NIBA - Celebrating 35 Years

NIBA Journal

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

Marketing
2 min read

Risk Assessment - FCM Style

Today’s FCMs face not just one risk, but many. Regulatory changes may dramatically alter the business model and viability of some. For other, managing risk associate with outsourcing key operations to 3rd party technology providers poses a challenge. And, of course, the financial risks some FCMs are taking in response to both internal and external pressures to perform are compounded by the current market environment. For over 20 years, Michael Coglianese CPA, P.C. has specialized in providing Introducing Brokers, CTAs and Funds with efficient and timely professional services, including audits, and compliance reviews. Tax preparation is tailored to each client’s specific operation and business strategy with the ultimate goal of developing more profitable business for the end user. Michael’s experience and contacts in our industry have given him a broad perspective on the regulatory, operational and financial risk facing FCMs today, and how they are responding. He will be moderating...

By NIBARead article
Marketing
2 min read

New NFA Rules: Customer Protection and Others

Over the past several months, NFA has worked with the industry to develop a number of rules to strengthen the protection of customer segregated funds. We will describe these rules in detail, including the adoption of NFA Financial Requirements Section 16, and steps we are proposing to obtain real-time information from FCMs' depositories. Additionally, the CFTC imposed new requirements under Regulation 1.71, which calls for the development of procedures for all IBs and FCMs relating to research reports. We will discuss some of the common questions relating to this regulation and how firms can comply with the new requirements. Jennifer Sunu is Director of Compliance at National Futures Association (NFA), where she has worked since July 1994. Ms. Sunu’s responsibilities include supervising the Compliance Department in its completion of its core functions, including audits, investigations, and financial surveillance; overseeing the development of enforcement cases; responding to Member inquiries; and informing...

By NIBARead article
Marketing
2 min read

Rule 1.71 – Pay Attention, It's Now in Effect

At the Kansas City Conference we discussed CFTC Rule 1.71, which among other things, applies to conflicts of interests within a brokerage operation. That is to say that the “research” department and the “trading” desks must independently coexist. The genesis of the rule really comes from the securities industry where research departments tout trade recommendations to the brokers who in turn interact with their clients and often suggest the trade. Admittedly, there is some overlap with the commodities world, but not as much as one may suppose leading to a conclusion that trying to replicate this concept in our industry is like comparing apples and oranges. NIBA highly recommends you discuss your duties and obligations under this new rule with your FCM. However, the buck stops with you, the Introducing Broker. If you are sending out trading recommendation materials the consensus at this juncture is to conspicuously label them as...

By NIBARead article
Marketing
4 min read

Your FCM: Hero or Villain?

To put it lightly, selecting a futures commission merchant (“FCM”) has become increasingly difficult during the last year. With the failure of MF Global (“MFG”), Peregrine Financial Group (“PFG”), and the missteps of Knight Capital Group fresh in our memories it’s no longer as simple as selecting a name off of a list. It doesn’t matter how low commission rates are, how good customer service is, or if you prefer a different order entry system. The only thing that matters is whether or not investor monies will be available for trading and your business will be around tomorrow. During these trying times what can an individual investor, commodity trading advisor (“CTA”), Introducing Broker (“IB”), or any other market participant do to try and protect themselves from the catastrophic loss of their FCM? Over the last year I have had conversations with individual customers, professional brokers, regulators, politicians, attorneys, and other...

By NIBARead article
Marketing
2 min read

The Drought of 2012 - What It Means To Your Business

U.S. corn and soybean yields were dramatically reduced by the drought and heat wave of 2012. Hints of the drought began in mid-May as the coverage of subsoil dryness rapidly increased. Drought conditions reached a breaking point in mid-June when it became apparent that unusual warmth dating to November 2011 would continue. Throughout 2012, the Pacific Ocean warmed and the first El Niño event since July 2009 - April 2010 is near-imminent to begin. Although the upcoming El Niño is only expected to be weak or moderate, it decreases the odds for a repeat drought in South America during the upcoming corn and soybean growing season. However, it increases the chance for dryness to exist in Australia when its wheat is particularly sensitive. Recent history and the weakness of the upcoming El Niño limit potential weather implications for the U.S. over the next six to nine months. Our presentation at...

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Marketing
1 min read

NFA Aims to Bolster Protection for Futures Customers

The National Futures Association's board of directors has approved rules that would require futures brokerage to provide regulators with view-only online access to customers' account information. If the Commodity Futures Trading Commission approves the rules, they will apply to all futures commission merchants. Reuters (8/16), Bloomberg (8/16)  src: FIA SmartBrief   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
MF Global Updates
3 min read

Reponse to Feedback | NIBA's Letter to the Membership Regarding PFG’s Bankruptcy,

Subsequent to NIBA’s letter to the membership regarding PFG’s bankruptcy, we’ve had additional in-depth conversations with senior officials at the regulatory agencies and at the PFG trustee’s office. Here is what we’ve learned. 1. There are statutory limitations which restrict the scope of the NFA’s spending, and would seem to prevent the NFA from providing the assurance or adequate security to the PFG trustee which would be similar to what the CME Group provided to the MFGI trustee. Specifically, Section 17 of the Commodity Exchange Act (CEA) sets the standards for registered futures associations. This section was added to the Act in 1974, when Congress created the CFTC. The language of Sec. 17 was, for the most part, lifted from the statute that allowed for the creation of NASD, and there is little legislative history on Sec. 17 in general, and a futures associations’ authority to impose fees in particular....

By NIBARead article
Marketing
2 min read

The Plan, Stan—Moving Forward on a Futures Insurance Fund

Statement of Commissioner Bart Chilton on the Futures Investor and Customer Protection Act (FICPA) Proposal August 9, 2012 Last November, in the wake of the MF Global debacle, I called for a futures insurance fund. It made no sense to me that banking customers had insurance (up to $250,000) through the Federal Deposit Insurance Corporation (FDIC) and that security customers had similar protections up to $500,000 through the SIPC Fund. The support for such a futures insurance fund, at the time, was essentially zero. Nobody said they liked it. A few folks said they didn't like it. Perhaps it would only encourage risky behavior by firms if they knew there was insurance, one Member of Congress suggested to me. That's a good point, which is why such a fund (if it were to exist) should never pay out for trading losses or losses as a result of a downturn in...

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MF Global Updates
2 min read

PFGBest Trustee Message

The Trustee is working to be able to distribute funds to customers, with the authorization of the Bankruptcy Court, as soon as possible. However, the Trustee must ensure that any such distribution goes to the correct customers in the correct amounts. Such a distribution would, of necessity, rely on the books and records of Peregrine. This requires that the Trustee be satisfied that he can rely on the accuracy and integrity of those books and records to the extent they identify customers and set forth the balance due to such customers. This is especially important in a case that started because of a fabrication of certain of the company's books and records. Based on information received from law enforcement and regulatory authorities, the Trustee is investigating the validity of the customer account statements and must complete that investigation prior to any provisional distribution to customers. The Trustee and his professionals...

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MF Global Updates
1 min read

MF Global Agreement With CME Group Wins Court Approval

The trustee liquidating MF Global Inc. (MFGLQ) won court approval to receive $130 million from CME Group Inc. to pay back the bankrupt brokerage’s customers and other creditors. U.S. Bankruptcy Judge Martin Glenn said in court papers filed in Manhattan bankruptcy court today that the agreement can go forward, overruling an objection from one customer. Glenn had heard arguments in court on Aug. 8., including those from the Commodities Future Trading Commission and Securities Investor Protection Corp. in support of the pact. » Read Full Article at Bloomberg   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.

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