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NIBA Journal

Insights, analysis, and updates from the National Introducing Brokers Association

MF Global Updates
5 min read

MFG Bankruptcy Highlights Regulatory Issues for Managed Futures Industry

The MF Global (MFG) bankruptcy has been a nightmare for managed futures customers, brokers and introducing brokers, SROs and the CFTC. The bad news keeps coming – in addition to the headaches the bankruptcy has caused the industry from an operational standpoint, we have now heard from MFG trustee James Giddens that there is the distinct possibility MFG customers will ultimately not be made whole. Regardless of whether customers are made whole, the MFG bankruptcy has highlighted important issues with respect to oversight of the industry. The three most important of these issues include (1) the design of the current SRO structure, (2) the fact that there is no SIPC-like insurance for margin in segregated accounts, and (3) the lack of resources for the CFTC. These three issues will be in sharp focus in 2012 and beyond, and it is unclear how and when Congress will act to address these...

By NIBARead article
MF Global Updates
2 min read

CME Group MF Global Update: Advocating on Behalf of Customers

For many in the agricultural community, the failure of MF Global shook the very foundation on which the hedging industry is built. Since the beginning of this unprecedented ordeal, the CME Group has advocated on behalf of our members and customers, and we will continue doing everything in our power to ensure that another failure at the firm level does not happen again. Most important to us is that all customers affected see their property returned -- as much as possible, as soon as possible. Our work with the Bankruptcy Trustee has already helped to accelerate that process. We successfully transferred 15,000 customer accounts and $1.45 billion in the week following the MF Global bankruptcy. We also provided a guarantee of $550 million to the trustee to speed the return of funds, and pledged an additional $50 million from CME Trust. After more than two months into the bankruptcy proceedings,...

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Member Announcements
2 min read

Chairman's Message | January 2012

Dear Members - With this issue, we are resuming our normal publication schedule of the NIBA Journal. The concerns surrounding the MF Global failure are far from over, and many NIBA members are still reeling from the abrupt transfer of their business and adjusting to new FCMs. NIBA will continue to fight for the rights of our members. During the first week of January, NIBA’s legal counsel called upon the MFG trustee to release the commission runs generated for October, 2011. We knew the runs were produced, but the trustee refused to distribute them. That caused reporting problems for many of our members. While the NFA has been somewhat flexible with regard to their requirements, filing accurate bankruptcy claims and federal taxes is difficult, if not impossible without these commission runs. Only three days after our demand, on January 6th, the trustee’s office agreed to our request. The procedure for...

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Member Announcements
2 min read

Membership Chairman Message

I'm sure that many of us in the futures industry are happy to see 2011 fade into the past. The MF Global failure and bankruptcy has caused much suffering and hardship for both brokers and clients alike. Unresolved issues surrounding the sovereign debt crisis and bank deleveraging along with and an increasing burdensome regulatory climate added to a challenging year. However, the new-year welcomes us with the same overhanging issues and specter of uncertainty and more challenging times ahead. It is at times such as this that the light shines bright on the benefits of your membership in the NIBA. The association took immediate action on behalf of the NIBA community in response to the MF Global situation. Our longtime legal advisors attended and participated in all court and trustee proceedings, we created a MF Global Update column on our website, and are working with other industry participants to work...

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Marketing
1 min read

NIBA Announces a New Service Provider Directory

The National Introducing Brokers Association has been the leading nexus between futures industry professionals since 1991. In keeping with its networking spirit the NIBA is excited to announce the new Service Provider/Vendor category of membership to encompass companies that supply products and services to our members. NIBA’s service and vendor providers understand the unique needs of futures professionals and can be found in the Association tab of the NIBA website under Service Providers. Here you will find a wealth of services that are tailored to your industry specific needs. In the directory you will find: Online Marketing Solutions Attorneys & Legal Counsel Lead Sources Accounting & Compliance Custodial Services Market & Data News Exclusive Discounts So whether you are looking to stay up to date on industry regulations, technology to help you grow your business, or niched oriented advice the NIBA Service Provider Directory is the one stop you need...

