NIBA Journal

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

December 16, 2013

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.

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December 16, 2013

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...

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...

Chairman's Letter for December 2013

0 0 1 415 2372 Gate 39 Media 19 5 2782 14.0 544x376 Normal 0 false false false EN-US JA X-NONE /* Style Definitions */ table.MsoNormalTable {mso-style-name:"Table Normal"; mso-tstyle-rowband-size:0; mso-tstyle-colband-size:0; mso-style-noshow:yes; mso-style-priority:99; mso-style-parent:""; mso-padding-alt:0in 5.4pt 0in 5.4pt; mso-para-margin:0in; mso-para-margin-bottom:.0001pt; mso-pagination:widow-orphan; font-size:10.0pt; font-family:"Times New Roman";} Chairman’s Article: Dear Members: This month’s issue of the NIBA newsletter focuses on the topic on everyone’s mind -- the CME Group market data fee increases. Not surprisingly, none of our members are happy about it. Some even say that added to the industry problems of the past two years, this could be the last straw for their business. On December 2, 2013 the NIBA Executive Board of Directors took your comments and suggestions to a meeting with the CME Group market data team. The points we emphasized are: The size of the fee increase as announced. The definition of ‘professional user’ versus ‘non-professional user.’ The...

Class Action Lawsuit Filed Against U.S. Bank on Behalf of IBs that Introduced Business to PFG

On November 11, 2013, a class action law suit was filed against U.S. Bank, one of the largest American banks, on behalf of introducing brokers that did business with PFG Best. The action, filed in the Northern District of Illinois and docketed as Fintec Group, Inc. v. U.S. Bank, N.A., aims to recover for IB losses resulting from PFG’s collapse, including unpaid commissions, security deposits and potentially other amounts. One of the attorneys representing the lead plaintiff in that suit, Larry Landsman, would like to communicate with any IBs impacted by the PFG bankruptcy to deepen his understanding of the circumstances and impact PFG's collapse had on the IBs. Any NIBA members or other such IBs interested in speaking with Larry are encouraged to contact him by e-mail at larry@block-landsman.com or by phone at 312-251-1144.

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CFTC Takes A Page From NSA; Broker Recording

December 12, 2013

6 min read

CFTC Takes A Page From NSA; Broker Recording

Around this time last year the Commodity Futures Trading Commission (“CFTC”) made major changes to Regulation 1.35(a) which will be taking effect on December 21, 2013. Perhaps the most widely discussed component of the CFTC’s recent amendments is the obligation of certain Futures Commission Merchants (“FCMs”), Registered Foreign Exchange Dealers (“RFEDs”) and Introducing Brokers (“IBs”) to tape record all oral communications concerning quotes, solicitations, bids, offers, instructions, trading, and prices that lead to the execution of a transaction in a commodity interest. The rule also includes an obligation to record oral communications related to cash or forward transactions (as defined by the CFTC). The obligation to tape record oral communications is imposed on all oral discussions whether they are conducted by telephone, voicemail, mobile device, or other digital/electronic media for a period of at least one year. Conversations must be captured and recorded by registrants whether they occur over company...

A Letter from George Enloe of Amarillo Brokerage Company on CME Market Data Fee Increase

It was very disappointing to hear of the massive price increases for CME data feed. There are eight of us in our office and upon analysis we believe that if we keep our current 7 quote systems, 7 electronic order platforms and 3 spreaders the extra yearly cost will be $6500 per employee! There is no telling how much it will cost many of our customers (who will likely ask us for lower rates as a result) as well as RCG and other FCM?s (who will likely want to charge us more to recoup some of their costs). As with burdensome taxation these increases make it harder for us to operate efficiently and in turn, grow our business. As a regulator the CME has encouraged us to have redundant systems in case of a simple malfunction or a natural disaster and now there seems to be no limit on how...

A Letter from Alex Breitinger of Paragon Investments on CME Market Data Fee Increase

As a director of an IB, my greatest concern is that our clients get good value for their money. With transaction fees increasing by as much as 20%, I would expect that the CME would provide a similar increase in value for the customers. I fear that this is simply going to be an increased source of revenue without a corresponding increase in service. To that end, I would ask the CME to justify these increases to our (and the CME's) customers. Without such justification, I would expect that customers will push back against the fee increases, which will have to come from FCM's & IB's pockets, hurting their ability to grow the customer base that is the primary source of the CME's revenue. On the subject of market data fees, I am even more concerned about how limiting access to market data could severely hamper CME & brokerage trading...

CME Fee Increase Concerns

We have little doubt the proposed fee increases, particularly for market data access, will have a profoundly negative impact on the number of industry service personal (IBs and Aps) as well as retail speculators. Consequently, we suspect the changes could trigger a potential drop in trading volume in our particular book of business by 20% to 30%. Additionally, small operations such as ourselves could be driven out of business at the hands of decreased volume and substantially higher fixed costs in the form of data fees. Here are some comments and concerns we would like to express: Data fees per device is unreasonable, and dramatically impairs the industry In a post PFG and MF Global world, IBs have shifted toward independence. We have spent the last 2 years scrambling to diversify our business among various FCMs. Accordingly, that involves the simultaneous use of multiple platforms. Should the new CME fee...

4 Obama Care Changes that Make Defined Contribution Irresistible

By Rusty von Sternberg Program Manager for The NIBA Benefits PPACA Certified & Registered for the Federal Exchanges ObamaCare. Love it or hate it, one thing is true... the landscape of employer-sponsored health insurance is changing. Many of the Affordable Care Act ("ObamaCare") provisions strongly favor the individual health insurance market, making “Defined Contribution” the ideal health insurance solution for most (if not all) US employers. To understand, there are four key ObamaCare changes happening January 1, 2014 that make the shift from defined benefits (group health insurance) to pure defined contribution simply... irresistible. Guaranteed-Issue Individual Health Plans Beginning January 1, 2014, insurance carriers must accept all applicants for individual health plans regardless of health status. Individual policies will become guaranteed issue, and eliminate the non-economic (i.e. moral) factors from an employer’s decision-making process. In other words, employers feel assured that sick employees will be able to get affordable individual...

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