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NIBA Journal

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

CTAs: Trend Following is What They Do
Trading Technology
5 min read

CTAs: Trend Following is What They Do

There was an odd story in the Financial Times titled, “Quant hedge funds hit by US bonds sell-off.” It was odd in that it treated a rather obvious observation as something more ominous and didn’t seem to have an understanding of the industry they were writing about. It further identified the “quant hedge funds” as “so called CTAs.” Someone needs to inform the FT and the author Sam Jones that CTA is a term of art, a regulatory designation meaning Commodity Trading Advisor (CTA). These CTAs trade futures contracts through various strategies on behalf of customers to hopefully earn positive returns similar to equity based mutual funds. Unlike mutual funds, however, CTA programs are absolute return vehicles that do not rely on positive equity performance. CTAs can go long or short a variety of futures markets across numerous sectors including fixed income, currencies, equity indexes, energies, livestock, grains, metals and...

By NIBARead article
Why Past Performance of a Conventional (60-40) Portfolio Is NOT Indicative of Future Performance
Marketing
5 min read

Why Past Performance of a Conventional (60-40) Portfolio Is NOT Indicative of Future Performance

For the past 31 years , a conventionally-diversified portfolio consisting of 60% stocks and 40% bonds has provided investors with satisfying returns of +10.80% annually. This was the result of both stocks and bonds advancing strongly throughout that period. Better yet, stocks and bonds complimented each other nicely. When stocks returned +19.35% annually from the market low in 1982 to its peak in August 2000, bonds lagged somewhat (although still returning a substantial +10.34% annually). But in the period from the 2000 market peak to the 2009 market low, while stocks declined a sharp -43.51%, bonds balanced that with a strong +61.78% rally. More recently, both stocks and bonds have advanced, with the 60-40 portfolio gaining an annualized +15.36% from the market low in March 2009 to May 31, 2013. The past 31 years was an unprecedented period for a 60-40 portfolio; one that wasn’t seen prior. In fact, as...

By NIBARead article
CFTC Issues Interpretive Letter on Regulation 1.73
5 min read

CFTC Issues Interpretive Letter on Regulation 1.73

Recently, the Commodity Futures Trading Commission (“CFTC”) issued an interpretive letter regarding new CFTC Regulation 1.73 and its applicability to introducing brokers (“IBs”) that enter into give up arrangements with their customers' clearing futures commission merchants (“FCMs”). In its letter, the CFTC confirmed that the term “executing firm” in Regulation 1.73 refers to both IBs and FCMs that execute orders for customers, requiring IBs who execute give-up orders on behalf of their clients to adopt risk management procedures. Background on CFTC Regulation 1.73 By way of background, adopted in 2012 as part of the Dodd-Frank Wall Street Reform Act, Regulation 1.73 requires clearing FCMs (and in some instances any “executing firm”) to establish risk-based limits for their proprietary and customer accounts based on position size, order size, margin requirements, or similar factors, and requires FCMs to screen orders for compliance with those risk-based limits. Clearing FCMs are permitted to retain...

By NIBARead article
MF Global’s Jon Corzine said to face CFTC lawsuit on collapse
MF Global Updates
4 min read

MF Global’s Jon Corzine said to face CFTC lawsuit on collapse

Jon S. Corzine, the former New Jersey Governor and Goldman Sachs Group Inc. co-chairman, probably will be sued by the Commodity Futures Trading Commission for his role in the collapse of MF Global Holdings Ltd., said a person with direct knowledge of the situation. The CFTC, the federal agency that regulated MF Global until the brokerage filed for bankruptcy in 2011, could sue Corzine as soon as this week, said the person, who asked for anonymity because the case isn’t public yet. Steve Adamske, a spokesman for the CFTC in Washington, declined to comment. The suit against Corzine, 66, would mark a new low for the Wall Street veteran, who rose to the top of Goldman Sachs before being elected New Jersey’s senator and then governor. He could face millions of dollars in fines and a ban from trading commodities if he’s found liable, the New York Times reported late...

By NIBARead article
NFA's Board approves expanded Fiscal Year 2014 budget
3 min read

NFA's Board approves expanded Fiscal Year 2014 budget

A number of factors are having a significant impact on NFA's operating budget for Fiscal Year 2014. The substantial expansion of NFA's regulatory duties has resulted in an 18 percent increase in NFA's budget for Fiscal Year 2014, which begins July 1, 2013. NFA's Board of Directors met on May 16 and approved a budget of $74 million for the coming fiscal year. One reason for the significant rise in spending is due to the registration and monitoring of new swap dealer (SD) and major swap participant (MSP) Members. NFA is currently hiring and training additional staff to manage these oversight efforts. NFA is in the second year of a ramp-up of its swaps regulatory program. There currently are 80 provisionally registered SDs and two provisionally registered MSPs. NFA's Board also recently approved a membership dues structure for SDs and MSPs. "In order for SDs and MSPs to obtain and...

