NIBA - Celebrating 35 Years

NIBA Journal

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

Chairman's Message | July 2012
Member Announcements
3 min read

Chairman's Message | July 2012

Dear Members - In our November 2011 newsletter I wrote: “The past three weeks have been the most frustrating, the most confusing, the most disappointing weeks I’ve spent in the 35 years I’ve been in the futures industry.” I never expected I would feel that way again. On July 9, two weeks ago, I was preparing for a trip to Washington, DC to meet with CFTC staff on several issues of concern to Association members, primarily the implementation of CFTC Rule 1.71 - Conflict of Interest. By the time I arrived at the Commission, the focus of our meetings had changed. Everyone wanted to discuss PFG. Most of us based in Chicago have met Russ Wasendorf, Sr. at one time or another. PFG was an NIBA member for a short period. When our Association would not back their efforts to have enhanced supervision and other responsibilities of the ‘tainted’ broker...

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Wake Up Call– Rule 1.71 Effective Date August 3
Marketing
3 min read

Wake Up Call– Rule 1.71 Effective Date August 3

CFTC Rule 1.71, applies to conflicts of interests within a brokerage operation, among other things. 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. This Rule was originally scheduled to be effective on June 4, 2012 but with the lobbying of the NIBA, FIA and others a 60 day extension was granted. Now it’s time to pay attention - August 3 the rule becomes effective. FCMs appear to be ahead of the curve on this rule...

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Judges in MF Global and PFG Bankruptcies to Decide Whether Proprietary FCM Assets are Allocated to Make Up Customer Seg Shortfalls
MF Global Updates
2 min read

Judges in MF Global and PFG Bankruptcies to Decide Whether Proprietary FCM Assets are Allocated to Make Up Customer Seg Shortfalls

The recent failures of MF Global and PFG represent two devastating FCM bankruptcies with substantial shortfalls in customer segregated assets. Each company also has significant firm assets – the MF Global trustee has apparently recovered more than $1.2B of firm assets and while it is too early to know what the PFG trustee will be able to marshal, PFG reported $31M of regulatory capital in its most recent Form 1-FR-FCM filing and there are news reports of an $18M office building, a $7M+ private jet and an array of other businesses and smaller properties. CFTC regulations provide that if there is a shortfall in customer segregated assets then FCM firm assets should be reallocated to make up the shortfall, giving priority to commodity customers over creditor claims. However, a bankruptcy court has found this rule to be invalid as exceeding the CFTC rule-making authority. The MF Global trustee and the...

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NIBA Chicago Conference Registration Now Open
Marketing
1 min read

NIBA Chicago Conference Registration Now Open

The NIBA Fall Membership Meeting is scheduled for the afternoon of September 12, 2012 at the UBS Center in Chicago. The Agenda includes: Business Sessions: Weather - the effects of this year’s extreme weather on the markets The Economy - the Federal Reserve Bank of Chicago will share their take on the economic outlook, nationally and locally Assessing the Risks of Doing Business with your FCM - a panel discusses how to spot distress signals, and how to protect yourself and your clients. Legal Update - among the topics: implementation of CFTC Rule 1.71 - Conflicts of Interest, NFA rule changes, CME Group responses to events of the past year Break-out Sessions: Ask NFA - two open-door sessions with NFA staff Ask Viaquest - NIBA’s new insurance benefits program explained by the provider Social Sessions: Coffee & Tea Breaks throughout the afternoon Networking Cocktail Reception held jointly with CTA Expo...

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Effective Date of NFA Financial Requirements Section 16 and the Related Interpretive Notice - FCM Financial Practices and Excess Segregated Funds/Secured Amount Disbursements
Member Announcements
11 min read

Effective Date of NFA Financial Requirements Section 16 and the Related Interpretive Notice - FCM Financial Practices and Excess Segregated Funds/Secured Amount Disbursements

