business, and the amount of assets held in Seg was $151,055,523,757.00:  fcm-data-2010YE-sorted-by-Seg-xls At that time, 122 FCMs were registered with CFTC.

Talk about concentration risk: roughly the same amount of Customer Seg assets held at roughly 25% fewer clearing firms.

And ten years ago, when just $94,204,546,290.00 was held in Customer Seg accounts, there were 94 FCMs clearing customer business, and there were 178 FCMs registered with CFTC: fcm-data-2005YE-sorted-by-Seg-xls

People talk about exchange volumes, and exchange revenue, how high the volumes are, how robust trading revenue is,  and cite this as evidence that the U.S. derivatives industry is healthy and growing.

In my view, they’re looking at the wrong metric.


FCM Data – November 2015

January 8, 2016

Well, here is the latest FCM Data and provided by the U.S. Commodity Futures Trading Commission, or CFTC.

By now you know the drill: CFTC publishes the FCM Financial Data on their website. I download the spreadsheet, sort it by Customer Seg Funds, and upload it here.

So, as discussed before: fewer and fewer FCMs are clearing customer business. Jefferies has wound down the customer portion of their FCM business as they continue to wind down the FCM, taking the venerable Bache and Prudential Bache names with it.

Currently there are 55 FCMs clearing customer business, but that will drop to 54 once the Xchange Financial Access FCM winds down, as it was ordered to do by NFA in that organization’s infinite wisdom.

In December 2013 there were 69 FCMs that reported Customer Seg. A list of them is here.

This sick trend continues apace, except when it periodically accelerates.


FCM Data – August 2015

October 12, 2015

Ahead of FIA Expo – I’ll be in Chicago for it next month – I figured this was as good a time as any to post another sorted summary of the CFTC FCM Financial Data reports. Sourced from here, you already know the drill, no doubt: CFTC publishes the report every month based on FCM/Broker Dealer FOCUS Reports, and/or FCM 1-FR reports.

CFTC publishes the report listing FCMs alphabetically, I grab their Excel version and sort it by Customer Seg Required (Column J). The amount of money in Customer Seg – aka Seg Required – is a pretty reliable and useful measure of the relative health of the US derivatives industry.

The sorted report is here: fcmdata0815 Sorted By Seg

Tops is Goldman Sachs, at a little under $24 billion. That’ roughly 25% higher than the second largest amount in Seg Required, JP Morgan at $17.2B. Third is SocGen (formerly Newedge) at $13.8B, then Morgan Stanley at $12.5B, and fifth largest is Merrill Lynch (BAML) at around $12.4B.

Relevant: there are 73 FCMs that submitted reports to CFTC, but only 56 of them had any Customer Seg amounts at all. And one of those – Jefferies (formerly Prudential Bache, before that Bache Securities) is winding down, so soon, there will be just 55 FCMs from which derivatives customers can choose.

Anyway, that’s it for now. If you’re in Chicago, or traveling there for FIA Expo, look for me on the trade show floor, or at some of the panels!

FCM Data – April 2015

June 10, 2015

By now you know the drill: CFTC publishes FCM data from the FCM 1FR reports, or from the broker/dealer FOCUS reports, every month. Every once in a while I download the CFTC report from here and re-sort the report by Customer Segregated Funds Required (Column J).

The report sorted by Customer Seg Req’d is here.

In July, 2014, the total Customer Seg reported by FCMs was $148,214,002,848.

In April, 2015 the total was $149,913,404,903, up a little bit.

The top five FCMs carry 51% of the Customer Seg, those FCMs are Goldman, JP Morgan, SocGen (formerly Newedge), Merrill Lynch and Morgan Stanley.

Add in the next five FCMs are the top-10 carry 74% of the Customer Seg balances. Rounding out the top-10 are Credit Suisse, UBS, Citi, Barclays, RJ O’Brien.

23 FCMs carry more than a billion dollars in Customer Seg, ranging from Goldman ($22B) at the high-end, to the winding down Jeffereis at the low end (just under $1.5B).

