NIBA Journal

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

July 23, 2012

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...

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...

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...

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....

By NIBARead article

July 15, 2012

2 min read

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...

By NIBARead article

July 13, 2012

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."

By NIBARead article

July 12, 2012

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.

PFGBest Brokers: Make Sure You Have Ownership of Your Domain Name

As we go through the failure of PFGBest less than a year after MF Global, I wanted to alert brokers and GIBs in particular, to make sure you have ownership and access to your domain name. Being able to transfer your domain name in an emergency can help keep your email and website hosting up and running in the event of a crisis such as MF Global and PFGBest. Why does an FCM have control of my domain name? In the past, many FCMs tried to provide website and email hosting and support as a benefit to doing business with that FCM. In doing so, the FCM registered the domain name on behalf of the brokers. Unless ownership of the domain was transferred directly to the broker, it typically stayed registered to the person registering the domain name, typically the FCM. What is the impact of losing control of my...

MF Global payouts could take six years

Source: cattlenetwork.com The complex pursuit of the missing $1.6 billion in segregated customer funds lost by bankrupt broker MF Global could take up to six years to sort out, with full payback to customers unlikely, a top futures industry official said. 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.

New Filing Requirements - Segregated Investment Detail Reports

Notice to Members I-12-11 June 27, 2012 New Filing Requirements - Segregated Investment Detail Reports Pursuant to NFA Financial Requirements Section 8, effective July 2, 2012, all NFA Member FCMs that hold customer futures and option segregated funds and/or foreign futures and foreign options secured amount funds will be required to file the Segregated Investment Detail Report (SIDR) as of the 15th (or the following business day if the 15th falls on a weekend) and the last business day of each month. The report is due by 11:59 P.M. Eastern time on the business day following the 15th and last business day of each month. The first SIDR under this requirement will report the information as of close of business on July 16, 2012 and must be filed by 11:59 P.M. Eastern time on July 17, 2012. SIDR requires an FCM to provide the following information as of the reporting...

By NIBARead article

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