Notice to Members I-12-14 July 18, 2012 Effective Date of NFA Financial Requirements Section 16 and the Related Interpretive Notice - FCM Financial Practices and Excess Segregated Funds/Secured Amount Disbursements The Commodity Futures Trading Commission (CFTC) has approved NFA Financial Requirements Section 16 and the related interpretive notice entitled FCM Financial Practices and Excess Segregated Funds/Secured Amount Disbursements. As described below, NFA Financial Requirements Section 16 and the related interpretive notice impose new requirements on FCMs with respect to customer segregated funds and secured amount funds accounts and require reporting of specific information regarding financial and operational information on a monthly or semi-monthly basis. The CFTC has also approved a minor amendment to NFA Financial Requirements Section 4, which codifies the requirement that any FCM that violates CFTC Regulation 30.7 is deemed to be in violation of an NFA Requirement. These requirements are effective September 1, 2012. Although this Notice...

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Frequently Asked Questions - Trading Program Performance Calculations and Presentation by CTAs with Client Assets held at Peregrine Financial Group, Inc.
Member Announcements
4 min read

Frequently Asked Questions - Trading Program Performance Calculations and Presentation by CTAs with Client Assets held at Peregrine Financial Group, Inc.

July 17, 2012 Frequently Asked Questions - Trading Program Performance Calculations and Presentation by CTAs with Client Assets held at Peregrine Financial Group, Inc. As a result of the enforcement actions taken by NFA and the CFTC against Peregrine Financial Group, Inc. (PFG), and the firm's subsequent bankruptcy filing, NFA has received a number of questions from CTAs regarding how to calculate and present performance information for Trading Programs with client managed accounts that had trading positions and other assets held at PFG at the time of these actions. NFA is issuing this notice to address those frequently asked questions. 1. All of my managed client accounts were held at PFG. The exchange-traded open positions in those accounts were liquidated at the direction of PFG's clearing firm. I have not had control over the forex positions since July 10, 2012 and have been unable to liquidate any of those positions....

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Important Message for Customers of Peregrine Financial Group and Peregrine Asset Management - Updated on July 12, 2012
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Important Message for Customers of Peregrine Financial Group and Peregrine Asset Management - Updated on July 12, 2012

FROM THE NATIONAL FUTURES ASSOCIATION. View Original Posting here. ---------------------------------------------------------------------------------------------------------------------------- On July 9, 2012, National Futures Association took an emergency enforcement action against Peregrine Financial Group, Inc. (PFG), an NFA Member futures commission merchant (FCM) and Forex Dealer Member (FDM) and Peregrine Asset Management, Inc. (PAM), an NFA Member commodity trading advisor (CTA) and commodity pool operator (CPO) which is closely affiliated with PFG. NFA took this action because NFA believes that PFG failed to maintain adequate funds in segregated accounts. The shortfall exceeds $200 million. In addition, PFG has filed false reports and has falsified bank records. It is NFA's understanding that almost all open customer positions at PFG have since been liquidated and that PFG will be generating accurate account statements as soon as possible. On July 10, 2012, the Commodity Futures Trading Commission (CFTC) filed an injunctive action in Chicago, and as a result, the court has...

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NIBA Statement on PFGBest Failure
1 min read

NIBA Statement on PFGBest Failure

On Thursday July 12th 2012, Melinda Schramm, Founder and Chairman of the NIBA was iin Washington, DC to discuss with CFTC official issues surrounding the collapse of PFG including orderly liquidation of customer positions. "The NIBA is stunned and outraged by the apparent actions of PFG and its owner. The NIBA supports a thorough investigation into the apparent fraud and deceptions, and if warranted, the prosecution of those involved," she said. Ms. Schramm added that, "The NIBA is continuing to work with the CME Group, the FCM community and other industry leaders to assure our customers that the industry is stable, and to help craft solutions to prevent failures such as this and that of MF Global, from ever reoccurring."

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CFTC reportedly plans client-fund protection in wake of allegation
1 min read

CFTC reportedly plans client-fund protection in wake of allegation

From the FIA SmartBrief today: The U.S. Commodity Futures Trading Commission is set to adopt safeguards for client funds in the wake of a shortfall allegation against Peregrine Financial Group and the collapse of MF Global Holdings, sources said. The regulator is also expected to approve a rule intended to hold executives at futures brokers responsible for customer funds. Full article at: Bloomberg, Reuters    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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