NIBA Journal

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

June 17, 2014

Era of Convergence

It probably won’t surprise many to hear that we are living and benefiting from an era of convergence --from network access to data, to digitization, to cloud computing. Convergence has become the new black. With a desire for increased transparency and risk management, we are experiencing the convergence of OTC with common clearing and Trade (Swap Data) Repositories along with Swap Execution Facilities and the increased trading of standardized products. Convergence is the name in cloud computing where advancements in compute, storage, and network are converging to enable new capabilities, decrease cost, and introduce scale previously thought unimaginable. Mobility is furthering that convergence with access from anywhere enabled itself from a convergence of voice, network, compute, and software. Just as cloud and mobile computing are enabling new business models and driving innovation, convergence in the financial industry is creating similar opportunities and new drivers for technology innovation. This is enabling...

Two-minute primer on leveraging your brand

I’ve met many traders, brokers, and introducing brokers having covered the derivatives arena for 30 years. Some have been memorable, some not. Typically why they are memorable is for a few reasons: a) performance, especially as a trader, b) what sets them apart, that is, what makes them special, especially as a broker, and c) keeping up the relationship, in other words, they continue to keep in touch even if they don’t see an immediate benefit. From a journalist’s point of view, brokers, large and small, are typically the easy people to access. They are happy – usually – to provide information as well as spout their wisdom.  Traders, not so much, unless they are trying to raise money. Nonetheless, here are a few ways of getting your name out there to get noticed. Who are you? I’ve visited several IB web sites (all important) that don’t even introduce the...

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Get to Know the Regulators: NFA's Registration Department

June 17, 2014

2 min read

Get to Know the Regulators: NFA's Registration Department

As a NIBA member, you are already familiar with the process of applying for CFTC registration and NFA membership. But you may not be familiar with the diverse array of responsibilities relegated to NFA’s registration department. The Registration department reviews applications for CFTC registration and NFA membership, and approves or denies those applications based in part on results of background checks and proof of passing appropriate qualification examinations. In addition to staffing the Information Center, which we highlighted last time and you can find here, the department is responsible for maintaining NFA's Online Registration System, reviewing all disciplinary information and evaluating it against statutory disqualifications under the Commodity Exchange Act, and responding to requests for copies of publicly available CFTC registration records. In Fiscal Year 2013, NFA's Registration department processed more than 1,500 firm registrations and more than 18,000 individual registrations. As a result of fingerprint card results and other...

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June 13, 2014

2 min read

Notice From CME Group

On Friday, June 6 the CME Group notified us about a new "netting" policy with regard to market data fees which will apply to IBs. The NIBA has been communicating its member concerns vigorously since last November when the CME announced its decision to discontinue the long-standing waiver of these fees. This new policy may bring relief for some NIBA members. It should be noted that the "netting" policy is only applicable to data that is routed from an FCM. It does not apply to any agreements or contracts, IBs may have with individual ISVs. Many GIBs have data provider arrangements with ISVs through their FCM, so this can be good news for those GIBs. However, IIBs often access platforms through an FCM as a backup, and negotiate both their data and execution platform needs directly with the vendors, not through the FCM. According to the CME Group, one of...

Get to Know the Regulators

Information is essential to participants in our markets. Our markets are ever changing not only with price action but also with best practices and regulations. NIBA wants to make sure our members know their way around both the NFA and CFTC and as such will be publishing an ongoing series discussing who is who and how you can get a hold of key regulators and/or information if you ever need to. As the designated self-regulatory organization for the U.S. derivatives industry, National Futures Association (NFA) recognizes that its members, CFTC registrants, industry professionals and the general public may have questions about registration matters, regulations and other related topics. To ensure that people receive prompt, accurate answers to their questions, NFA established its Information Center in July 1985 to be a one-stop shop for almost any questions or problems that people may have. The Information Center, which typically has a staff...

