Industry Snapshot: Introducing Broker Business 2015

During the spring of 2015, a survey was completed  by NFA-registered Introducing Brokers (IBs). The survey contained questions ranging from operational preferences to the lingering effects of the failures of MF Global, Inc. (MFG) in the fall of 2011, and that of Peregrine Financial Group, Inc. (PFG) in summer, 2012. Results of the survey, sponsored by the CME Group, are the basis for The Complete IB Handbook, written by Melinda Schramm, President of MHS Capital Resource, Inc., and Founder & Chairman of the NIBA.

Survey answers indicate the important role an IB plays in the futures and options industry, as well as the importance of the CME Group to the IB business.Included here are six responses — a small sample of the 53 questions on the 2015 survey. The answers indicate the important role an IB plays in the futures and options industry, as well as the importance of the CME Group to the IB business.

The Complete IB Handbook, 6th Edition, will be available in late September, 2015 at cmegroup.com/ibhandbook and at theniba.com. For additional information, please contact Melinda Schramm, melinda@futuresrep.com or Barbara Schmdit-Bailey,  barbara.schmidt-bailey@cmegroup.com.

Participants

As in surveys past, the majority of IBs responding to the 2015 survey are registered as Guaranteed (GIB) as opposed to Independent (IIB). While the percentages were slightly down from 2014, 63% of survey respondents are GIBs.

Sixteen percent of survey participants have been registered as an IB for 1-5 years, 28% for 5-10 years and 12% of the respondent IBs have been registered for more than 30 years. Less than 1% have been registered less than 1 year.

Also similar to previous years, Commodity Trading Advisor (CTA) was most often the other license held for those IBs which had additional professional registrations — about 60%. Finra/SEC licensing was reported at about 30% this year, up slightly from 2014.

Graphic 1: Length of IB Registration

Graphics 2: IBs with Multiple Registrations

Markets & Clients

Of the IBs who specialize in a particular market type, agricultural futures were the overwhelming choice at 70%. Energy markets came in at 15%; equities and interest rates both scored 13%.

Graphic 3: IB Market Type Specialization

Graphic 4: Percentage of Firm Order Volume

Nearly 83% of all orders transacted for IBs customers are handled electronically with only about 5% being done by open outcry. These numbers reflect the changes floor operations and marketplaces have undergone as a result of technology and other expansions during the past few years.

Introducing Brokers customer orders are most likely to be executed on one of the CME Group exchanges. CME, 65 CBOT, and NYMEX orders account for about 86% of the 60 business of a typical IB - up from 83% in 2014.

Graphic 5: Percentage of Business by Exchange

Post MF Global & Peregrine Financial Group

Although nearly 60% responded the IB revenues were still being affected by the collapses and continued fall-out from the failures of MFG & PFG, that number is significantly lower than both 2012 and 2014 when we surveyed. Even IBs who did not do business with either firm, reported during those years they had lost customers and income. They are recovering in 2015.

Graphic 6: IBs Who Still Feel the Effect of MF Global and PFG Failures

About CME Group

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