NIBA Journal

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

November 19, 2014

Highlighting Important Changes Happening to BASIC

As part of its ongoing commitment to customer protection, National Futures Association (NFA) recently made changes to its display of futures commission merchant (FCM) financial information on its Background Affiliation Status Information Center (BASIC) online tool. BASIC is a comprehensive database of registration, disciplinary and financial information about derivatives firms and salespeople. It contains the disciplinary history and other background information of more than 150,000 individuals and 10,000 firms that currently, or have been, involved in the derivatives industry. Since 2012 when NFA enhanced the amount of information it provides to investors performing due diligence of firms, BASIC has displayed a variety of futures commission merchant (FCM) financial data. At this time, NFA made publicly available three reports on FCMs' percentage of customer segregated funds, secured amount funds and cleared swaps customer collateral held in cash, which are updated on a monthly or semi-monthly basis. However, in November 2013, the...

2014 NIBA Board of Directors Nominations

NIBA BOD Nominations The National Introducing Brokers Association nominates the following association members for positions to the Board of Directors. Nominees For Additional 3 Year Term: Ralph Preston: Asoociated Person, Heritage West Financial, Inc. (HWFI), San Diego, CA. Ralph has served on the NIBA Board of Directors for the past three years. He is the Committee Chairman, Service Providers and Joint Chairman, southern California membership meeting. Ralph has been registered with HWFI since 2003 and has been a principal of the firm since 2005. If no additional names are nominated, the above are deemed elected within 15 days of this notice. To nominate an additional candidate: i) the candidate must have been a NIBA member for at least 2-years prior to this notice ii) the candidate must have served on a NIBA committee or worked on a NIBA program or project such as the conference or newsletter iii) the candidate...

Market Data Fees - An Opinion

As the NIBA has been reporting since last November, the CME Group is discontinuing the current market data waiver effective January 2015. For many members of the NIBA and traders at large, the financial impact could be devastating. The Zaner Group, a longtime member of the NIBA located in Chicago, is a well established IB. They are a good example of what I consider to be a traditional IB model. The knowledgeable brokers have personal relationships with their clients and offer a variety of services. Matt Zaner, CEO of Zaner Group, shared a breakdown of costs associated with the platforms and data they currently use together with his expected expenses after the waiver is discontinued. The results are staggering. he facts: An office with a dozen brokers can expect an increase in expenses for market data alone of over $15,000 per month. All firms will see costs go up. Zaner...

Big Trends in Big Data:

Reprinted with permission from DePaul Business Exchange.  © 2014 by DePaul University Driehaus College of Business. All rights reserved.   Ninety percent of the data that exists in the world today has been created since 2010.   The consulting firm IDC predicts that by 2020 this digital universe will expand by a factor of 300, from 130 to 40,000 exabytes.   How much is that? One exabyte has 18 zeros behind it.   In people terms, that’s more than 5,200 gigabytes of data for every man, woman and child on Earth by 2020.   Consumers are the main source of this growth, creating more than two-thirds of the data in cyberspace through videos watched, photos shared, social media messages sent and purchases made online. Add to this a mountain of machine-generated data from smartphones, tablets and networked computers, plus supermarket scanners and other sensors, and what has come to be...

Master of One: The Specialist CTA

Over the past 10-20 years the client/broker relationship has fully evolved from a transactional one to a consultative one and appropriately to the client’s benefit.  Where commissions and fees used to be major elements of the sales cycle, now portfolio construction and access to alpha are key selling points toward attracting and maintaining investors.  This combined with an expanding universe of managed futures investments to choose from have brokers and advisors, now more than ever, charged with sourcing new and differentiated Commodity Trading Advisor (CTA) strategies and then building balanced, stable portfolios out of them.  Given this evolution and for ease of communication I will use the terms ‘portfolio advisor’ or just ‘advisor’ to indicate the person building the multi-CTA portfolio and ‘CTA’ to indicate the constituent Commodity Trading Advisors that are combined to form the portfolio. In this article we will: Define two basic types of CTA strategies Discuss...

By NIBARead article

October 23, 2014

3 min read

Ask the NFA

As your industry advocate, the NIBA provides many services which help your business stay in compliance with NFA regulations. "Ask the NFA," is the way you can ask questions about those regulations and compliance requirements without having to call NFA directly. Just email us at nfacomments@theniba.com and we will get the answers for you. Please keep in mind the purpose of this contact is to keep the lines of communication between NFA and NIBA members open, not to fix any specific individual concerns. This month's questions were selected from those submitted by NIBA members over the last two months. The answers were supplied by NFA staff. Question 1: "In the eyes of the NFA ..is it ok for a CPO to compensate any IB to sell it's product through fee share? (In order to maintain the client relationship.) If so, what would the best verbiage to use?" Answer: A CPO...

