A new report published by derivatives research firm Acuiti and the CME Group has found that 67% of brokers in Europe see futures and options as a “very important” part of their retail trading strategy for the next two years.
Acuiti surveyed 41 brokers and neobanks across the continent for the report, which looks at what is driving uptake for exchange-traded derivatives (ETDs).
What is striking is how many firms see compliance as a huge burden to their operations today. Almost 80% of firms listed compliance as one of the top three challenges they face today.
No other option in the questionnaire came close to this level. Moreover, the third most chosen answer to this question was “rising operational costs,” which is presumably itself a knock-on effect of more regulation.
To top that off, 62% of firms said they are “very concerned” that more regulation will negatively impact CFDs, with a further 30% replying that they are “somewhat concerned”.
Demand driving change
Interestingly, regulation does not appear to be the driving factor behind brokers’ decision to consider adding ETDs.
More than half of firms say that they see client demand for ETDs as “strong and growing”. The biggest factor driving the addition of options and futures was also client demand.
However, of the brokers surveyed, only 21% said they will add options and futures soon, with another 26% saying they are considering offering them.
The biggest reasons for not adding the products appear to be a mix of client knowledge and operational complexity.
With regard to options, for example, building a simple user interface is quite difficult. For futures, clients can often get confused about the basis, which is part of the reason exchanges are launching perpetual contracts.
Many brokers are also not set up to add the products. For example, a firm offering MetaTrader can offer products like futures or cash equities, but the platform is not really designed for the product, making it feel clunky. Other proprietary platforms tend to be the same as they have nearly always been designed for CFD and spread bet trading.