Chairman's Letter

Dear Members - The NIBA submitted our comment letter to the NFA regarding its capital requirement proposal for CTAs and CPOs and other changes to the CTA registration status. We are firmly opposed to capital requirements for CTAs and to the elimination of registration status for the group of current CTAs which NFA refers to as “inactive.” NIBA believes CPO criteria may be quite different than that for CTAs, and should be considered separately. The full text of our submission is found in this newsletter. We understand the NFA is considering all the submissions -- we hear there were many. We have requested a further opportunity to discuss this issue with the NFA before any regulations are changed. During our May 1 meeting in New York, the NFA was a part of a panel presentation on this issue, and on concerns surrounding the ability of swaps registrants to comply with...

NYC Meeting a Success!

Thanks to everyone who helped make the May 1 event in New York City a success. We hit a new attendance high for our NYC meetings - 135 IBs, CTAs, and FCMs. Thank you to our first panel speakers: Al Helmig, Jim Steel, Fred Penha, and Howard Hopkins. Their review and outlook for the energy and metal markets was comprehensive - they are all experts in the field. Thank you to our second panel speakers: Susan Osmanski, Brian Clark and John Brand. They presented a very complete update on where swaps registrants stand with regard to compliance with current rules for IBs and CTAs, and the NFA proposal regarding capital requirements for CTAs/CPOs. We actually ran out of time for discussion on the issues -- our members had questions! A special thanks to NIBA member Howard Rennell, The Windham Group, NY, and member of the New York Athletic Club for...

Questions for the NFA? Comments for NFA? No problem just call the NIBA!

The NIBA is now offering a premium service for its members and will be acting as a liaison between the association’s membership and the NFA. Do you have something you want to bring to the NFA but are hesitant to do so directly, let the NIBA do it for you. The NIBA is your advocate in the industry. We encourage all members to bring their issues to us. In turn, we will address each and every concern anonymously with the NFA. We have found all registrants periodically have questions on business practices, compliance, registrations, etc on which they would like NFA’s opinion. We have also found many members do not feel comfortable calling their regulator directly to ask something about which they may be unsure. We all appreciate a helping hand at times, and this is exactly what the NIBA will do for you, so please do not hesitate to...

Arditti Center announces Dennis Chookaszian, former CEO of CNA Insurance as keynote speaker for June Risk Leadership Program

This June, DePaul University's Arditti Center for Risk Management is hosting a two-day executive risk leadership program led by Dr. Mark Frigo, Director of the Center for Strategy, Execution and Valuation, and Director of the Strategic Risk Management Lab in the Kellstadt Graduate School of Business; and Steve Lindo, an industry expert and educator with more than 20 years of risk management practice in the U.S. and internationally. The program—offered with both one and two day options—will be held Friday, June 13, 8:30 a.m. - 7:30 p.m., and Saturday, June 14, 2014, 8 a.m. - 5:30 p.m. DePaul recently held a Risk Conference at the Federal Reserve Bank of Chicago, and one of the major themes was a rising need for greater board engagement and education in risk management. This program offers a unique combination of the following elements: • Participants drawn from non-executive board directors, CEOs, CFOs, COOs, Managing...

Legacy Swaps Brokers and Regulatory Outtrades

Traditionally, counterparties executing swaps transactions in the unregulated Over-The-Counter (“OTC”) marketplace maintained entire teams of staff devoted to the credit or delivery risk of a counter-party. Inclusive in this regime was the preeminent notion that brokers never held client funds of any kind. This key discrepancy may cause various regulatory outtrades between regulators and parties in the Introducing Broker regime, most notably the legacy swap broker and the traditional Introducing Broker (“IB”). With the move to central counter-party clearing, it is likely that legacy swaps firms will see a cost-shift to that of compliance.  The rules promulgated in response to the Financial Crisis of 2008 and subsequent failures of MF Global and Peregrine Financial Group (“PFG”) have focused primarily on the protection of customer assets and increasing market transparencies. New methods of execution, whether mandated by federal authorities or unintentionally created from dark liquidity pools, have caused significant discrepancies with...

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