Futures Commission Merchants Concentration and Commodity Futures Market Microstructure: Empirical Evidence

ABSTRACT This study examines market concentration within the client clearing services from 2008 to 2025. Our analysis reveals a significant structural shift beginning mid‐2014: large bank‐affiliated Futures Commission Merchants (FCMs) have consolidated their dominance as smaller entities exit the industry, while concentration has also risen among the remaining non‐bank FCMs. We investigate how these structural changes affect market dynamics, price discovery, and trader behavior across commodity futures markets. While our findings indicate no systematic market‐wide effects, we document significant impacts in specific markets, particularly regarding small investor participation. Several commodity futures markets exhibit reduced small trader activity when concentration levels are higher, especially during periods of elevated volatility.