FIA has published a white paper on the role of clearing firms in futures markets as a resource to help public sector stakeholders better understand how these important intermediaries support safe and efficient capital markets.
In futures markets, as in most financial markets, there are several types of intermediaries that provide customers with access to the markets and a range of services related to their trading activity. In futures markets, however, there is one type of intermediary that is especially important. This is the clearing firm, which functions as the intermediary between the customers and the exchanges and clearinghouses.
Clearing firms, which are known as futures commission merchants in the US and general clearing members in Europe, perform several critical functions in the trading and clearing lifecycle for the futures markets.
- First, they offer customers a central point of access to futures exchanges and clearinghouses around the world.
- Second, they maintain an array of checks and controls aimed at protecting both markets and customers.
- Third, they are responsible for collecting margin from their clients and guaranteeing their clients' obligations to the markets.
- Finally, they contribute significant financial resources to the default funds maintained by clearinghouses. These default funds serve to absorb losses from defaults and protect the stability of the futures markets.
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