FCMs try to ‘off-board’ credit and commodity funds

Four banks have shut down their swaps clearing business in the past two years, as they flee the associated capital burden. But there are other ways to limit the cost of the business – by getting rid of unwanted clients, for example. Credit and commodities traders are in the firing line

The model breaks down: some say traditional client clearing is on its last legs. Illo: Mark Long

Some call it off-boarding. Others speak bluntly of ‘firing' unprofitable clients. The more diplomatic refer to "the new economics of clearing".

It all means the same thing: faced with higher regulatory capital requirements, futures commission merchants (FCMs) are hiking fees and giving clients the choice of paying up or moving on.

"Raising fees is a soft way to off-board clients," says the head of clearing at a bank in New York. "If an FCM feels a client relationship is no longer profitable, the