NIBA - Celebrating 35 Years

NIBA Journal

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

An Examination of CFTC Rule 1.71
Marketing
3 min read

An Examination of CFTC Rule 1.71

The Commodity Futures Trading Commission (CFTC) has proposed rule 1.71 that establishes conflicts of interest requirements for futures commission merchants (FCMs) and introducing brokers (IBs). The proposed rule is meant to deter non-research employees such as sales and trading personnel from influencing the content of research reports prepared by research analysts employed at the same company or an affiliate. The CFTC had a comment period which closed January 18th. There is no timeline for when a final rule may be published. The proposed rule was brought on by Title VII of the Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank Act), which directs FCMs and IBs to implement informational partitions between those researching or analyzing prices or markets for commodities and those involved in trading or clearing activities. Specifically, the rule in pertinent part requires: Persons researching or analyzing the price or market for any commodity are separated by...

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NFA | Notice: I-11-07
2 min read

NFA | Notice: I-11-07

Recent Changes to NFA's Self-Examination Questionnaire and Interpretive Notice 9020 entitled Compliance Rules 2-9, 2-36 and 2-39: Self-Audit Questionnaires April 12, 2011 NFA requires all Members to review the Self-Examination Questionnaire on a yearly basis in order to help Members identify and correct any supervisory deficiencies. As originally drafted, the Questionnaire contained a general section for all Members as well as a supplemental section specifically tailored for FCMs, IBs, CPOs and CTAs. NFA recently added a section to the Questionnaire specifically tailored to an FDM's operations (e.g., trading systems, disclosure obligations and trading standards) and updated other Questionnaire sections to assist other Members engaging in forex transactions in reviewing their forex operations. In addition to these changes, NFA modified the Questionnaire as follows: Changed the format from a checklist to a questionnaire in order to generate a "yes" or "no" response from the Member completing the questionnaire; Identified CFTC and/or...

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Five Quick Social Media Tips for IBs and CTAs
Marketing
4 min read

Five Quick Social Media Tips for IBs and CTAs

Last week, Phil and I spoke at the National Introducing Brokers Association (NIBA) New York conference. We discussed the topic of lead generation and how IBs (introducing brokers) can use social media to grow their businesses. After the session, we had opportunity to talk to a number of IBs and CTAs (commodity trading advisors) about the challenges they encounter in building their businesses. Most rely heavily on cold calling, seminars, and referrals to generate new business. The common complaint we heard over and over is that these IBs and CTAs lack the time and resources to dedicate to building a presence online. As we looked at several of their websites and LinkedIn profiles, we discovered some consistent issues: Their websites often include a lot of educational content, but there is no lead capture mechanism to identify prospects who are using that content. The only lead capture form on most sites...

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Dangers of Position Limits and Overreaching Regulation
Marketing
4 min read

Dangers of Position Limits and Overreaching Regulation

Dangers of Position Limits and Overreaching Regulation William Purpura, Managing Director | Great Lakes Global Limited The CFTC’s proposed position limits along with the complexity and immensity of Dodd-Frank has already caused market participants to take flight from the US markets to OTC and foreign markets which have less onerous regulation. The Commission has often dismissed the probability of regulatory arbitrage as paranoia. One only need to look at the impressive growth in the Brent crude oil contract traded in London in the wake of jawboning about position limits in the US that would affect the WTI crude contract on NYMEX. Chairman Gensler’s view is that there should be “international harmonization” among global regulators to alleviate the threat. This is a wrong approach. The US government, through the CFTC and other agencies has been pressuring other regulators to fall in line, and while there may be some lip service about...

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Chairman's Message | May 2011
Member Announcements
2 min read

Chairman's Message | May 2011

On Monday, April 18, I met with Chairman Gensler and members of his staff in the Washington, DC offices of the CFTC. I brought your questions and suggestions, along with other topics to the meeting. Among the issues we discussed were: The impact of the inclusion of IBs in various CFTC rules currently being written in response to the Dodd-Frank Act. The effect of the proposal of CFTC Rule 1.71 - separation of the research department from other functions within the office - upon the IB community. ETF and swap trading among IBs. Position limit regulation. Results of the 2-year investigation of possible manipulation in the Comex silver market. Chairman Gensler commented that our issues were well presented, but he did not respond definitively regarding any of the topics or questions we raised. Along with two senior members of the staff, he listened to our concerns and said that they...

