NIBA - Celebrating 35 Years

NIBA Journal

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

Housekeeping
3 min read

HOUSEKEEPING, REMINDERS AND UPDATES NOVEMBER 2015

COMMODITY FUTURES TRADING COMMISSION Form CPO-PQR and FORM CTA-PR Frequently Asked Questions On November 5, 2015, the Commodity Futures Trading Commission’s (“CFTC”) Division of Swap Dealers and Intermediary Oversight (“DSIO”) published a Frequently Asked Questions (“FAQs”) regarding Form CPO-PQR (“Form PQR”) and Form CTA-PR (“Form PR”). Generally, the Form PQR is a quarterly report filed by commodity pool operators (“CPOs”) and the Form PR is a quarterly report filed by commodity trading advisers (“CTAs”). The DSIO FAQs includes fifty-three (53) questions regarding Form PQR and twelve (12) questions pertaining to Form PR. The purpose of the FAQs was for the DSIO to address technical issues, filing requirements, reporting thresholds, the different schedules of the Form PQR, specific questions on the Form PR, and report deadlines. The complete FAQs are available online. The DSIO will update the FAQs on an as needed basis. NATIONAL FUTURES ASSOCIATION Form PQR and Form PR...

By NIBARead article
7 min read

The Clock is Ticking; Required Cybersecurity Policies

The headlines in today’s paper should read: “The Wild West is back! Stick ups and heists at an all-time high!” Only today the villain is not riding up to a stage coach on a horse or storming a bank with police sirens in the background. Today’s banks also aren’t holding gold bullion and stacks of bills. Rather today’s “banks” are holding something much more valuable – personal identifying information that criminals the world over are trying to pilfer at an alarming rate. Operating a regulated commodity futures and derivatives firm successfully is already challenging. Operating such a business when criminals value private data such as password information and/or social security numbers over the literal money in the company’s bank accounts, and the stakes are even higher. As a Commodity Futures Trading Commission (“CFTC”) registered, National Futures Association (“NFA”) member firm, the proprietary information held by your company is more valuable...

By NIBARead article
Member Announcements
2 min read

NIBA Advisory Group

The NIBA is committed to serving the derivatives industry and as such has created an advisory group to our board. This group of highly qualified industry professionals will help to make our association even better going into our 25th year and add additional value to our members. On December 2, 2015 the NIBA we will hold its inaugural Advisory Group (AG) meeting. The focus of the AG meeting will be to review the mission and actions of the NIBA from the member's individual expert viewpoint, and advise as to effectiveness and methodology. The individuals that have been invited to participate in the group come with diverse experiences throughout the industry. They represent exchanges, legal, compliance, operations, marketing and product research. We also feel it is important to get fresh eyes on new issues that are of concern to the futures industry and how the association should respond to them. We...

By NIBARead article
Member Announcements
2 min read

November Chairman Letter

Dear Members, As you receive this newsletter, the NIBA will be in Washington DC at the office of the CFTC. The talking points/agenda for the Commission, was developed from suggestions made by the membership, and includes: HFTs: What is the Commission’s definition, and what effect that could have on NIBA members. Follow-up on the economic impact of Regulations 1.35 (Recording of Communications which lead to a Transaction). Follow-up on the effect of Reg. 1.22 (“Residual Interest”) on Association members. NIBA is also meeting with the Commodity Markets Council and other industry participants based in DC. A summary of those November 9 meetings will be posted in the next Association newsletter. The NIBA Advisory Group will hold its first meeting December 2 in Chicago. The purpose of bringing this group of industry experts together is to discuss the changing role of the NIBA in today’s market and regulatory environment. Advisory Group...

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Member Announcements
2 min read

Breaking News!

On November 9, NIBA traveled to DC to meet with CFTC Commissioner Bowen and CFTC Chairman Massad. Issues suggested by the NIBA membership were discussed -- HFT definitions and CFTC Regulations 1.35 and 1.22. Steve Petillo, Mike Burke and I prepared a list of talking points and delivered them in advance of our meeting. In addition to putting issues that are important to our membership in front of the Commission, these sessions with the CFTC serve the purpose of reminding the regulators that the NIBA is a very special trade association. Unlike most industry organizations, we don't have an office or staff in DC. In fact, the work of the association is done entirely by volunteers and the opinions expressed are voiced by working IBs and CTAs -- not paid representatives. When we talk about the effect of a rule or regulation on the IB/CTA community, we are speaking from...

