John C. Jensen

President, Membership Chairman of National Introducing Brokers Association

Interview Date: January, 2011

Interviewed by John F. Gallwas - Founder of Striker Securities

John C. Jensen (NFA 229230) is President of the National Introducing Brokers Association ("NIBA"), a Chicago based trade association. The NIBA provides a format for the members of the commodity futures industry to address mutual areas of interest, as well as to provide an information platform for the public. Members include Introducing Brokers ("IB"), Commodity Trading Advisors ("CTA"), Futures Commission Merchants ("FCM"), futures exchanges, and industry regulators. Mr. Jensen is also President and Founder of Heritage West Financial, Inc., a registered IB located in San Diego, California.

John Gallwas: The focus of this interview is to highlight the IB members of the NIBA and the various services these organizations provide to the futures customer. Futures regulators define the IB as "a firm or individual that solicits and accepts futures orders from customers but does not accept money, securities or property from the customer. An IB must be registered with the Commodity Futures Trading Commission and must carry all of its accounts through a futures commission merchant on a fully disclosed basis."

What is the difference between an "independent" and "guaranteed" IB and does it make any difference regarding the services provided? 

John Jensen: A Guaranteed Introducing Broker (GIB) has an exclusive relationship with an FCM and all accounts must be carried by the guaranteeing FCM. In return, the FCM "guarantees" the operations of the IB. Clients accounts are backed by the capitalization of the FCM, not the IB. The FCM is responsible for the manner in which the IB conducts its business; reviewing promotional materials, keeping them abreast of compliance issues, and conducting annual audits to ensure that they operating their business in compliance with National Futures Association (NFA) rules and regulations. 

An Independent Introducing Broker (IIB) on the other hand is self-guaranteed and must maintain its own minimum capital and can trade with more than one FCM. These IBs are generally stable due to their ability to maintain their own capital base. However, it is important to make sure that the IIB you are doing business with is adequately capitalized as it is possible they have little backing above their required minimum capitalization. The NFA maintains strict financial requirements for non-guaranteed IBs and closely monitors their operations. 

A Guaranteed IB might have services or products available that are offered exclusively through its FCM, while conversely, Independent IBs might not be able to offer those services or products to its clients but might have different ones available. 

John Gallwas: As of November 2010 there were 1,494 registered IB's, most of which are located in the United States. Over the last 30 years the IB has largely replaced the FCM "branch-office" network that used to provide brokerage services. Why did this happen and how did this evolution create the need for the NIBA? 

John Jensen: IBs replaced what were traditionally FCM Branch offices beginning with the change in registration brought about by the creation of the NFA. Branch offices, which some FCMs still have, are primarily FCM owned and operated. But IB offices are stand-alone operations, which puts liability one step further away from the FCM. Costs of operation of the office are borne by the IB, so FCMs can realize bigger profits while limiting risks. The registration requirement and treatment allowed by the NFA has made the IB structure practical for FCMs. 

The growing independent business IB community created a need for the NIBA to fill a void for an impartial, independent clearing house of ideas and support. The IB community also needed to show strength in numbers to have their voices heard and to accomplish together what they could not do apart. 

John Gallwas: IB's are independently owned and operated; offering a variety of futures related trading and investing services. What should we know about these services and where can our readers go for additional information?

John Jensen: Although IBs are able to execute trades in virtually every commodity; many tend to focus on a specialty or niche. This might occur due to their background before becoming an IB, their location (such as in the Agriculture Belt), or their client base (perhaps primarily interested in energy commodities or financials or metals). Someone searching for an IB to trade through should find one that matches their particular needs and interests as all IBs are not created equal. 

Obviously, an IB's website is the place to start. But, don't stop there. Take time in choosing a broker — it's one of the most important decisions when trading. Talk to friends or other traders for referrals, contact industry professionals or industry organizations such as the NIBA and its Futures Broker & CTA Directory to help in your search. Also contact the National Futures Association and find out if there are any disciplinary actions against a broker you are considering. If there are, ask the broker to explain the circumstances before dismissing them from your list. 

John Gallwas: We note than in addition to being the President of the NIBA's, you are also its Membership Chairman. Why should a non-member IB consider becoming a member of the organization?

John Jensen: For twenty years now, NIBA continues to be the foremost, nationally recognized organization representing Introducing Brokers and professionals in the futures and options industry. We are regularly called on by the U.S. Congress, the CFTC, the NFA and other agencies to represent our members interests and to participate in rule-making forums and to develop position papers on issues which affects activity in our members' offices.

But I truly believe the many benefits conferred by membership far exceed the legislative and lobbying efforts that the NIBA conducts on its members' behalf. I feel that membership in the NIBA serves as a "portal", if you will, to the industry. We are a close knit community of professionals that comes together with a common goal of seeing our members succeed and operate at the highest levels of professionalism. Membership in the NIBA puts you in the center of the conversation. 

Benefits include: Government representation, global resource network, networking events, annual meetings, website, education, mentorship program, and industry discounts.You can join online at www.theniba.com. Yearly dues: IBs/CTAs: $150, APs: $75, FCMs: $1,500, Associates/Vendors: $250.

John Gallwas: Will the NIBA be doing more joint conferences, like the recent CTA-Expo meeting, and is there anything special planned next year to celebrate the NIBA 20th birthday. 

John Jensen: Yes, we have upcoming conferences in NYC on April 20th and in Chicago on September 20th, each followed the next day with the CTA Expo. We also have an early summer meeting planned in Kansas City which is still in the planning stages.

For the 20th Anniversary of NIBA we are rolling out our new feature - Focus on the Membership. This begins with the February 2011 issue of the NIBA Journal and will feature a different long-standing member of the NIBA each month. Each member will share ideas about success-building and why he/she belongs to the NIBA.