By NIBARead article
MF Global ends bankruptcy as trustee Freeh steps down
MF Global Updates
2 min read

MF Global ends bankruptcy as trustee Freeh steps down

Collapsed brokerage MF Global Holdings Ltd on Tuesday effectively ended its bankruptcy, saying court-appointed trustee Louis Freeh will step down and hand the estate's remaining wind-down duties to a new three-member board. The commodities broker, led by former New Jersey Gov. Jon Corzine, went into court-protected bankruptcy in 2011 after investors were spooked by its exposure to $6.3 billion in European sovereign debt. The company's liquidation plan put together by Freeh, a former FBI director, and MF Global's creditors, was approved by bankruptcy Judge Martin Glenn in April, and the plan went into effect on Tuesday. "With the plan approved and a new board in place, I am confident the liquidation process can be effectively administered to the satisfaction of the creditors," Freeh said in a statement. The plan could not go into effect until certain conditions were met or waived, one of which was that the estate had enough...

By NIBARead article
CME Group Customer Forum Feedback
Operations
1 min read

CME Group Customer Forum Feedback

CME Group wants your feedback on their recent Customer Forum: "In order to provide you with the most relevant and interesting updates on our technology and business initiatives at the CME Group Customer Forum, we ask that you complete this brief survey. This survey will take no more than 10 minutes of your time. For additional information or if you have any questions, please contact CME Global Account Management at +1 312 634 8700 in the United States." Take the Survey     The Opinions expressed are the opinions of the author. The opinions, the trading styles, trading information and trading programs are not endorsed by the NIBA, but are the individual opinions, styles, information and programs of the author.

By NIBARead article
Reporting Requirements for Memorial Day
2 min read

Reporting Requirements for Memorial Day

This is a reminder that Monday, May 27, 2013 is Memorial Day. This holiday will impact your regulatory filings as follows: Daily segregated, 30.7 secured, sequestered and daily forex statements prepared as of May 24, 2013 are required to be submitted by noon on Tuesday, May 28, 2013; Daily segregated statements are not required to be prepared as of May 27, 2013; Daily 30.7 secured, sequestered and forex statements are required to be prepared as of May 27, 2013 and are required to be submitted by 12:00 noon on Tuesday, May 28, 2013. If an FCM is required to file a May 27, 2013 daily 30.7 secured or sequestered statement, it should also include the most recent segregation balances from May 24, 2013; and FCMs and RFEDs are reminded that any information filed after its due date must be accompanied by a fee for each business day that it is...

By NIBARead article
The Top 21 Chief Technology Officers in North American Electronic Trading
Member Announcements
2 min read

The Top 21 Chief Technology Officers in North American Electronic Trading

We have compiled a list of the top 21 Chief Technology Officers in the electronic trading industry, operating in North America. The 21 CTOs were selected based on a survey distributed through our Total Trading blog with the following criteria in mind: Excellence in building and maintaining technological infrastructure Respected selection of technological products Influence on the electronic trading industry We want you to gain a true insight into North America’s top technology officers, so we asked all of them the same questions: 1.) What has been your biggest achievement or accomplishment as CTO? 2.) Which future technology or advancement do you see playing a large role in the electronic trading industry in the future? 3.) What is a skill, trait, or experience that you discovered early in your career, which has enabled you to be successful today? 4.) What is a fun or interesting fact that people might not...

By NIBARead article
Outlook for IB Claims in MF Global Bankruptcy Improves, Claim Sale Opportunities Arise
MF Global Updates
3 min read

Outlook for IB Claims in MF Global Bankruptcy Improves, Claim Sale Opportunities Arise

Many IBs have general unsecured claims in the MF Global Inc. SIPA liquidation. As demonstrated by the recent sale of a large general unsecured claim at 90% of the claim amount, institutional players believe such claims have very strong prospects for recovery. For IBs, the good news is that not only is the market consensus that IBs should recover a high amount before too long but also that IBs may be able to sell their claims for high amounts. IB general unsecured claims in the MFGI bankruptcy stem from unpaid commission splits and float for October 2011 and also from security deposits. For commission splits and float, an IB's claim may be based on a payout report document that the IB has been able to request from the MFGI trustee. For a security deposit claim, the MFGI trustee has been willing to stipulate to the amount of the claim if...

By NIBARead article
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