NIBA Journal

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

NFA Representatives Panel Preview
August 6, 2013
2 min read

NFA Representatives Panel Preview

I’ve been asked to moderate the NFA Representatives Panel at the upcoming NIBA membership meeting in September. This is an opportunity I’ve been hoping for -- an opportunity to discuss specifics with our elected representatives. I’ve wondered how the IB and CTA representatives to the NFA interact with other Board of Director members - do they get together ahead of the meetings to discuss issues to bring before the Board? I’ve wondered how they interact with NFA staff - do they have regular communications with staff members to update themselves on topics on which the NFA is working? How carefully are they following the CFTC and other regulators? Do our representatives bring specific issues proposed by the communities they represent before the NFA Board or do they simply address those topics brought to the table by the NFA? As a longtime member of the NIBA, I am aware of the...

By NIBARead article
From Paul J Georgy, GIB Representative on NFA Board of directors
August 6, 2013
2 min read

From Paul J Georgy, GIB Representative on NFA Board of directors

The CFTC is not done writing rules mandated by the Dodd-Frank Bill. Customer protection is the focus and who can argue with that? However, it will have an impact on the way FCMs and IBs do business. Currently the CFTC is considering a change in margining policy requirements. That means FCMs must have the ability to calculate accurate margin requirement intraday. The changes may cause intraday margining by certain participants and will increase capital requirements of FCMs. The trickledown effect on the IB could require our retail clients to meet margin calls daily. The old way of receiving a check by mail will not be good enough for some FCMs. There will be a comment period notice in the Federal Register. Make sure you comment on your behalf directly or through the NIBA. Another rule that will impact some IBs is the new taping requirement of all conversations that lead...

By NIBARead article
MF Global Trustee to Boost Distributions to Ex-Customers
MF Global Updates
July 19, 2013
2 min read

MF Global Trustee to Boost Distributions to Ex-Customers

MF Global Inc.’s former customers should get “significantly” increased distributions in coming months, and the goal is still 100 percent recoveries, the failed brokerage’s trustee said. Customers who traded on U.S. exchanges may get distributions starting in early September that would bring their percentage recoveries into “the high nineties” while customers who traded on foreign exchanges may get “in the sixties,” trustee James Giddens said in a statement today. “These further distributions are dependent on final approval of a motion by the trustee to confirm the allocation of property already received,” Giddens said. His projections assume that agreements with MF Global’s U.K. unit and JPMorgan Chase & Co. (JPM) take effect in mid-August. A prior projection in June estimated customers would get 94 cents on their dollar. Giddens said at the time that disputes including a lawsuit against directors and officers delayed the potential for full recovery. Most customers have...

By NIBARead article
MF Global Agrees to Pay Customers 100% to Settle CFTC Suit
MF Global Updates
July 8, 2013
2 min read

MF Global Agrees to Pay Customers 100% to Settle CFTC Suit

Last week, CFTC and MF Global Inc. agreed to a settlement whereby MF Global Inc. would pay restitution to its former commodity customers to bring them to a 100% return of their accounts. This restitution, which requires judicial approval, would likely involve the trustee sending out checks bringing both 4d domestic futures customers and 30.7 foreign futures customers to 100% toward the end of 2013. The trustee indicated in a consent order filed on the MF Global Inc. docket that the trustee will wait to receive a payment from the MF Global UK affiliate before requesting court authority to make the 100% restitution payments. The trustee expects to receive that payment from the affiliate around September 10, 2013, and the trustee would then file the request within five days of receiving the payment. The processes of achieving court approval and mailing checks may each then take several months, bringing customer...

By NIBARead article
NIBA Board of Directors Letter to Senate Committee
NIBA Briefings
July 3, 2013
4 min read

NIBA Board of Directors Letter to Senate Committee

July 1, 2013 The Honorable Debbie Stabenow Chairwoman U.S. Senate Committee on Agriculture, Nutrition and Forestry 328A Russell Senate Office Building Washington, DC 20510 The Honorable Thad Cochran Ranking Republican Member U.S. Senate Committee On Agriculture, Nutrition and Forestry 328A Russell Senate Office Building Washington, DC 20510 Dear Chairwoman Stabenow and Ranking Member Cochran: The National Introducing Brokers Association appreciates the opportunity to submit the following comments to the Senate Agriculture Committee (Committee) with regard to issues relating to the reauthorization of the Commodity Futures Trading Commission (CFTC). The National Introducing Brokers Association (NIBA) is a non-profit membership association of Introducing Brokers (IBs), Commodity Trading Advisors (CTAs) and Associated Persons (APs). Founded in 1991, the NIBA’s purpose is to provide education to registrants primarily engaged in futures and options transactions on behalf of retail market users. The Association has the support of Futures Commission Merchants (FCMs) and Exchanges, and has...

