NIBA - Celebrating 35 Years

NIBA Journal

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

Member Announcements
1 min read

Help Wanted!

Planning for the NIBA Annual Meeting, September 24 in Chicago is underway. If you would like to serve on the planning committee, please contact Mike Burke, mikeb@highgroundtrading.com or Melinda Schramm, melinda@futuresrep.com. This September's meeting will include five business sessions, a demo hall and a networking cocktail reception. Topics for two of the business sessions are already being developed and a committee is being formed. To serve on the committee, you must be able to attend planning sessions and help out onsite during the event. If you cannot serve on the committee, your suggestions for topics and speakers are still welcome - just send them to Mike. Thanks to the following members who have already volunteered: Tom Sandy, Rice Dairy John Nelson, Applied Research Mike Coglianese, NIBA Board of Directors Steve Petillo, NIBA Board of Directors Mike Burke, NIBA Board of Directors

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Member Announcements
3 min read

June Chairman's Letter

Dear Members - The last few weeks have been busy for the NIBA. Just as we closed out a very successful member meeting in New York City, we stepped up work on the June 18 event co-chaired with DePaul University, Chicago and we formed a planning committee for our Annual Membership Meeting, September 24. Planning and implementing educational events is one part of the NIBA mission. Keeping up with, and notifying you about regulation update and change is another part. This month the NFA announced a proposal to reduce the number of members on its board of directors. For many years, it has been suggested that at 39 members, the NFA board was too large to get anything done in a timely, meaningful way. Overall, our members support the reduction proposal which leaves both IB positions intact but reduces the number of CTA/CPO representatives slightly to four with one of...

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Risk Management
3 min read

NIBA Wedbush Futures FCM Risk Management Questionnaire

NIBA will be featuring a recurring article in its monthly newsletter to membership with a focus on FCM Risk Management. The article will feature a different Member FCM each month discussing their approach to risk management. FCM Name: Wedbush Futures Head of Risk Name: Jim Kearney Do you have a risk committee: Yes If yes, what matters does your risk committee consider: The Wedbush Futures Risk Committee regularly meets to identify current risk events, define appropriate client and firm limits and mitigate the effect of future risk events on capital deposits. What is your general approach to risk management: Our risk management philosophy encompasses three concepts, identify risk, measure risk and manage risk. Every policy, procedure and process is designed to advance this philosophy. We strive to build a best in class risk management structure in all of our lines of business. How is pre-trade risk management handled: All of...

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4 min read

The Red Flag Rules

Dodd-Frank transferred responsibility for identity theft from the FTC to the CFTC and SEC for those financial institutions under their jurisdiction. The rules adopted in April 2013 require “financial institutions” that “hold” “covered accounts” to establish an Identity Theft Prevention Program (“ITPP”). These rules are known as the “Red Flag” rules. The CFTC has defined the term “financial institution” to include FCMs, IBs, CTAs and CPOs as well as Swap Dealers. Traditional futures trading accounts are considered “covered accounts”. If you don’t “hold”, covered accounts, directly or indirectly, then the extent of your responsibility under the Red Flag rules is to conduct a periodic review to make certain that you have not acquired any covered accounts. The SEC has made the determination that investment advisers may be indirectly holding covered accounts if they have the authority to authorize payments to third parties from their customer’s accounts. A similar interpretation could...

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3 min read

NIBA - Ask the NFA Questions

As your industry advocate, the NIBA provides many services which help your business stay in compliance with NFA regulations. "Ask the NFA," is the way you can ask questions about those regulations and compliance requirements without having to call NFA directly. Just email us at nfacomments@theniba.com and we will get the answers for you. Please keep in mind the purpose of this contact is to keep the lines of communication between NFA and NIBA members open, not to fix any specific individual concerns. This month's questions were selected from those submitted by NIBA members. The answers were supplied by NFA staff. My firm was recently examined by NFA. As part of the exam document production effort, we were directed by NFA staff to submit documents via an online, file transfer tool called “NFA Files Box.” Can you provide details on the security controls for the website? NFA utilizes a file...

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1 min read

Trading at Settlement (TAS) for Agricultural Futures

First Trade Date Monday, June 8, 2015 Trading at Settlement (TAS) is an order type that allows a market participant to buy or sell futures contracts during the trading day equal to the yet-to-be determined settlement price, or at a price up to four ticks above or below that price. Why TAS Reduce uncertainty related to pricing around settlement Grain elevators and processors may use TAS orders to price forward contracts at or near the settlement value TAS orders offer a transparent alternative to floor based MOC orders, which will no longer be available after July 2 Key Features Available on CME Globex for Grain, Oilseed and Livestock futures Available for outrights and spreads Quotes will be published in real time on the screen throughout the trading day TAS order entry is not allowed prior to the beginning of each group's pre-open state Learn About TAS View SER View TAS...

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5 min read

Recent CFTC Enforcement Matter Serves as Warning to Exempt CTAs

Earlier this year, the CFTC ordered Summit Energy Services, Inc. ("Summit Energy") to pay a $140,000 civil penalty to resolve allegations that it violated Section 4m(1) of the Commodity Exchange Act by failing to register as a CTA. The CFTC held that Summit Energy engaged in the business of advising 15 or more clients as to the trading of natural gas swaps and futures and generally held itself out to the public as a CTA. Additionally, Summit Energy included descriptions of its “risk management services” on its website and sale brochures, which the CFTC considered to be holding itself out publicly as a CTA. The CFTC also noted that Summit Energy had brokered some OTC natural gas swaps trades, and that Summit Energy’s commodity trading advice was not just solely incidental to its business. Since the CFTC Order was the result of a settlement and not following a hearing on...

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4 min read

Housekeeping, Reminders and Updates

Foreign Account Tax Compliance Act Cayman Islands Update The Cayman Islands Department of International Tax Cooperation (“DITC”) has further extended the due dates for submitting Foreign Account Tax Compliance Act (“FATCA”) notifications and reports to the Cayman Islands Tax Information Exchange Authority (“TIA”). As per the latest news and updates issued by the DITC, notifications are due by Thursday, May 21st; and returns may be reported by Friday, June 12th. The latest due dates are an extension to the dates referenced in the DITC Industry Advisory released on April 27, 2015. Financial institutions with reporting obligation are required to make notifications to the TIA on an annual basis using the online form available on the Cayman Islands Automatic Exchange of Information Portal (“AEOI Portal”). Financial institutions with reportable accounts will also use the AEOI Portal to fulfill their reporting obligations. The DITC has stated that it will take a soft...

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2 min read

CME CORE: Clearing Online Risk Engine

Risk management is a trade craft that never sleeps: Market conditions change, new products are invented, mathematics advance, operational flows become more complex, regulation evolves. We’ve seen all of these over time in CME Group’s futures and options markets: Recent oil market and FX market gyrations, the introduction of deliverable swap futures, SPAN margin model changes, customer gross margining regulations, and increasingly strict funding timelines and processes for margin calls. Our web-based CME CORE application is part of the next generation of risk management tools we’re developing to help traders, brokers, risk managers and reconciliation personnel measure and monitor risk in a fast, user-friendly way. It has an intuitive user interface and workflows focused on “what-if margining.” For example, if you execute a new trade, CME CORE will help you illustrate how your margin requirement will change. CME CORE also is compatible with simple csv uploads for those who prefer...

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