By NIBARead article
Housekeeping
7 min read

NFA Announces 2015 Nominations

NFA's Articles of Incorporation were amended to reduce the size of NFA's Board of Directors from 37 to 29 Directors. The new Board structure will be in place in February 2016, and all current Directors' terms expire at the Board's regular Annual Meeting on February 18, 2016. In accordance with NFA Bylaw 406, the Office of the Secretary has received from the 2015 Nominating Committee a list of its nominees for positions on NFA's Board of Directors and 2016 Nominating Committee. The terms of the new Member Director positions have been staggered as determined by the respective Subcommittees of the Nominating Committee. The list of nominees included with this Notice shall serve as notification to NFA Members of the candidates proposed by the 2015 Nominating Committee. Other nominations may be made by petition. Article VII, Section 3 of NFA's Articles of Incorporation provides that: (b) Petition Procedure. "Nominations may be...

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Member Announcements
3 min read

CFTC Requires NFA Membership for Registered Intermediaries

The CFTC has adopted a final rule, CFTC Rule 170.17, which will require almost all IBs, CTAs and CPOs to become NFA Members. CFTC Rule 170.17 requires each person or entity registered as an IB, CTA or CPO to also be a member of a “registered futures association,” subject to a narrow exception for registered CTAs that meet the requirements of the exemption from registration set forth in CFTC Rule 4.14(a)(9). The NFA is the only registered futures association; thus, most CFTC registrants who are not NFA members will be required to become members of NFA or withdraw their registrations. Prior to the adoption of CFTC Rule 170.17, existing CFTC rules only required FCMs, CFTC-registered swap dealers and major swap participants to be members of a registered futures association. Specifically, CFTC Rule 170.15, in the case of FCMs, and CFTC Rule 170.16, in the case of Swap Dealers and Major...

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Housekeeping
3 min read

Housekeeping, Reminders and Updates

NATIONAL FUTURES ASSOCIATION Information Systems Security Programs - Cybersecurity On October 23rd the National Futures Association (“NFA”) announced the adoption of the interpretive notice regarding NFA Compliance Rules 2-9, 2-36 and 2-49. The purpose of the interpretive notice was to address information systems security programs – cybersecurity. The interpretive notice entitled Information Systems Security Programs (“Cybersecurity Interpretive Notice”) was recently approved by the Commodity Futures Trading Commission (“CFTC”). The Cybersecurity Interpretive Notice requires Member firms to adopt and enforce written policies and procedures to secure customer data and access to their electronic systems. The terms of the Interpretive Notice become effective March 1, 2016, for all NFA Members. As noted in the October 23rd Notice the Members, the NFA stated that the purpose of the Cybersecurity Interpretive Notice was adopt a principles-based risk approach that would provide flexibility for Member firms to develop a bespoke information systems security program (“ISSP”)...

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Trading Technology
3 min read

Cyber Security

While attending the recent NIBA conference, we learned about new rules affecting our industry. Brokers will no longer be able to email client documents to their customers, clearing relationships, or service providers without being highly aware of their duty to protect client information from would-be hackers. This is big adjustment for the industry. Just as we adapt to the fluctuating Chicago seasons, in time, we will learn to adjust to these new rules as well. At Midland, we provide administrative and custodial services for futures accounts for individuals that are using IRA money to invest in these products. As the administrator, we require documents to setup and fund these investments: account statements, FCM paperwork, CTA disclosures, letter of direction, and so on, depending on the nature of the product. For the past many years, documents have been sent primarily by email, fax, and regular mail. In the digital age, no...

By NIBARead article
4 min read

NFA Compliance – Preparing for an NFA Exam

Since 2012, the number of CPOs, CTAs, and IBs required to register with NFA has seen a dramatic increase. With this increase came a renewed commitment by regulators to not only audit new NFA Members within the first year, but more frequently thereafter as well. The frequency of subsequent on site audits depends upon an analysis of risk factors. Some of the risk factors include but are not limited to: Customer Complaints Qualifications of Principals Principals Prior Firm Regulatory Issues Reviews of Promotional Materials Regulatory Filing Issues Time between Registration and/or last NFA Exam Of late, NFA has been scrutinizing financial statement footnotes, perusing websites, and searching for industry publications for firm information. Furthermore, information on forms submitted to NFA such as Form PQR, 1FRs, and PRs are also analyzed for risk factors. Typically, NFA will notify new members two weeks prior to a visit. However, NFA has been known...

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