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Traders Network | NIBA Focus on the Membership, May 2011
Focus on the Membership
3 min read

Traders Network | NIBA Focus on the Membership, May 2011

About the Firm: How did you get started? Do you provide additional services besides brokerage? Joe Kellogg, my partner, and I met working for a brokerage firm in southern California. Joe moved to Colorado to start Traders Network in 1987. I followed in 1989, after a short sojourn to Eugene, OR to help found a research firm which is now known as Moore Research Center. Along with our broker-assisted and electronic trading platforms, we offer auto-traded swing trading programs. Our advisory newsletter, Trader Market Views Swing Trading Report, in its 24th year of publication is one of our several educational products. What are the biggest challenges your clients face today, and how do you help them? The biggest challenges facing our customers are risk management and trading discipline. Most of our clients are speculators which have never found a trading approach that works for them, or they lack the discipline...

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NIBA Chairman's Letter: What Would You Like to Say to the CFTC?
2 min read

NIBA Chairman's Letter: What Would You Like to Say to the CFTC?

On April 18th, I will be visiting the Commission in Washington D.C. with one purpose - to bring the opinions of NIBA's members directly to the CFTC Commissioners. CFTC's response to the Dodd-Frank legislation has resulted in over 30 proposed regulations so far. While some of those will primarily effect derivatives trading, swaps and forex, several proposals also result in increased recordkeeping and reporting for all NFA registrants. Proposals such as those which would regulate conflicts of interest in the research and analysis areas of your office have the potential to affect all of our members. The NIBA has been steadfast in opposing new rules and changes that increase paperwork, cause repetitive reporting and ultimately, likely raise fees for our members. I urge you to visit the CFTC's website and read the list of proposals the Commission posted there - www.cftc.gov/LawRegulation/DoddFrankAct. I also urge you to keep up with Chairman...

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Legal Corner: Keeping Up With the Times
3 min read

Legal Corner: Keeping Up With the Times

As we all settle into a new year, the growth of your business is your obvious goal. However, the matrix of industry rules, regulations and compliance procedures continues to evolve. So keeping up with the times, and remaining aware and diligent of your regulatory and business obligations, is not be overlooked. Note that at the April 20, NIBA Conference in New York, I will be moderating a Panel of attorneys and industry professionals for an interactive panel discussion entitled Rules, Regulations and Your Revenue. The Conference also includes several other Panels and presents a wonderful opportunity for NIBA members to ask questions to help them "keep up with the times" while growing their businesses. Social Networking One topic we will discuss is the use of Social Networking sites in the role of business development. While sites such as LinkedIn, FaceBook and others can be useful to introduce new opportunities which...

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Commodity ETFs vs. Futures – An Overview of the Growing Impact of ETFs on the Investor
Marketing
3 min read

Commodity ETFs vs. Futures – An Overview of the Growing Impact of ETFs on the Investor

Opinion by Rich Strait Today ETFs provide the smaller retail investor an ever-growing variety of products that offers indirect access to the futures markets via these securitized instruments. Transactions are done simply through the investor's retail securities account, bypassing the requirement of maintaining a regulated futures account with an FCM. However, this comes at a relatively high cost to the investor. Fees, tax treatment and inefficient futures hedging practices hat may cause price correlation slippage between the ETF price and that of the underlying commodity must all be considered. Despite these pricing realities, the meteoric growth of ETFs has dramatically altered market fundamentals. ETF investors are mostly holding long positions, so large pools of non-working underlying inventories of allocated physical commodities or exchange futures (or a combination) are created. This buying and holding drives prices artificially higher while increasing margin requirements on the underlying futures contracts. The results can have...

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Managed Futures to Grow to $3 Trillion in Assets Under Management: New Challenges and Opportunities for Managed Futures IBs
Marketing
7 min read

Managed Futures to Grow to $3 Trillion in Assets Under Management: New Challenges and Opportunities for Managed Futures IBs

The good news for Introducing Brokers (IBs) offering direct managed futures accounts might be found in industry growth projections. Bold industry discussions are eyeing a target of $3 trillion in managed futures assets under management. That’s a long way from the current level of $267 billion, according to the latest 4th quarter estimate from Barclay Hedge. If this were to come even close to true, the resulting explosive growth would not only be historic in the cloistered futures and options industry, but more significantly it would represent a monumental shift in the core investing landscape. While this may sound a little optimistic if not wildly aggressive, this milestone just might be realistic when some core analysis is applied. There will be introducing brokers (IBs) that succeed in this new environment – but also many that fail to adapt to this new world. Yes, with managed futures growth is a double...

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