NIBA Journal

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

August 11, 2016

August's Chairman Letter

Teamwork: Cooperative or coordinated effort on the part of a group of persons acting together in the interests of a common cause. Dictionary.com Teamwork is one of the great strengths of the NIBA. For 25 years, the Association’s team members have worked together to further the interests of the professional derivatives community -- to keep it strong, to make it’s voice heard and, at times, to even ensure its relevancy. Much of the success of the NIBA is due to the contributions of its team members. From the very first board meeting in May 1991, the CME Group has been one of NIBA’s most valuable team members. With their help and that of the Chicago Board of Trade, New York Mercantile Exchange and Kansas City Board of Trade - now all part of the CME Group, the NIBA presented our first member meeting. This September 14, the CME Group will...

Life of a Brokerage Firm - Part 2

Ron Grossman and Ryan Griffeth conducted a series of interviews discussing the various stages of a brokerage firm. Interviews are presented here in Q&A form. There are a number of participants in this article series from brokerage firms, new individual brokers and industry professionals contributing their unique opinion and expertise. <Brokerage Firm> Scott Peterson, Stewart-Peterson How did you get started in the Commodity industry? At a previous employer, while writing market commentary and advice for a magazine, it occurred to me that many farmers and ranchers needed more than published comments. (This was before internet provided information at our fingertips.) They needed one-on-one advice that is specific to their situation. Can describe the type of business you specialize in?   We specialize in hedging. We enjoy helping our clients provide time for them to do what they love to do – producing commodities and products. Helping our clients with their...

By NIBARead article

The CFTC Proposes Significant Relief For Non-U.S. Market Participants

August 9, 2016

3 min read

The CFTC Proposes Significant Relief For Non-U.S. Market Participants

The U.S. Commodity Futures Trading Commission ("CFTC"), which regulates commodity interest transactions such as swaps and futures contracts, has requested comments from industry market participants on its proposed amendments to CFTC Rule 3.10. CFTC Rule 3.10 sets forth the exemptions that may apply to non-U.S. market participants, and the rule impacts brokers, advisers and fund operators. The CFTC’s stated goal, subject to receiving comments, is to expand the exemptions from registration for non-U.S. firms engaged in commodity interest transactions in the U.S. on behalf of customers located outside of the U.S. The proposal also seeks to simplify the exemptions’ requirements. For non-U.S. firms, this could be a major development if ultimately promulgated by the CFTC, in that the amendments would significantly broaden the exemptions under CFTC Rule 3.10. In this Client Alert, we examine the proposed amendments to CFTC Rule 3.10 and the exemptions. In light of the proposal, a...

Life of a Brokerage Firm - Part 1

Life of a Brokerage Firm <Part One> Ron Grossman and Ryan Griffeth conducted as series of interviews discussing the various stages of a brokerage firm. Interviews are presented here in Q&A form. There are a number of participants in this article series from brokerage firms, new individual brokers and industry professionals contributing their unique opinion and expertise. <Industry Professional> James Bibbings, Turnkey Trading Partners What is the background of new IBs or brokers entering the business today? I began my career in this industry when I moved to Chicago to work for NFA in 2005. At that time the CME and CBOT were still separate and both had active (albeit slowing) floor businesses. IBs were being created by guys who could see the end of floor brokerage was near. They were coming “upstairs” to broker and to do so needed to set up CFTC/NFA member IBs. From what I recall...

Housekeeping, Reminders, and Updates

COMMODITY FUTURES TRADING COMMISSION Guidance on Clearinghouse Recovery and Wind-Down Plans On July 21, 2016, the CFTC announced the publication of guidance to clearinghouses on recovery plans and wind-down plans, CFTC Letter No. 16-61 (“Letter 16-61”). The subject of Letter 16-61 is recovery plans and wind-down plans maintained by derivatives clearing organizations (“DCOs”) and tools for the recovery and orderly wind-down of DCOs. Pursuant to CFTC Regulation 39.39(b), DCOs are required to adopt and maintain recovery and wind-down plans. The purpose of the plans are to detail how the DCO intends to maintain a viable plan for: the recovery or orderly wind-down necessitated by uncovered credit losses or liquidity shortfalls; and for recovery or orderly wind-down necessitated by general business, operational or other risks that are a continued threat to the company. As stated by the CFTC in Press Release PR7409-16, the development of the recovery plan (“Recovery Plan”) and/or...

