NIBA Journal

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

October 11, 2024

Recent CFTC Order and Dissenting Statement

Contributed by: Braden Perry, KennyHertz Perry, LLC The recent CFTC Order (Release Number 8972-24) and the Dissenting Statement by Commissioner Mersinger raise significant questions about how the Commission interprets the rules regarding offline communications and recordkeeping, especially under Regulation 1.35. This is an important discussion for firms in the commodity trading realm, including all NIBA members, as it directly impacts compliance procedures and communication methods. Commissioner Mersinger’s statement brings to light a critical issue: the challenge of aligning modern communication methods with existing recordkeeping requirements. Her dissent suggests that the CFTC’s current approach to recordkeeping may lack flexibility and a clear understanding of how communications in the commodities space differ from those in other financial markets. Possible Rule Clarifications and Future Adjustments: Clarifying Offline Communication Scope: The CFTC may need to define what constitutes “unapproved communication methods” more clearly and establish guidelines tailored to the nuances of commodity trading. This...

AI Innovation in Finance, Agriculture, and Marketing

Author: Shane Stiles, President, Gate 39 Media As a marketing and technology agency serving financial and agricultural clients, Gate 39 is witnessing firsthand the transformative impact of artificial intelligence (AI) across these sectors. AI analyzes vast amounts of data to predict commodity prices, uncover patterns, and consider market sentiment, weather, and disruptions to provide a comprehensive market view. AI in Financial Services In finance, AI is revolutionizing risk management, fraud detection, and customer service. Machine learning algorithms swiftly analyze transaction data to identify suspicious activities, safeguarding the financial system's integrity. AI-powered chatbots are transforming customer service by offering personalized advice and support, enhancing satisfaction, and building long-term client relationships. Early AI tools in finance focus on simple reporting, summarizing data into visuals or reports. However, accuracy remains a concern, as many predictive analytics tools are correct only 80-90% of the time. While this may not be sufficient for financial decisions...

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A Powerful New Challenge to Exchange Enforcement Actions

September 12, 2024

3 min read

A Powerful New Challenge to Exchange Enforcement Actions

Written by: Renato Mariotti and Maggie DePoy, Paul Hastings LLP Self-regulatory organizations, including futures exchanges, could face aggressive challenges in the wake of the SEC v. Jarkesy decision, which provides a new avenue to challenge regulatory enforcement matters. Its reach may extend beyond the SEC and other federal agencies to reach the NFA and even exchanges like CME and ICE that use administrative proceedings to police market participants. SEC v. Jarkesy In Jarkesy, the Supreme Court held that the Seventh Amendment entitles defendants accused of securities fraud the right to a jury trial. The Court reasoned that the Seventh Amendment applies to claims created by federal statute if they are “legal in nature,” as opposed to claims that seek equitable relief. Whether a claim is “legal in nature” depends on the cause of action and the relief sought. Under the Court’s two-part analysis, a securities fraud action is legal in...

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The Rising Tide of AI in Trade Surveillance: Adapting to an Increasingly Complex Regulatory Landscape and Solving for False Positives

August 23, 2024

4 min read

The Rising Tide of AI in Trade Surveillance: Adapting to an Increasingly Complex Regulatory Landscape and Solving for False Positives

Written by: Joe Schifano, Global Head of Regulatory Affairs at Eventus In recent years, the financial industry has faced mounting pressure from regulators, driving significant transformation within compliance functions. At the National Introducing Broker’s Association (NIBA) event at DePaul University on July 11th, I had the privilege of discussing the potential role of artificial intelligence (AI) in this space with Renato Mariotti and John Falck. The discussion highlighted the existing struggles compliance teams face, the increasing consideration of AI, how regulators are responding to greater use of AI in financial markets, and how companies like Eventus are already leveraging machine learning (ML) to enhance trade surveillance operations. My comments below are focused on trade surveillance. The Escalating Complexity of Trade Surveillance Trade surveillance has always been essential to maintaining compliance in financial markets, but its complexity has surged due to expanding regulatory frameworks and an increase in enforcement actions. Regulations...

AI and Email Marketing

Written by: Adam Aronoff, Founder & CEO, GlossyDev In the fast-paced digital era, staying ahead of the curve is paramount for successful businesses. The advent of Artificial Intelligence (AI) has sparked a revolution across industries, and email marketing is no exception. If you're ready to take your email campaigns to new heights, it's time to embrace the potential of AI. In this article, we'll walk you through the basics of AI and how you can leverage it to supercharge your email marketing strategies. Demystifying AI: A Quick Overview At its core, AI involves the creation of intelligent machines that can simulate human-like thinking and decision-making processes. In the context of email marketing, AI can analyze vast amounts of data, predict outcomes, and automate tasks that were once time-consuming and manual. Let's delve into some ways AI can transform your email campaigns: Personalized Content and Recommendations: AI algorithms can analyze user...

