The CFTC is not done writing rules mandated by the Dodd-Frank Bill. Customer protection is the focus and who can argue with that? However, it will have an impact on the way FCMs and IBs do business.
Currently the CFTC is considering a change in margining policy requirements. That means FCMs must have the ability to calculate accurate margin requirement intraday. The changes may cause intraday margining by certain participants and will increase capital requirements of FCMs.
The trickledown effect on the IB could require our retail clients to meet margin calls daily. The old way of receiving a check by mail will not be good enough for some FCMs. There will be a comment period notice in the Federal Register. Make sure you comment on your behalf directly or through the NIBA.
Another rule that will impact some IBs is the new taping requirement of all conversations that lead to a transaction. In our own office, we are struggling with the logistics of recording all conversation from office phone to cell phones, the ability to use the data once recorded and needless to say the cost and invasion of broker privacy.
As CFTC rules are made, it becomes the responsibility of the NFA to interpret and enforce these changes. The Board of Directors and staff are working hard to minimize the disruption of our business. It is an honor to represent the IB community on NFAs Board of Directors. Hope to see you at the NIBA Chicago Conference on September 18.
About the Author
Paul Georgy is President/CEO of Allendale, Inc., a GIB he co-founded in 1983 in McHenry, IL. Prior to the founding of the brokerage and advisory firm, he was a manager of a purebred cattle and farming operation. Paul served as both the President and Secretary of the NIBA from 1994-1999, and is currently the GIB representative to the NFA Board of Directors. You can reach Paul at pgeorgy@allendale-inc.com.