Just 57 FCMs reported any Customer Seg balances at all. That’s down six from just last July. And it is down more than 40% in the past 10 years.

I spoke about this a little more than a year ago at the FTF Derivops Conference in Chicago. At year-end 2003, 177 FCMs submitted FOCUS/1FR reports to CFTC. Ten years later, at year-end 2013, just 102 did. By April 2015, that number had dwindled to just 75.

At year-end 2003, 102 FCMs reported to CFTC that they cleared customer business (Customer Seg balances) At year-end 2013, just 69 did. By April 2015, that number had dwindled to just 57.

These are awful numbers, it is an awful trend.

What are your thoughts?

2014 Year-End Customer Seg Figures

February 26, 2015

I’ve been away for a bit, but I saw when I was out that the CFTC published the FCM Financial Data report for December, 2014, so I figured I’d create a post and compare some of the high-level figures to the 2013 year-end report.

CFTC FCM Data Report Page

And here is the December 2014 report sorted by Customer Seg.


Total Customer Seg reported was $136,456,771,305. That’s down almost $7B from the 2013 year-end figure of $143,741,158,888. In 2012 the total Customer Seg report showed $145,900,203,492.

Only 66 FCMs reported Customer Seg balances in December 2013. 69 FCMs reported Customer Seg in December 2013.

The top-5 in 2014 were:

Goldman Sachs at $20,285,919,590
JP Morgan at $17,447,852,777
Merrill Lynch at $11,208,908,563
Morgan Stanley at $10,031,840,202
Deutsche Bank at $9,773,050,189

Goldman and JPM were the top-2 in 2013, followed by Newedge (now called SG Americas and not reporting any Customer Seg; confusing, that), Deutsche and Morgan Stanley.

I do wonder what happened to SocGen’s report. The December 2014 report list Newedge among the deletions, and lists SG Americas Securities as an addition, but SG Americas reported zero in Customer Seg in the list above, sorted by Customer Seg Required.

November 2014 FCM Financial Data

January 18, 2015

By now you all know the drill: the CFTC publishes monthly financial data for FCMs, or futures commission merchants. Every once in a while, I download the spreadsheet and sort it by Customer Segregated Funds, which I consider among the most useful measures of the relative health of the U.S. futures market.

Then I post the sorted report here, mainly for my own reference, but for yours, too, if you want. Since the FIA Divisions Meetings are this week in Florida, and since CFTC published the latest report this past week, I figured this was a good time to post a fresh update.

Here is the November, 2014 data.

See anything interesting in the report?


– JPM is tops, as measured by Customer Seg. GS is second. GS was first last month, with JPM second.
= DB is 5th, with $10.5B; the top five all have more than $10B. Morgan Stanley is 6th, at $9.9B.
– 25 FCMs have more than $1B in Customer Seg.
– Only 59 US FCMs reported Customer Seg, and the last, LEK Securities, had less than $1MM.

CFTC FCM Financial Data Report – July, 2014

October 13, 2014

Ahead of next month’s FIA Expo in Chicago, I figured it would be a good time to take a fresh look at the CFTC’s monthly FCM Financial Data report. I admit that I haven’t looked at it for some time – the last time I posted anything here about it was back in February for the 2013 year-end report. (A link is here.)

So, refreshing: the CFTC data is published here: CFTC Link.

I saved the spreadsheet version of the CFTC report and then sort the FCM list by categories.

fcmdata July 2014 Sorted by Seg Required

fcmdata July 2014 Sorted by Secured Required

And new this time, I learned from this review that since my last peek, CFTC has started including Swaps Seg Funds required:

fcmdata July 2014 Sorted by Swaps Seg Required

So, a quick look at the numbers, compared to 2013 year-end:

Customer Seg Required totals:
July 2014: $148,214,002,848
December 2013: $143,741,158,888

A small increase of $5B.

