Futures commission merchants (FCMs) and retail foreign exchange dealers (RFEDs) must file monthly financial reports with the CFTC’s Division of Swap Dealer and Intermediary Oversight (DSIO)…
http://www.cftc.gov/MarketReports/FinancialDataforFCMs/index.htm
Floor trading for CBOT Grain and Oilseed futures and options will open at 7:20 a.m. CT on Wednesday, September 12 due to the release of two major USDA reports: Crop Production and World Agricultural Supply and Demand Estimates.
August 16, Chicago – The Board of Directors of National Futures Association (NFA) today approved amendments to NFA Financial Requirements that will require each futures commission merchant (FCM) to provide its Designated Self-Regulatory Organization (DSRO) with view-only access via the Internet to account information for each of the FCM’s customer segregated funds account(s) maintained and held at a bank or trust company. The same requirement would apply to the FCM’s customer secured account(s) held for customers trading on foreign futures exchanges.
In addition, the rule states that if a bank or trust company is unable to allow the FCM to provide its DSRO with view-only full access via the Internet, the bank or trust company will not be deemed an acceptable depository to hold customer segregated and secured accounts.
“Under this rule, DSROs will be able to check any customer segregated and secured bank account balance for any FCM any time, without asking the firm or the bank, and compare those balances to the firm’s daily segregation report,” said NFA President Dan Roth. “This is one step in a series of initiatives the Board is working on.”
NFA intends to expand this approach, once it is implemented, to receive daily reports from all depositories for customer segregated and secured accounts, including clearing FCMs. NFA plans to develop a program to compare these balances with those reported by the firms in their daily segregation reports. The system will then generate an immediate alert for any material discrepancies.
The rule was developed by the SRO Committee formed shortly after the demise of MF Global. The committee, comprised of representatives from NFA, CME Group, the InterContinental Exchange, the Minneapolis Grain Exchange and the Kansas City Board of Trade, has made several recommendations for rule changes that have already been approved by NFA’s Board in May and by the CFTC in July.
“Early on in its deliberations, the committee recognized that we need to make better use of technology to monitor firms for compliance with segregation requirements,” said Roth.
The newly approved requirements will now be sent to the CFTC for approval.
CHICAGO, Aug. 9, 2012 /PRNewswire/ — CME Group, the world’s leading and most diverse derivatives marketplace, today announced a record in daily trading volume for its Brent crude oil futures contract. These contracts are listed by and subject to the rules of NYMEX…
http://cmegroup.mediaroom.com/index.php?s=43&item=3303&pagetemplate=article
Washington, DC —Commodity Futures Trading Commission (CFTC) today announced that staff will hold a public roundtable on Thursday, August 9, 2012, from 9:30 a.m. to 5:00 p.m., to discuss customer protection requirements for futures commission merchants (FCMs). The objective of the roundtable is to gather public input on a variety of ideas to further protect customers…
December, 2010
It’s not overtly obvious, but these seemingly unrelated topics actually do have a connection. Let me explain.
President Bush was at the Union League Club in Chicago last month promoting the release of his memoir Decision Points. According to Crown Publishers, Decision Points will offer “gripping, never-before-heard detail” on such historic events as the Sept. 11, 2001, attacks. Anyway, that got me thinking; thinking about all the horrible life-altering events of that day and the days that followed. It also got me thinking about how those events were the catalyst for some very important regulatory changes in the financial services industry. Anti-Money Laundering (AML) rules and regulations were put into place in April of 2002 as a direct result of the International Money Laundering Abatement and Anti-Terrorist Financing Act of 2001, which was signed into law barely a month after the attacks. Business Continuity Procedures (BCP) a/k/a Disaster Recovery Procedures were adopted about a year after that.
