Commodity and Currency Futures Markets: Can They Come Back, Bigger Than Ever?
Report Summary
Commodity and Currency Futures Markets: Can They Come Back, Bigger Than Ever?
A serious image problem is challenging the futures industry, but commodity and currency futures volumes will increase in uncertain markets.
Boston, August 28, 2012 – A new report from Aite Group examines the rising popularity of commodity and currency investing as alternative asset classes for futures market participants. It delves into the causes of increasing volatility for commodity and currency markets, considers the ongoing viability of the futures market in light of recent scandals, and addresses the potential impact of pending regulation on the volume of these effective hedging instruments.
Against the backdrop of investor deleveraging and futures industry scandal, recent futures volume growth, most notably in commodity and currency futures, is remarkable. The deleveraging effect caused by the global credit crisis of 2008 and 2009 and the European sovereign debt crisis of 2010 through 2012 has led to a sharp decline in trading, and the 2011 MF Global and 2012 Peregrine Financial scandals have presented the U.S. futures industry with a serious image problem. As a result, a major U.S. Commodity Futures Trading Commission revamp of regulatory oversight for customer fund segregation is now a foregone conclusion, and a government-sponsored futures insurance fund that will protect clients’ deposits may be inevitable.
“The more uncertain the world, the more likely that commodity and currency futures volumes will grow,” says Howard Tai, senior analyst with Aite Group and author of this report. “The markets will be challenged by increasing regulation from the Dodd-Frank Act in the United States and EMIR in Europe. Industry participants that adapt quickly and efficiently will surely prosper."
This 29-page Impact Note contains 17 figures and two tables. Clients of Aite Group’s Institutional Securities & Investments service can download the report.