Customer Due Diligence

The Financial Crimes Enforcement Network issued a final rule, to clarify and strengthen customer due diligence requirements, which became effective on July 11, 2016 for which covered financial institutions must comply with by May 11, 2018. Covered financial institutions include banks, brokers or dealers in securities, mutual funds, and futures commission merchants and introducing brokers in commodities. The rules contain explicit customer due diligence requirements and include a new requirement to identify and verify the identity of beneficial owners of legal entity customers, subject to certain exclusions. Covered financial institutions are not presently required to know the identity of the individuals who own or control their legal entity customers (also known as beneficial owners). This enables criminals and others looking to hide ill-gotten proceeds to access the financial system anonymously. The beneficial ownership requirement addresses this weakness and provides information that will assist law enforcement in financial investigations, help prevent...

Industry Education Meeting

On July 19, the NIBA was invited to meet with representatives of the CFTC to discuss the status of customer education in the industry. NFA hosted the meeting in its Chicago office. Individuals from the NFA, ICE CME Group and CMC were also invited to meet the five staff members visiting from the CFTC Washington Office of Customer Education & Outreach (OCEO). The original purpose of the gathering was to share information on how various industry groups educate the customer against fraudulent practices, with a primary emphasis on how we make use of social media. The discussion eventually centered on how our groups communicate to our professional members using our websites and newsletters. I believe the CFTC learned that industry groups communicate often and well with our members. Generally, NIBA and CMC do not communicate through group-focused media directly with customers. CME Group, ICE and NFA construct websites with the...

Keep ORS Records Up-To-Date

NFA's Online Registration System (ORS) is the web-based CFTC registration and NFA membership application system. In order to ensure firms and individuals receive NFA communication, it is important that all ORS records are kept current and accurate, including addresses and email addresses. NFA initially collects registration information for firms using the Form 7-R and for individuals using the Form 8-R in ORS. NFA Registration Rule 210 requires that firms keep the information entered in the Form 7-R and individuals keep the information entered in the Form 8-R up-to-date. In addition, NFA Registration Rule 213 requires that each registrant and affiliated principal, while registered or affiliated with a registrant and for two years after registration or affiliation is terminated, keep current the address on file in the Form 7-R or 8-R. To update information submitted in a Form 7-R or Form 8-R, the firm's designated Security Manager can authorize individuals to...

By NIBARead article

July 27, 2016

4 min read

Just Following Orders

There can be no doubt about the vast, if not monumental, effect that modern technology has brought to the futures broker industry. Processes that were once the purview of man-made machinations, are now fully automated by the gently humming, and beguilingly autonomous computer processors and omnipotent trading platforms. Calculations are being made, trades entered and exited at a speed that would make Doc Brown giddy. Yet for all of this precocious computing power, there are still some elements of our trade that we may, from time to time, ply by hand. Order tickets, and time stamps more specifically, remain one of the areas that may have a more quaint solution. So what is best for your business, and more importantly, what solutions make the best practice from a compliance perspective? The answer, as is often the case, is it depends. As it relates to order tickets it is important to...

Summary of the Managed Futures Panel 3rd Annual NIBA/ DePaul University Derivatives Briefing on July 14, 2016

A few months ago Tom Sandy (Rice Dairy), Jerry Nolan (County Cork) and I discussed some ideas for the topic of this panel. Tom is involved in operations, Jerry in marketing and I’m involved in research. The one overlapping component for all of us is compliance and operations. The topic of the panel discussed marketing managed futures from a compliance and operations perspective. This topic is probably a different perspective from marketing managed futures as you may frequently hear at events. A CTA may be successful at raising assets. However, if it wasn’t done properly, you may get a call from the regulators, lawyers or your internal compliance. It may cause investors to leave. If someone is doing due diligence on the manager, they may spot some of the compliance issues and say “thank you, but we are not interested” and they may not tell you why they were not...

By NIBARead article

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