NIBA Journal

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

June 14, 2010

Times Like These Try a Broker's Soul: NIBA President's Message June 2010

The month of May was a treacherous one; continuing concerns over sovereign debt, the stability of the Euro, North Korean saber rattling, and the sustainability of the economic recovery - not to mention the frightening "Flash Crash" of May 6th caused a very volatile market environment. For half the month I was on vacation in Europe. While on this “vacation”, I found myself monitoring the markets nearly 7/24 on my Blackberry and running up a $1,800 cell phone bill. Such is the life of a broker in the 21st century! It is times like these that try a broker’s soul. Risk, drawdowns, and of course, client relations and retention are a natural part of every broker's job. These elements and a month such as we just experienced are also a test of fire, a test from which many brokers never recover. It is the management of these factors that determines...

NIBA Members Submit Your Press Releases

As a new NIBA member benefit, we welcome press releases from all member IBs, CTAs, member FCMs, Exchanges and Service Providers. Member Announcements will be featured and archived in the NIBA Journal section of the website and it's own NIBA Member Announcements category. NIBA Member Announcements are also included in the NIBA Journal eNewsletter sent to over 4000 recipients. Submitting Your Announcement Submit your press release by sending a Word document to theniba@gate39media.com. Press releases will generally be posted within 5 days of receipt. A link to your website and logo is also allowed. Logo must be sent in JPG, GIF or PNG format. There is a limit of 2 press releases per month. The NIBA reserves the right to refuse or remove any announcement at its discretion. Announcements should be newsworthy and not of a pure promotional nature. This benefit is available to all NIBA Members. Many news sites...

Electronic Execution Risks

When you opened your futures trading account, when you took delivery of your electronic execution software, signed up for internet service, did you read all the contracts you signed? Successful trading is about the creation of profitable strategies that minimize the risk of loss. Very few of us read the contracts to which we agree. Computers and click through contracts have become so integrated into our lives, and they work so well, we do not read them. We forget about the risk of failure or malfunction associated with computers. Under the open outcry method of order execution we used a telephone to call orders into the market. Responsibilities and risk of loss were easily and clearly defined. Although not easily assigned. As volumes and volatility increase, the risk of loss increased. Firms established methods to fix the risk, recording devices were installed on all order phone lines, some firms had...

Due Diligence Guide to Cash Management

Few aspects of hedge fund due diligence deserve more attention – and receive less – than cash management. Historically, fund managers and investors have focused their evaluations on other, more glamorous parts of a fund’s assets and operation. For some funds, cash balances often represent a substantial percentage of the fund’s total assets. For others, the cash component may be a less significant percentage of the total. In every case, however, it is imperative that fund managers – and their investors – know at all times where that money is being held, the safeguards in place for those cash balances and the investment returns those balances are generating. Making certain that a fund’s unencumbered cash assets are kept as safe and secure as possible should be among a fund manager’s most important responsibilities. This has been underscored by the separate pronouncements in early 2009 by three highly respected and objective...

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Net Capital and Reporting Requirements for IIBs

May 24, 2010

4 min read

Net Capital and Reporting Requirements for IIBs

Independent Introducing Broker Net Capital Requirements Independent Introducing Brokers ("IIB") or non-guaranteed Introducing Brokers have a capital requirement mandated by the NFA Rules and CFTC Regulations. The following will discuss such capital requirements and reporting requirements of an IIB. Required Financial Statements IIBs are required to maintain an accounting system which records all of the IIB's financial activity. The financial statements created from the accounting system must be prepared following U.S generally accepted accounting principles ("GAAP"), on an accrual basis, and kept current. Net Capital Net Capital is generally defined as Assets less Liabilities. However, NFA financial requirements and CFTC Regulation 1.17 requirements are much more restrictive than GAAP. CFTC Reg. 17 specifically identifies Net Capital as Current Assets less Liabilities. Moreover, the CFTC further defines (much more restrictive) what is considered a Current Asset towards the IIBs Net Capital. To calculate Net Capital, per CFTC Reg. 1.17, only Current...

The Chairman's Letter - January 2010

In the coming year, the NIBA is adding two more ways to become a member. First, we are actively expanding our membership to include CTAs. Originally organized as an association for Introducing Brokers, NIBA has been welcoming CTAs to share information and to membership meeting for several years. In 2010, CTAs are invited to join the NIBA with full membership privileges including serving on the Board of Directors. Fees for both IB & CTA members are $150.00 per year. Second, NIBA is also accepting membership of individuals registered in the futures and/or equities industry (APs/RRs). Individuals who hold a Series 3, 7 or 63 license AND whose sponsoring firm is NOT primarily registered as an IB or CTA, may join the NIBA for $75.00 per year. John Jensen and Ralph Preston have begun the 2010 membership campaign. You can contact them directly at hwfi@pacbell.net. The NIBA Board of Directors also...

How To Make the Most Out of a Conference

16 years ago, Horizon Cash Management asked a host of industry professionals to contribute their best tips for making the most of a conference. Remarkably, many of those suggestions are as timely and appropriate today as they were when first submitted. Among those helpful hints: "Set definite goals for what you expect to accomplish. Make appointments in advance. Bring lots of business cards and disclosure documents. Focus on making friends, not just business contacts. Talk to your competitors: you might learn something important. Eat and drink sensibly: party some other time." --Jane Martin, MFA "Visit the exhibit hall early: vendors often run out of the best stuff. Don't bother to take promotional literature: people appreciate not having to travel with this extra bulk. Think of having business cards with your picture on them: it might help others remember you after three mind-numbing days of shaking hands and smiling." --Frank Smith,...

Networking Legalities: Avoiding Legal Pitfalls

With the NIBA Sales & Marketing Seminar set for October 20, 2009, followed the next day by the CTA Expo, our Members are presented with wonderful opportunities to meet other industry participants, such as CTAs and Capital Raisers, and to explore new business opportunities. But, are there any legal pitfalls to avoid when discussing or touting your business models? While we must continuously navigate through the regulatory structure controlling registration requirements, types and methods of permissible solicitations of investors and how properly to configure revenue sharing arrangements, typically at professional conferences of this sort these legal issues are premature. The audience at these events will consist of industry professionals and presumably not the general public searching for investment opportunities. If appropriate to your business, you may consider having available copies of your disclosure document or private placement memorandum to share if circumstances so dictate. Otherwise, enjoy the conferences and be...

CME Group Now Offering Free, Independent Market Analysis to NIBA and Their Customers

As a futures professional, you are always focused on getting new clients, keeping the ones you have, and providing solid, up-to-date information that your clients will value. To help you do this, CME Group now offers free independent market analysis in the Education section of our website at: http://www.cmegroup.com/education/market-commentary/Commodities/ Intra-day Market Analysis: CME Group's market analysis covers Grains, Currencies, Precious Metals and Energies and also provides technical insights into Equity Indexes. And it's provided by top industry analysts commenting on the most popular markets up to three times a day. Special Reports and Market Updates: You'll also find in-depth analysis of breaking news in special reports from key research firms from around the world. In many cases these reports will come at critical points in the market, when you can use their insight and information the most. Impartial Third-party Contributors: All commentary is provided firms whose primary business is research...

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