CTAs: Trend Following is What They Do
Trading Technology
June 26, 2013
5 min read

CTAs: Trend Following is What They Do

There was an odd story in the Financial Times titled, “Quant hedge funds hit by US bonds sell-off.” It was odd in that it treated a rather obvious observation as something more ominous and didn’t seem to have an understanding of the industry they were writing about. It further identified the “quant hedge funds” as “so called CTAs.” Someone needs to inform the FT and the author Sam Jones that CTA is a term of art, a regulatory designation meaning Commodity Trading Advisor (CTA). These CTAs trade futures contracts through various strategies on behalf of customers to hopefully earn positive returns similar to equity based mutual funds. Unlike mutual funds, however, CTA programs are absolute return vehicles that do not rely on positive equity performance. CTAs can go long or short a variety of futures markets across numerous sectors including fixed income, currencies, equity indexes, energies, livestock, grains, metals and...

By NIBARead article
Why Past Performance of a Conventional (60-40) Portfolio Is NOT Indicative of Future Performance
Marketing
June 26, 2013
5 min read

Why Past Performance of a Conventional (60-40) Portfolio Is NOT Indicative of Future Performance

For the past 31 years , a conventionally-diversified portfolio consisting of 60% stocks and 40% bonds has provided investors with satisfying returns of +10.80% annually. This was the result of both stocks and bonds advancing strongly throughout that period. Better yet, stocks and bonds complimented each other nicely. When stocks returned +19.35% annually from the market low in 1982 to its peak in August 2000, bonds lagged somewhat (although still returning a substantial +10.34% annually). But in the period from the 2000 market peak to the 2009 market low, while stocks declined a sharp -43.51%, bonds balanced that with a strong +61.78% rally. More recently, both stocks and bonds have advanced, with the 60-40 portfolio gaining an annualized +15.36% from the market low in March 2009 to May 31, 2013. The past 31 years was an unprecedented period for a 60-40 portfolio; one that wasn’t seen prior. In fact, as...

By NIBA
CFTC Issues Interpretive Letter on Regulation 1.73
June 26, 2013
5 min read

CFTC Issues Interpretive Letter on Regulation 1.73

Recently, the Commodity Futures Trading Commission (“CFTC”) issued an interpretive letter regarding new CFTC Regulation 1.73 and its applicability to introducing brokers (“IBs”) that enter into give up arrangements with their customers' clearing futures commission merchants (“FCMs”). In its letter, the CFTC confirmed that the term “executing firm” in Regulation 1.73 refers to both IBs and FCMs that execute orders for customers, requiring IBs who execute give-up orders on behalf of their clients to adopt risk management procedures. Background on CFTC Regulation 1.73 By way of background, adopted in 2012 as part of the Dodd-Frank Wall Street Reform Act, Regulation 1.73 requires clearing FCMs (and in some instances any “executing firm”) to establish risk-based limits for their proprietary and customer accounts based on position size, order size, margin requirements, or similar factors, and requires FCMs to screen orders for compliance with those risk-based limits. Clearing FCMs are permitted to retain...

By NIBARead article
MF Global’s Jon Corzine said to face CFTC lawsuit on collapse
MF Global Updates
June 26, 2013
4 min read

MF Global’s Jon Corzine said to face CFTC lawsuit on collapse

Jon S. Corzine, the former New Jersey Governor and Goldman Sachs Group Inc. co-chairman, probably will be sued by the Commodity Futures Trading Commission for his role in the collapse of MF Global Holdings Ltd., said a person with direct knowledge of the situation. The CFTC, the federal agency that regulated MF Global until the brokerage filed for bankruptcy in 2011, could sue Corzine as soon as this week, said the person, who asked for anonymity because the case isn’t public yet. Steve Adamske, a spokesman for the CFTC in Washington, declined to comment. The suit against Corzine, 66, would mark a new low for the Wall Street veteran, who rose to the top of Goldman Sachs before being elected New Jersey’s senator and then governor. He could face millions of dollars in fines and a ban from trading commodities if he’s found liable, the New York Times reported late...

By NIBARead article
NFA's Board approves expanded Fiscal Year 2014 budget
June 6, 2013
3 min read

NFA's Board approves expanded Fiscal Year 2014 budget

A number of factors are having a significant impact on NFA's operating budget for Fiscal Year 2014. The substantial expansion of NFA's regulatory duties has resulted in an 18 percent increase in NFA's budget for Fiscal Year 2014, which begins July 1, 2013. NFA's Board of Directors met on May 16 and approved a budget of $74 million for the coming fiscal year. One reason for the significant rise in spending is due to the registration and monitoring of new swap dealer (SD) and major swap participant (MSP) Members. NFA is currently hiring and training additional staff to manage these oversight efforts. NFA is in the second year of a ramp-up of its swaps regulatory program. There currently are 80 provisionally registered SDs and two provisionally registered MSPs. NFA's Board also recently approved a membership dues structure for SDs and MSPs. "In order for SDs and MSPs to obtain and...

By NIBARead article
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