Retreating FCMs spark systemic risk fears

Growing cleared swap volumes will have to be handled by a shrinking number of FCMs, following the exits of BNY Mellon and the Royal Bank of Scotland – a boost for the commercial prospects of the remaining players, but a red flag in terms of systemic risk. Joe Rennison reports

Ray Kahn, Barclays

The game of Jenga involves progressively weakening a previously solid structure. Players take it in turns to remove a block from the middle of a neatly stacked column, replacing it at the top so the increasingly precarious tower eventually falls. The loser is the player who removed the last block.

Something similar is now happening in the world of over-the-counter derivatives clearing, with BNY Mellon shutting its US business in December and Royal Bank of Scotland (RBS) announcing a decision to