AML always made sense to me. And while for some firms it required significant amounts of new procedures and additional staff, its goal was to help fight the war on terrorism, something everyone supported. Not to mention, it had some interesting elements; high finance, international intrigue and danger; heady stuff for a compliance staffer. Disaster Recovery Procedures on the other hand seemed like more of a nuisance; boring and void of any real impact, especially for smaller firms. While I’ve since changed my opinion, daily news accounts serve as a constant reminder that not everyone has learned the important lessons of September 11th.
I learned my lesson in October of 2005. In my previous role as the CFO of an online futures IB, I remember when news reports of Refco’s eventual failure started to surface. As any industry veteran can tell you, Refco had a regulatory history that would make Charlie Sheen blush. They were the bad boys of the futures industry and, like Houdini always seemed to escape the regulatory death blow. So when these charges of “accounting irregularities” surfaced it seemed like just more of the same. However this time they wouldn’t escape. As rumors swirled, we started getting calls from a significant number of clients we had introduced to Refco. Like us, our clients were getting nervous. Our choices were simple, either help the client close the account and get their money out, and likely lose their trust and continued business, or offer to move their account to another FCM. We did both.
For those clients that wanted to continue to trade but wanted a different and safer FCM, we were happy to oblige. Fortunately, we were an Independent IB and maintained multiple clearing relationships. We simply called one of our other FCMs, explained that we wanted to quickly move a large number of accounts, and with their help, got it done. It was a defining moment for us. Our clients were thrilled that we had an alternative for them. Without an effective Business Continuity Plan we faced not only losing a significant amount of business but maybe even the loss of our firm.
So, I’ve tied together President Bush and Refco. What about “The Chihuahua”?
Last month, Carnival Cruise ship, The Splendor, endured a fire in the aft engine room that disabled its six diesel electric engines. Passengers described the conditions as dark, smelly and frustrating. Fortunately, no one was injured. It appears that Carnival had some elements of a disaster recovery procedure but overall it wasn’t very effective. There was no heat, no hot water, no hot food, no cell phone service and no lights in the ships interior. They did however, manage to open the ships bar. It’s a safe bet that drinks were “on the house”. A poll of the ship’s passengers indicated that only about half of them would take Carnival up on its offer of a discount for a future cruise; a customer relations nightmare for sure. There’s no doubt Carnival will soon be back at the drawing board making significant changes to their business continuity procedures.
The ship arrived safely in San Diego but had to be escorted by two Mexican tug boats. Good thing they had two, because one broke down, temporarily leaving a tug nicknamed “The Chihuahua” to bring the mammoth cruise liner to port.
Disaster Recovery Procedures, Business Continuity Procedures, Backup Plans, whichever term you prefer, can be life savers and business savers. Take the time to evaluate your vulnerabilities and come up with some practical realistic solutions. Maybe even name your plan “The Chihuahua”.
Mark DeRolf is owner and Principal of Brightwork Financial Services, a Chicago-based Independent IB. He has more than 25 years experience in the financial markets industry most recently as CFO and CCO of an online retail brokerage firm. Throughout his career he’s provided support and guidance to FCM’s, Broker-Dealers, IB’s, CTA’s and proprietary trading groups. You can reach him at mark@brightworkfinancial.com.
NFA to Increase Assessment Fee Effective January 1, 2011
December 9, 2010
Effective January 1, 2011, NFA’s Futures Commission Merchant (FCM) assessment fee will increase from $0.01 per side to $0.02 per side. In addition, the Forex Dealer Member (FDM) assessment fee will increase from $0.01 per $10,000 of notional value to $0.02.
The increase will mark only the third time in NFA’s 28-year history that it has increased the fee. Conversely, NFA has decreased the fee eight times during the past 10 years.
In January 2008, NFA reduced the FCM assessment fee by 50% to $0.01 per side. When Members were notified of this fee reduction, NFA noted that the fee reduction may be sustainable for two years. In fact, NFA has been able to sustain the fee for the past three years despite a reduction in public trading volume. However, in order for NFA to continue to fund its operations and maintain adequate reserves, an increase in the assessment fee has become necessary.
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