NIBA - Celebrating 35 Years

NIBA Journal

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

Managing Risk in a Complex Agriculture Supply Chain
Trading Technology
2 min read

Managing Risk in a Complex Agriculture Supply Chain

The disruptions and extreme complexities of the commodity supply chain create great risk that needs to be managed, as well as equally great opportunities if prices move in a favorable direction. The interior (North America) agricultural commodity supply chain is heavily based on various events, such as weather impacting supply and transportation, scheduled/unscheduled maintenance of railroad tracks, and planned and required federal transportation restrictions. Global demand for agricultural commodities, the impact of regional weather, and economic and geopolitical events can also dictate interior transportation requirements. As with other commodities, transportation and storage costs can have an adverse impact on agricultural commodity prices. By responding quickly and efficiently to observed and expected changes in the supply chain, commodity market participants can optimize their business operations, reduce risk, and increase profit potential. Traditional, disparate software systems are becoming insufficient in this complex business environment as they are not built to be responsive...

By NIBARead article
CTA Insights: Clarke Capital Management on Asset Raising from a Broker's Perspective
3 min read

CTA Insights: Clarke Capital Management on Asset Raising from a Broker's Perspective

As the world’s investors become more sophisticated, the quest for portfolio diversification using more advanced strategies is growing. Investors from Wall Street to Main Street are seeking to include strategies that give them a low correlation to the stock market. Managed futures is an ideal asset class to fill this niche, providing good opportunities for market professionals such as Introducing Brokers to expand their business to include managed futures products for their client base. Clarke Capital Management (CCM) has found this to be an effective business model. Founded in 1993, CCM offers six different managed account programs with the longest continuous track record extending back to 1996. Since CCM relies on relationships with the brokerage industry to expand its reach, this offers an opportunity for brokers to partner with CCM to build their business. At CCM we make ourselves readily available to speak directly to the prospects of our Introducing...

By NIBARead article
CFTC Recording Requirements
1 min read

CFTC Recording Requirements

New recording requirements went into effect in January. Although some IBs are exempted, many are not. The NIBA has opposed this requirement from its beginnings, noting that enforcement is difficult -- if not impossible, it requires new expenses for many offices, and requirements for recording of transactions vary greatly from state-to-state. We want to revisit this issue with the CFTC. Will you send us a note explaining how the requirement is affecting you? Please include additional costs (equipment, legal advice, extra staff, etc), you have expended and expect to spend to stay in compliance; and, other issues you are running up against in order to implement this rule. Address your note to Melinda Schramm, and send it to melinda@futuresrep.com by March 1, 2014. We want to get enough feed-back to bring before the Commission. We'll compile the comments -- no individual's or IB's will be separately identified. Melinda Schramm, Chairman,...

By NIBARead article
Chairman Letter for February 2013
NIBA Briefings
3 min read

Chairman Letter for February 2013

Dear Members - If you think endless snow storms and wind chills below zero have gotten you pretty far down, don't even look at the new and proposed regulation discussed below. Over at the NFA, fines are now in place for registrants, including IBs, who are late filing various reports. Fines are in the amount of $1,000 per day! No doubt there are some bad apples who file late regularly, but currently there are no exemption or waiver procedures in place for an IB who is late once during the term of membership. Also at the NFA, a proposal to have CPOs/CTAs meet minimum financial standards has been suggested, along with a rule that requires an independent third party to review and authorize a CPO's disbursement of any pool funds, and an independent verification of performance results if those results are prepared by a third party. This proposal also includes...

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Outline of Current NFA/CFTC/SEC Issues
4 min read

Outline of Current NFA/CFTC/SEC Issues

CFTC CFTC Adopts Rules Regarding Risk Management Programs for FCMs New CFTC Regulation 1.11 imposes specific risk management requirements on FCMs that accept any money, securities, or property (or extend credit in lieu thereof) to margin, guarantee, or secure any trades or contracts that result from soliciting or accepting orders for the purchase or sale of any commodity interest. In accordance with the new regulation, each FCM is required to establish, maintain, and enforce a system of risk management policies and procedures designed to monitor and manage the risks associated with the activities of the FCM, taking into account market, credit, liquidity, foreign currency, legal, operational, settlement, segregation, technological, capital, and any other applicable risks together with a description of the risk tolerance limits set by the FCM and the underlying methodology in the written policies and procedures. FCMs must file their initial 'Risk Management Program' electronically through WinJammer with...