The top 5 FCMs measured by Customer Seg were:
Goldman Sachs $18B
JP Morgan $17.3B
Deutsche Bank $$12.4B
Newedge $12.1B
Morgan Stanley $10.6B

Those five firms hold 47.65% of all the Customer Seg Funds.

The next 5 FCMs are:
Merrill Lynch $10B
Credit Suisse $8.8B
UBS Securities $7B
Barclays $6.2B
Citigroup $5.3B

Those top-10, all in, hold 73% of all the US Customer Seg Funds Required.
There were 63 firms that reported Customer Seg on their July 2014 FOCUS (or FCM 1-FR) reports. That’s down SIX FCMs from the December 2013 year-end reports.

Customer Secured Required totals:
Total Secured Funds (or 30.7) Required in July 2014 was $31,721,736,168.

The top 5 FCMs measured by Customer Secured were:

Goldman Sachs $7.2B
Barclays $3.4B
UBS Securities $3.3B
Newedge $3B
JP Morgan $2.9B

Those five firms hold 62.8% of all the Customer Secured Funds.

The next 5 FCMs are:
Credit Suisse $2.6B
Merrill Lynch $2.6B
Morgan Stanley $2.1B
Deutsche Bank $1B
Citigroup $931MM

Those top-10, all in, hold 92.6% of all the US Customer Seg Funds Required.
There were 53 firms that reported Customer Secured on their July 2014 FOCUS (or FCM 1-FR) reports.

Finally, the Customer Swaps Seg Required totals:
Total Swaps Seg Funds Required in July 2014 was $37,573,414,231.

Since there were only 22 FCMs/BDs/SDs that reported these funds, and since this is the first time I’ve looked at this, all the firms, their reported amounts, and the percent of the totals are listed below:

1. Credit Suisse $7,583,982,994 (20%)
2. Barclays $5,824,094,747 (15.5%)
3. Citigroup $5,475,668,782 (14.5%)
4. Morgan Stanley $4,633,503,266 (12.3%)
5. JP Morgan $4,010,710,065 (10.7%)
6. Goldman Sachs $2,353,995,394 (6.3%)
7. Merrill Lynch $2,065,002,087 (5.5%)
8. Wells Fargo $1,509,345,655 (4%)
9. Deutsche Bank $1,502,136,236 (4%)
10. UBS Securities $829,082,727 (2.2%)
11. HSBC $522,398,676 (1.4%)
12. Newedge $422,435,013 (1.1%)
13. BNP Paribas Securities $370,185,150 (1%)
14. State Street $315,334,914 (0.8%)
15. Mizuho $43,755,732 (0.1%)
16. Jefferies $41,203,000 (0.1%)
17. RBS $39,683,871 (0.1%)
18. Nomura $24,047,555 (0%)
19. Macquarrie $3,316,120 (0%)
20. ADM $2,687,874 (0%)
21. BNP Paribas Brokerage Services $731,813 (0%)
22. CHS Hedging $112,560 (0%)

FTF News Chicago DerivOps Conference – April 1, 2014

April 2, 2014

I’ve said this before, here and elsewhere, that I’ve been a great admirer of FTF News for some time. The team at FTF is great at what they do: new aggregation and curation, tremendous original content, and conferences and events in New York, Chicago and London.

Today FTF held their Chicago DerivOps conference. I was honored to chair the event, and to moderate a panel on FMCs with Yvonne Downs from Jefferies, Max Itkin from Pentwater Capital and Rajeev Ranjin from the Chicago Fed. The full conference agenda is here.

As conference chair, I was able to deliver some opening remarks. As I do sometimes, I selected the topic of FCM data, as published by CFTC, as a topic on which to focus. The opening remarks are pasted below, but full disclosure: I pretty much strayed from the text and spoke extemporaneously. I was supposed to talk for 5 to 10 minutes. I had to cut myself off when the clock counted down from 15 minutes to zero.

