NIBA Journal

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

NFA Spreads Investor Education Message During The Fed's Money Smart Week
Member Announcements
April 19, 2012
3 min read

NFA Spreads Investor Education Message During The Fed's Money Smart Week

Coordinated by the Federal Reserve Bank of Chicago, National Futures Association and other strategic partners such as the Commodity Futures Trading Commission, the Chicago Board Options Exchange and the CME Group, have come together to organize Money Smart Week. From April 21-28, more than 450 free educational classes, seminars and activities will be offered around the Chicagoland area focusing on financial topics for people of all walks of life. On Wednesday, April 25, NFA will join other regulatory and enforcement agencies at a Financial Regulators Fair at the State of Illinois Building, Thompson Center. Representatives from twelve agencies, including the Commodity Futures Trading Commission (CFTC), Financial Industry Regulatory Authority (FINRA), the Securities and Exchange Commission (SEC) and the Federal Deposit Insurance Corporation (FDIC) will distribute information on financial protection, banking, credit and investing. The event will run from 10:00 a.m. to 2:00 p.m. "When making important financial decisions, even simple...

By NIBARead article
Gate 39 Media Launches Online Managed Futures Portfolio Management Tool—Clarity Portfolio Viewer™
Member Announcements
April 17, 2012
3 min read

Gate 39 Media Launches Online Managed Futures Portfolio Management Tool—Clarity Portfolio Viewer™

Chicago, IL—April 17, 2012—Gate 39 Media, a web marketing and development firm specializing in online solutions for the futures industry, announces the launch of its Clarity Portfolio Viewer™. Clarity Portfolio Viewer provides investors with instant access to the daily performance of their managed futures investments online; and for futures brokerages and Futures Commission Merchants (FCMs) it provides data across the managed futures accounts they manage. Clarity Portfolio Viewer’s format is understandable, attractive, and easy to read. Upon login, investors are clearly presented with the performance of their entire futures portfolio on a single screen. At a glance, investors know the profitability of their managed futures investments. Investment data is updated daily—not monthly like a statement. Investors can easily access statistics and account information such as rate of return, margin to equity, drawdowns, and more. The Clarity Portfolio Viewer also allows investors to quickly access reports such as margins, drawdowns, and...

CME Group Family Farmer and Rancher Protection Fund Update
MF Global Updates
April 4, 2012
2 min read

CME Group Family Farmer and Rancher Protection Fund Update

By Bryan Durkin, CME Group Chief Operating Officer and Managing Director, Products & Services We are pleased to announce that registration resources are now available for the CME Group Family Farmer and Rancher Protection Fund. This $100 million program has been established to provide further protection of customer segregated funds for U.S. family farmers and ranchers who hedge their business in CME Group futures markets. For registration forms and further information, please consult www.cmegroup.com/familyfarmerfund. Under the terms of the Family Farmer and Rancher Protection Fund, farmers and ranchers using CME Group products will be eligible for up to $25,000 per participant in the case of losses resulting from the future insolvency of a clearing member or other market participant. Farming and ranching cooperatives also will be eligible for up to $100,000 per cooperative. Since the failure of MF Global, in which a clearing firm violated CFTC regulations and misused customer...

By NIBA
FIA Special Report: House Financial Services Panel Holds Third MF Global Hearing
Marketing
April 3, 2012
6 min read

FIA Special Report: House Financial Services Panel Holds Third MF Global Hearing

Lawmakers on the Oversight and Investigations Subcommittee of the House Financial Services Committee held a hearing on March 28 to investigate the events that led to the loss of customer funds at MF Global during its final days before going into bankruptcy. The witnesses included four current and former MF Global executives. At the start of the hearing, Representative Randy Neugebauer (R-Tex.), the chairman of the subcommittee, emphasized to the witnesses that his committee is simply trying to discover what took place. “This is a hearing and not a trial,” Neugebauer said at the onset of the three-hour hearing. “It's important that we understand what was going on corporately, what was going on from a regulatory standpoint, and really what was going on within the systems that support this entity and these businesses.” Representative Spencer Bachus (R-Ala.),the chairman of the full committee, also repeated that none of the witnesses have...

