Sell-side firms offering derivatives clearing services face both significant opportunities and risks during President Trump’s second administration, with volatility and deregulation expected to combine with geopolitical risk and increased global complexity, an Acuiti study has found.
The study, conducted in partnership with ION Markets, surveyed 59 senior executives from leading global Future Commission Merchants (FCMs). The resulting report – The Next Four Years: The Outlook for FCMs Under the Second Trump Administration – provides an analysis of how President Trump’s second term will shape industry dynamics, and the steps FCMs are taking to prepare.
The report examines key regulatory changes, the anticipated rise in market volatility, and evolving client appetites for trading in markets such as China and India under the new US administration. It also analyzes the key technology investment strategies that FCMs are deploying to optimize their operations over the next four years. These range from automation and front-to-back integration, to blockchain adoption and AI’s expanding role.
Key trends identified include:
- Positive outlook: A vast majority (86%) of respondents expect the new administration to benefit clearing activity, driven by deregulation and sustained market volatility.
- Regulatory shifts: While deregulation is seen as a tailwind, geopolitical tension and possible US restrictions on clearing outside national borders introduce new complexities.
- Competition: Over three quarters of FCMs anticipate increased competition amid evolving capital requirements.
- Technology investments: Automation, front-to-back integration, and post-trade processing top the list of IT priorities as firms ramp up capacity to handle higher trading volumes.
- New opportunities: Firms expect to take a more aggressive stance on digital assets. Most remain cautious on ESG and carbon trading amid the administration’s move away from climate-related initiatives.
The report provides an overview of how FCMs expect their businesses to perform over the next four years, and a deep dive into expectations of how the new administration will approach some of the key issues facing the market. It concludes by analyzing how firms are approaching technology investment.
“The headlines and news will generate uncertainty over the next few years, but the constants in business do not change. A sound process for identifying and assessing risk will be key. For FCMs to succeed in the long-term, a consistent investment strategy in technology and maintaining a long-term vision will be vital to positioning themselves for the future,” says Bruce Roberts, Cleared Derivatives, ION Markets.
“The next four years are likely to be defined by high volatility and high volumes,” says Ross Lancaster, Head of Research at Acuiti. “At the same time, economic policies in the US could lead to higher-for-longer interest rates, while President Trump’s approach to regulation could bring down capital costs and barriers to growth.
“These all provide positive tailwinds for the FCM business. However, uncertainty and volatility will also bring risk – both domestically and in terms of geopolitics for firms operating globally. This report finds FCMs investing in efficiency and automation to seize the opportunities and mitigate the risk that the next four years will bring.”
Click here to download the full report.