By NIBARead article
Marketing
3 min read

Measuring and Using Relative Strength

Relative Strength, sometimes called comparative Relative Strength, can measure the relationship between two securities, between a security and an index, or between two indexes. This does not refer to the popular indicator called Relative Strength Index. The RSI measures the performance of a security or index against itself by producing a normalized measurement of “up closes” versus “down closes” across a chosen time period. Comparative Relative Strength is used in futures markets in inter-market situations, say comparing European wheat prices to Chicago corn prices as a spread or a ratio. We also see intra-market calendar spreads, another form of measuring Relative Strength, used as common hedging and trading tools. A very useful way to apply RS is to compare a single security to an index by dividing the security price by the index level. This type of comparison then gives us an idea of the strength of that security compared...

By NIBARead article
Marketing
2 min read

ICE Futures Canada Launches New Canadian Grain Contracts on January 23

New Contracts Listed Reflect Market Participant Demand ICE Futures Canada will introduce three new futures and options contracts for durum wheat, milling wheat and barley January 23. The contracts are being launched following the end of the Canadian Wheat Board’s legal monopoly to market all wheat, durum wheat and barley grown in Western Canada and destined for human consumption or export. The new ICE contracts take advantage of the changed regulatory environment that allows these Western Canadian grains to be freely traded for the first time in nearly 70 years. Domestic and international market participants have expressed substantial demand for global benchmark futures contracts designed specifically for these products. The contracts are modeled on ICE Futures Canada's canola futures contract, which has annual trading volume in excess of 4 million contracts (80 million tonnes) and is familiar to Canadian farmers, merchants and processors, as well as the international trading community....

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MF Global Updates
2 min read

CFTC and MF Global Trustee: Firm Assets to Reduce Customer Seg Shortfall

The MF Global trustee, James Giddens, estimates a $1.2B shortfall in domestic customer segregated funds, and a further shortfall of $800M of foreign secured funds exists unless and until foreign jurisdictions allow that money to be returned by foreign MF Global affiliates to the US broker. However, the CFTC and Giddens take the position that the US broker’s proprietary firm assets will first go toward reducing any such shortfalls before any amount would be paid to creditors. Assuming the bankruptcy judge accepts this position, a key question would then be just how much firm assets there are. The US broker reportedly maintained about $1B of regulatory capital not long before the bankruptcy proceeding, but Giddens’ attorneys have stated that they currently control just $200M of firm assets. News reports indicate that MF Global worked to sell a large amount of securities in the week before the bankruptcy filing, and it...

By NIBARead article
MF Global Updates
5 min read

MF Global Bankruptcy – Request for Release of IB Commission Runs

On behalf of NIBA Members, this letter was delivered to MF Global courtroom and trustees by NIBA attorneys on Jan. 4, 2012. A transcript of the letter is below. View the Original Document as Submitted to the MF Global Trustee (PDF) Dear Mr. Giddens: I write on behalf of my client, the National Introducing Brokers Association (NIBA). The NIBA is a membership organization which has represented the interests of Introducing Brokers (IBs), Commodity Trading Advisors (CTAs) and other registered futures industry professionals for over 20 years. Many NIBA members cleared customer’s transactions through MF Global (MFG), and earned commissions as a result. The commission amounts earned were tracked on a daily basis by MFG on documents known as ‘commission runs.’ These commission runs have always been routinely provided to IBs on a monthly basis as standard business records. We know that the commission runs already exist, so their production would...

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MF Global Updates
1 min read

IIBs: MF Global Reporting for Net Capital

Discussions with the NFA regarding accounting requirements and concessions in light of the MF Global debacle.  Even though these may change, this is what is recommended up to this point. Receivables from MFG are to remain non-current for net capital Broker commissions remain a liability, a reduction of net capital As long as both parties are in agreement, the MFG broker commissions due can be added back in for the net capital computation. Information provided courtesy of Michael Coglianese CPA, P.C. www.cogcapa.com

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