Commercial bank participation in the futures markets has been limited. One reason for this is the accounting procedures used to recognize gains and losses from futures trading. These accounting procedures tend to show volatile fluctuations in income for those banks active in the futures markets.

Question

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Commercial banks have traditionally been cautious about participating extensively in futures markets due to the accounting practices for recognizing gains and losses from futures trading, which can lead to significant volatility in reported income. This volatility is often viewed unfavorably by investors and regulators, making banks hesitant to engage heavily in these markets.

Commercial Bank Participation in the Futures Markets Has Been Limited