The lineup was, as always, terrific. I was proud to be able to contribute to the event. My guess is that most attendees got a lot out of it. I certainly did.

My comments:

I want to start by thanking all the fine folks at Financial Technologies Forum – my friend Maureen Lowe, Katie Flanagan, Eugene Grygo, Liz Acury, and the rest of their team. I’ve been fortunate to be a part of this DerivOps conference for a couple of years now, it really is one of the best conferences in Chicago. And I’ve been a big fan of Maureen and the rest of the folks at FTF. If you’re not engaged with this team – on Twitter, in their LinkedIn group, on their website, well, I’d strongly encourage you all to do that. They are excellent at what they do – the content aggregation and curation, the original content they are producing, it is all really terrific stuff. Trust me when I say this, you should be engaged with them in the many ways they are available -it will help you professionally in ways that will surprise you.

I want to thank the sponsors of today’s event: TriOptima, LCH Clearnet, Tradeweb, Options Clearing Corp and Omgeo, Lombard Risk, Misys, Simcorp and MarketAxess. Without these sponsors this event would not be possible, thank you all for participating. And to the attendees, be sure to visit with them during the breaks today – they have a lot to offer in the FinTech space, you should take some time to see what innovations these sponsors are bringing online in the recent past and for the rest of 2014.

Finally, I want to thank all of you, our attendees. Obviously, the purpose of the event, the reason we’re all here, the sponsors, FTF, all the panelists and speakers, is for you. I’m sure you’ll get a lot our of today’s event.

We have an excellent lineup: In a few minutes we’ll get started with a roundtable on SEFs – Swap Execution Facilities, those brand new regulated platforms on which OTC swaps are required to be traded, born out of the Financial Reform Bill that we all know as Dodd-Frank, The moderator for this panel is John McPartland, the Senior Policy Advisor at the Federal Reserve Bank, a fellow I first met a few years ago here at the FTF DerivOps conference in Chicago. Pay attention to this panel, folks – McPartland is one of the really great minds in trading and clearing policies, and he has a top-notch lineup with folks from LCH Clearnet, Citi and Tradeweb.

After a short break we’ll have a presentation by Mary Harris from TriOptima on portfolio reconciliation, and after that we’ll have a panel on Collateral Management, moderated by Larissa Miller, founder of Stuart Investments and a professor at IIT, with panelists from Northern Trust, Nuveen and she’ll have Ted Levroni from Omgeo.

After lunch I’ll be moderating a panel on FCMs – we’ll be touching on some of the points from this morning’s panels, and looking at some of the criteria that firms can and should use to help them choose clearing firms for the OTC and exchange-traded derivatives activity. This panel includes Max Itkin, head of Ops at Pentwater Capital, Yvonne Downs, Chief Operating Office at Jefferies, and Rajeev Ranjin, a policy specialist at the Chicago Fed.

Following that we’ll have a panel on Global Reg Compliance, moderated by Michael Sackheim from the law firm Sidley Austin, with panelists from Gladius Capital Management, the FCM Straits Financial, and with Gavin McConville from Lombard Risk.

That panel will be followed by a presentation Risk and Reconciliation in the derivatives market, by Maan Bsat from Misys.

We’ll wrap thing up this afternoon with a panel moderated by Larissa Miller from Stuart Investments and IIT, the topic there will address how firms can cope with the new rules and requirements for clearing. Larissa will have Joe Corcoran from OCC, Kevin Walker from Nuveen, and Joe Kamnick, a director at the SEC, who is really sharp and who was on one of my panels at last year’s conference. He’s a great guy and a really good sport. We were a little hard on him last year, as a representative of one of the market regulators, but he came though that okay. The proof is that he is back again this year. I’m looking forward to hearing what Joe has to say.