How To Build A Personal Brand (and Why You Should)

By, Jessica Darmoni, The Title Connection In a world where everyone has control of their own narrative, it is important to have a handle on what people think when they think of you. When there is a cool job opportunity and hiring managers are thinking of the right person to fill the role, how do you get your name in the hat? The answer is a mix of promoting your valued services, knowing the right people and maintaining a level of trust and transparency. This is part of your brand, something that you can create and evolve over time. Below are a few things you should think about when building a personal brand. Promoting Your Skills Self-promotion is a challenge for many individuals. One of the ways you can promote your skills is by doing the work no one wants to do. This is a way to make a presence,...

Marketing Strategy: Customer Segmentation

When I am talking with a friend or colleague who wants to kickstart their marketing efforts, my approach is “simpler is better”. It’s a lot like getting off the couch and back into the gym. Often the best way is to start simple and then build up from there. So, what I’d like to suggest to you as a NIBA member firm is to get started with SEGMENTATION of your contacts and customers. Imagine the difference in experience for a commodities trader who receives an email promoting opening an account. In the first email, it has a general header that seems to focus on equity indexes and has several forex symbols shown. In the second example, the entire header is showing commodities and the first content section is specifically about the advantages of trading commodities with your firm. Which email is more likely to get their attention? Which is more...

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Marketing and Promotional Material | Compliance Reminders from NFA

June 27, 2023

4 min read

Marketing and Promotional Material | Compliance Reminders from NFA

NFA Members are required to ensure that their customer solicitations and promotional materials are in compliance with NFA Compliance Rule 2-29. Subsection (a) applies to any type of communication with a customer, whether in person, by telephone, or by e-mail. In particular, it prohibits a Member from making any communication related to its commodity interest business that acts as a fraud or deceit, employs a high-pressure sales approach, or makes any statement that commodity interest trading is appropriate for all persons, and thus sets the basic foundation of appropriate communications with customers. When it comes to standardized promotional material directed to the general public, the possibilities for how information can be presented are wide-ranging, and so NFA's rules go a bit more in-depth. Subsection (b) sets forth specific prohibitions that may not be included in promotional material. NFA Members cannot misstate a fact or omit a fact if the omission...

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Practical Considerations in NFA’s Expanding Authority: Compliance Rule 2-51

June 20, 2023

6 min read

Practical Considerations in NFA’s Expanding Authority: Compliance Rule 2-51

Written by: Jeffry Henderson, Shareholder, Greenberg Traurig Douglas Arend, Of Counsel, Greenberg Traurig On March 29, 2023, National Futures Association (NFA) adopted Compliance Rule 2-51 (Rule 2-51), which became effective on May 31, 2023. Rule 2-51 expands the scope of NFA's authority to NFA members (Members) and associate members (Associates) engaging in spot or cash transactions in “digital asset commodities.” Rule 2-51 imposes anti-fraud, just and equitable principles of trade and supervisory requirements on Members and Associates transacting in such markets. Rule 2-51 also reconfirms NFA members' disclosure obligations in such markets as originally set forth in NFA’s May 2018 Interpretive Notice 9073 (IN 9073). As adopted, Rule 2-51 applies only to Members’ or Associates’ spot or cash market activities in two digital assets that have derivatives listed on exchanges regulated by Commodity Futures Trading Commission (CFTC): Bitcoin (BTC) and Ether (ETH). In its rule submission to CFTC, NFA noted...

Letter to Membership: Announcing the new NIBA "Toolbox"

To All Registered Derivatives Professionals: NIBA is excited to announce the formation of a new Working Group which will create and regularly update the NIBA Toolbox. NIBA’s Toolbox is a resource center which will be located on our website, theniba.com and provide direct links to information which helps Association Members be proactive on issues pertaining to all aspects of running their businesses. From the NIBA Toolbox, Association Members can access five categories of data: Marketing Regulation/Compliance Training Conferences/Webinars Other (such as technology, cybersecurity and more) Experts and industry professionals from each of these areas are providing everything from compliance updates to training programs and marketing ideas to NIBA Members through our new Toolbox. Other topic areas are likely to be added from time-to-time as needed and as the membership directs. NIBA’s Toolbox will be open on our website soon. We have formed a Working Group to reach-out for materials and...

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