By NIBARead article
CME Group Market Data Policies Update
Operations
6 min read

CME Group Market Data Policies Update

In November, 2013, the CME Group announced changes to market data license agreements and schedules. The resulting increase in user fees significantly affect all NIBA members. NIBA members voiced several concerns surrounding the changes and the Executive Board of Directors presented them to the exchange. On February 14, 2014, the CME Group released an update to the market data policies. One of our major issues has been addressed: the definition of non-professional. Non-professionals are now defined to include certain small business entities such as LLC, trusts, etc., that are: (i) not affiliated with a Professional, and (ii) whose primary business purpose is not trading. There is also a limit in the number of trading terminals allowed to be used at the entity to qualify as a non-professional. This definition is important because so many IB customers are organized as LLCs, trusts or other legal entities, all of which seemed to...

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CME Group/NFA/NIBA - March 6 - Newport Beach, CA
Member Announcements
2 min read

CME Group/NFA/NIBA - March 6 - Newport Beach, CA

March 6, 2014: 2:00pm - 7:00pm Sessions Begin: 2:30pm Marriott Newport Beach There will be two information sessions followed by a networking reception with the speakers, CME Group, NFA representatives and the NIBA. There is no cost for this event - all futures industry participants are invited, but you must register in advance. Session 1: Why Smart Money Invests in Managed Futures - CME Group's Initiatives Going Forward: Presented by David Lerman, Senior Director, Client Development & Sales, Asset Managers, CME Group Session 2: Compliance Issues featuring the NFA: Presented by Patricia Cushing, Director Compliance, National Futures Association and Matt Reynolds, AIF(R), CRCP - McGladrey LLP NIBA Networking: Cocktails, good company and conversation. Details regarding registration and information: >Register Now! This is the NIBA's second winter meeting in southern California. Last year's event was at capacity. You do not need to be a NIBA member to attend, but membership is...

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Suitability: At the Corner of Series 3 and Series 7
8 min read

Suitability: At the Corner of Series 3 and Series 7

Recent changes to FINRA’s suitability rule may have implications for the futures industry. The futures industry has never had a suitability rule. In 1978, the U.S. Commodity Futures Trading Commission (CFTC) considered adopting one but decided against it, opting instead to impose on a Series 3 broker a robust duty to disclose the risks and let the customer decide whether to engage in futures trading.1 When the NFA adopted Compliance Rule 2-30, it followed the CFTC’s lead: “Once … the customer has been given adequate disclosure, the customer is free to make the decision whether to trade futures and the Member is permitted to accept the account.” 2 In contrast, the bedrock obligation of a Series 7 securities broker has been the duty to make suitable recommendations. The responsibility for determining whether a particular security transaction is right for a customer is placed on the broker—not the customer. Indeed, in...

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Request for Comments – CPO/CTA Capital Requirement and Customer Protection Measures-Comments Due by April 15, 2014
MF Global Updates
7 min read

Request for Comments – CPO/CTA Capital Requirement and Customer Protection Measures-Comments Due by April 15, 2014

NFA regularly reviews the continued effectiveness of its regulatory requirements. Over the past three years, NFA has issued 26 Member Responsibility Actions (MRAs), and 92% of those MRAs were against CPO and/or CTA Members. Most of these matters involved misuse of customer funds (including one CPO that improperly used pool funds because it had insufficient assets to operate as a going concern) and/or misstating net asset values and/or performance information. In light of these actions, NFA is reviewing the current regulatory structure applicable to CPO and CTA operations. In particular, NFA is looking at ways to strengthen the regulatory structure governing CPO operations to provide greater protection for customer funds. Additionally, NFA is exploring ways to ensure that CPOs and CTAs have sufficient assets to operate as a going concern. NFA’s Executive Committee approved the issuance of this request for comments to solicit CPO and CTA Member input on the...

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FinCEN Issues an Advisory on the FATF-Identified Jurisdictions with AML/CFT Deficiencies
Member Announcements
1 min read

FinCEN Issues an Advisory on the FATF-Identified Jurisdictions with AML/CFT Deficiencies

On December 4, 2013, the Financial Crimes Enforcement Network (FinCEN) issued an advisory announcing that the Financial Action Task Force (FATF) had updated its list of jurisdictions with strategic AML/CFT deficiencies. NFA Member FCMs and IBs should review this Advisory to ensure that their AML programs have the most current information on FATF identified jurisdictions with AML/CFT deficiencies and revise their AML programs accordingly. A copy of the Advisory is available through FinCEN's website at: http://www.fincen.gov/statutes_regs/guidance/html/FIN-2013-A008.html

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