Let me wrap up my comments with a few stats, some raw numbers to keep in the back of your mind as you speak to the sponsors, as you listen to the speakers, as we go through the day. People often refer to the explosion of exchange volumes as a sign of robust health and growth in the US Capital markets. They often make the same case when talking about outstanding notional amounts for the swaps market. My own suspicion is that volume alone, or outstanding notional amount alone, only tells part of the story. Certainly volume figures are indicative of exchange and clearinghouse health, but I’m not sure that the same can be said of the overall health of the US financial markets.

As you all know, FCMs and broker dealers are required to submit, to CFTC, FOCUS reports, or FCM 1FR forms if they’re not a broker dealer, and the CFTC uses these reports to produce their FCM Financial Data reports every month. There is an extensive archive of these reports at CFTC’s website: These reports have a ton of useful information that anyone can review, and can use to draw some conclusions about the relative health of the US futures market, and by extension, the US swaps market, the US securities markets, and the US financial world in general.

Since the focus of my consulting practice is mainly in the FCM back-office technology world, I look at these reports pretty often. In preparation for this years DerivOps conference, I took a look at the year-end reports for 2013, posted by CFTC in February, and year-end from 10 years before, in 2003. As one might expect, the pure raw figures provided by CFTC show some positives and some negatives.

For example: in those 10 years, between 2003 and 2013, the amount of US Customer Segregated Funds more than doubled – from a little over $71 million in 2003, to $143.7 million in 2013. That is a clear sign of outstanding growth. And it is worth noting that during this period, the US and the global economy went through staggering upheaval: from the collapse of the US housing market, the global recession, the international credit crisis, the collapse of Lehman and Bear Stearns, the bankruptcy of what was then one of the top-10 FCMs in the US – MF Global, and all the attendant upheaval from that – missing customer money, accusations of mismanagement and malfeasance. MF Global’s collapse was followed in short order by the revelations out of Cedar Falls Iowa that Russ Wasendorf had stolen more than $200 million of his own customer’s money to fund his lavish lifestyle and to fund his divorce settlement with his ex-wife. Russ Wasedorf’s actions led to the demise of a mid-tier FCM called Peregrine Financial, or PFG Best, as it was rebranded.

Fun Fact, as an aside: in the months just after MF Global failed, US customers took more than $10 million out of the US Futures Markets. That sounds like a mind-bogglingly large figure, but at the time, it was only one-fifteenth of the total ledger balance of what was then around $153 million in US Customer funds.

So that’s some good news. Here is some news that might be considered less-good:

Between 2003 and 2013, the concentration of US Customer Seg at the top end of the spectrum has grown. In 2003, the top-5 FCMs had 41.7% of the total reported Customer Seg, and the top-10 had 65% of the Seg Funds reported. By 2013, the top-5 reported 49.6% and the top-10 had 75% of the US Customer Seg balance. That’s right, as of December 2013, more than thee quarters of all the US Customer Seg funds were held at just 10 FCMs.

I’ll leave it to others to decide whether that is a sign of health in the US futures industry. But here are some figures that I, and many others, consider definitely bad news.

In 2003, 177 FCMs submitted FOCUS reports or FCM 1FRs to CFTC. In 2013 only 100 did.
In 2003, 102 FCMs reported that they held Customer Seg funds to CFTC. As of December 2013, just 69 FCMs reported that they are clearing Customer Seg.

So in ten years, while the amount of Customer Seg more than doubled, we’ve seen a decrease of roughly 30% in the number of FCMs, and in the number of FCMs who clear customer business. In oder to promote a healthy, robust, vibrant US capital market, that is a trend that I think we should all commit ourselves to reversing.

With that said, with those figures fresh in your mind, let’s get started with today’s program. First up is the roundtable on SEFs, so I’ll turn the dais over to a man I greatly admire, John McPartland from the Chicago Fed.

If you were at the event, drop a comment in below and let me know what you thought of it, or e-mail me at my G-Mail address and say hello. (You can find the G-Mail address on my Twitter profile, my LinkedIn profile, the Needham Consulting Facebook Page, or my Google+ profile page.


Get every new post delivered to your Inbox.

Join 1,490 other followers