NIBA - Celebrating 35 Years

NIBA Journal

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

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...

By NIBARead article
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
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...

By NIBARead article
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...

By NIBARead article
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...

By NIBARead article
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...

By NIBARead article
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

By NIBARead article
NIBA Briefings
1 min read

CME Group Market Data Fee FAQ Clarification

CME Group Market Data Fee FAQ In response to the NIBA, the CME Group Market Data Team has submitted the following clarification to its November 12, 2013 notice regarding market data fees: Question: I am an end user, with one software application that has order routing capabilities to multiple broker/FCMs. Do I have to pay the market data fees for each broker/FCM connection? Answer: No, market data fees are assessed per device, not per the number of order routing connections. The CME Group has indicated it will notify us promptly of any additional clarifications or changes to the original announcement.

By NIBARead article
2 min read

CFTC Rule Change Proposal

The Commission is currently asking for comments on a proposed rule change. They wish to add a section to require that each person registered as an IB, CPO or CTA become and remain a member of a registered futures association, such as the NFA. Under CFTC Reg. 4.14(a)(9) a person is not required to register as a CTA if it does not: (i) direct any client accounts; or (ii) provide commodity trading advice based on, or tailored to, the commodity interest or cash market positions or other circumstances or characteristics of particular clients. This exemption from registration primarily applies to CTAs who only provide advice to the general public, usually in a newsletter and not to specific clients. The Commission requires registration of these entities currently, but does not require membership in the NFA. In response to a member inquiry, the NIBA contacted the NFA. They explained that the CFTC...

By NIBARead article
MF Global Updates
2 min read

Peregrine Financial Trustee Seeks to Return $41 Mln to Clients

Peregrine Financial Group's bankruptcy trustee plans to return up to $41 million to former customers of the failed futures brokerage in the second payout since the firm collapsed 17 months ago. Court-appointed trustee Ira Bodenstein is seeking to return about 7 percent, or $27.5 million, to Peregrine customers who traded on U.S. exchanges, according to court filings. In the first payout last year, the group, which comprised the bulk of the firm's clients, received back about 30 percent of the money they had in accounts when Peregrine failed. Clients who traded on foreign markets would get back about 45 percent more of their money, or $13.5 million, in the second payout, court documents show. They received back about 40 percent of their missing money in the first payout last year. A hearing on the trustee's motion is set for Dec. 18. "Just in time for the holidays, former customers of...

By NIBARead article
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