By NIBARead article

Housekeeping, Reminders and Updates--Oct 2014

October 22, 2014

16 min read

Housekeeping, Reminders and Updates--Oct 2014

New Self-Executing Registration Relief for Delegating CPOs On October 15, 2014, the Division of Swap Dealer and Intermediary Oversight (the “Division”) of the Commodity Futures Trading Commission (“CFTC”) issued CFTC Letter No. 14-126 (“Letter 14-126”). Letter 14-126 grants self-executing no-action relief from the requirement to register as a commodity pool operator (“CPO”) under the Commodity Exchange Act (the “CEA”) to persons that have delegated certain of their responsibilities as a CPO (“Designating CPO”) to another person that is registered as a CPO (“Designated CPO”), such that the Designated CPO will serve as the CPO of the pool in lieu of the Delegating CPO. In essence, Letter 14-126 is a progression of the relief previously addressed in CFTC Staff Letter No. 14-69 (“Letter 14-69”), which granted relief under essentially the same circumstances as Letter 14-126 but pursuant to a formal request for relief (as opposed to self-executing relief). In addition to...

By NIBARead article

Recent Changes to the U.S. Tax Laws and Their Impact

October 22, 2014

10 min read

Recent Changes to the U.S. Tax Laws and Their Impact

Four years ago in 2010, Congress enacted new tax legislation that only recently came into effect. This article briefly discusses two additional U.S. tax regimes arising from such new tax legislation: (i) the 3.8% net investment income tax plus the additional 0.9% Medicare payroll tax; and (ii) the 30% withholding tax under the Foreign Account Tax Compliance Act. These additional tax regimes have the effect of increasing the effective tax rate of individual taxpayers, and creating additional administrative responsibilities for withholding agents with respect to identifying payees, withholding taxes on amounts paid to payees, and reporting payee information to the relevant tax authorities. NET INVESTMENT INCOME TAX / ADDITIONAL 0.9% MEDICARE PAYROLL TAX Summary Net Investment Income Tax. The 2010 Affordable Care Act (the “Act”) imposed a new 3.8% tax beginning on January 1, 2013 on certain net investment income of individuals, estates and trusts that have income above certain...

Chairman's Letter

Dear Members - For the 23th year in a row, this year’s NIBA fall conference was the best one yet! It does seem as if we always think the NIBA meeting we have just finished was the absolutely best one ever. And looking back over the conferences since our first one in May, 1991, it is true. Each meeting addresses the hot topics of the day, highlights new products and services and brings old friends and colleagues together. Thank you to all the speakers, sponsors and supporters for making the September 22 Chicago event a success. Please take a moment to take our survey and let us know what you want to talk about at our next member meeting - southern California in January, 2015. In November, the first phase of CFTC Reg. 1.22 dubbed the “residual interest” regulation will be implemented. Although NIBA President Steve Petillo and I suggested...

NFA Representative Panel Thoughts and Follow Up

At the recent NIBA meeting in Chicago several panel discussions focused on issues affecting the IB, CTA and CPO community. Regulations are always a hot topic for both Independent and Guaranteed IBs, especially at a time when rules are being created by the CFTC. The “Residual Interest Rule” which affects the FCMs net capital requirement as of November 14, 2014 could have a lasting impact on many IBs. This rule requires the FCM to capitalize margin calls older than T+1 (trade day plus 1 day). To meet this new requirement the FCM will likely insist your customers meet their margin calls by wire or ACH, depending on the size of the call. In most cases, sending checks through the US mail will no longer be a viable option. In addition to the issue of collecting margins in a volatile market, the IB should be aware of their FCMs available excess...

By NIBARead article

Page 68

NIBA Journal

Highlighting Important Changes Happening to BASIC

2014 NIBA Board of Directors Nominations

Market Data Fees - An Opinion

Big Trends in Big Data:

Master of One: The Specialist CTA

Ask the NFA

Housekeeping, Reminders and Updates--Oct 2014

Recent Changes to the U.S. Tax Laws and Their Impact

Chairman's Letter

NFA Representative Panel Thoughts and Follow Up

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