By NIBA
Chairman's Message | April 2012
Member Announcements
April 2, 2012
3 min read

Chairman's Message | April 2012

For the past several years, I have served a s Special Advisor to the IB Advisory Committee of the NFA. At last week’s meeting, NFA staff presented several proposals in response to the MF Global collapse. These proposals would enable the NFA to work more closely with other SROs to recognize warning signs of imminent FCM failing(s). These proposals also include means by which professionals and the trading public can access information about their FCM more easily and in a more transparent form. Here is a short summary. The IB Advisory Committee viewed these ideas as favorable. Some will begin to take affect as soon as late spring; others require further approval and cooperation among regulatory entities. Requiring all FCMs to file daily seg reports. This report is already required at the NFA; now this will be required at all SROs. (According to reports, MFG was on daily reporting to...

By NIBARead article
Global Trading
Marketing
March 30, 2012
2 min read

Global Trading

As an IB, you may well have clients outside the US. In these cases, the need for non-US price data and currency conversions, time differences, language issues and more can arise. While the language issues may be difficult, and time differences inconvenient, software tools can help in other areas. As an example, a customer may wish to monitor their US futures position P&L in their own currency. A real time feed into a spreadsheet of both the futures price, say a near month gold contract, and a forward currency quote from a software package would work for this. As an example, using DTN ProphetX, we set up the quotes below: The Euro quote is in USD per Euro, and the 3 month forward quotes the number of pips to add to the spot price. The real time data in these quote cells can be linked directly to a spreadsheet, with...

By NIBARead article
Use and Investment of Customer Funds by Financial Institutions
Marketing
March 29, 2012
13 min read

Use and Investment of Customer Funds by Financial Institutions

1. Introduction Regulation 1.25, promulgated by the United States Commodity Futures Trading Commission (“CFTC”), sets forth the types of products and instruments in which futures commission merchants (“FCMs”) and derivatives clearing organizations (“DCOs”) may invest customer funds held in segregated accounts (“Permissible Investments”).[1] Related regulations pertaining to “secured funds” (CFTC regulation 30.7), “cleared swap customer collateral funds–FCMs” (CFTC regulation 22.2), and “cleared swap customer collateral funds–DCOs” (CFTC regulation 22.3) require that investment of those categories of customer funds comply with CFTC regulation 1.25. Most recently, the CFTC amended the scope of Permissible Investments in accordance with the Dodd-Frank Wall Street Reform and Consumer Protection Act (“Dodd-Frank Act”) and (in part) in response to the issues associated with the bankruptcy of MF Global.[2] In addition to dealing with Permissible Investments, the CFTC recently established regulations applicable to cleared swaps, which also cover the protection of customer collateral for cleared swaps and...

Rice Dairy | Focus on the Membership - March 2012
Focus on the Membership
March 23, 2012
3 min read

Rice Dairy | Focus on the Membership - March 2012

How did you get started? How did the firm get started? Brian Rice and Pete Turk, the owners of Rice Dairy LLC have a combined 45 years of experience in the futures industry and a combined 33 years being NFA registered. Brain started the company in 2002 with a vision in providing strong price risk management services in the dairy futures industry. With his focus on the floor, Brian created a streamlined execution venue for his customer base that was successful in building the company in the early days. Brian wanted to continue growing his company and expand his product offerings in other areas so in 2005 he partnered up with Pete; the two of them have taken the company to the next level as they converted their small boutique IB with a niche in floor execution to having 16 employees and a branch office in Pennsylvania that services all...

By NIBARead article
Summary of Last Ten Year Trends in FCM/Listed Derivatives Industry
Marketing
March 23, 2012
7 min read

Summary of Last Ten Year Trends in FCM/Listed Derivatives Industry

Overview of the Last Ten Years of Segregated Funds Data for US FCM’s: Source: CFTC, in Billion USD. 10 Year Evolution of Segregated Funds: As illustrated above, 2011 & 2009 are the only two years in the last 10 that the US segregated funds decreased, as published by the CFTC. The percentage decrease in 2011 was 4% and in 2009 the decrease was 15%. The total segregated funds at the end of December 2008, 2009, 2010 & 2011 were 158, 134, 151 & 145 billion respectively. Over the ten year period from 2002-2011 the customer segregated funds for US markets grew at a compounded annual growth rate (CAGR) of 12%. If one were to only look at the December 31st figures it could be accurately assumed that the industry has not yet recovered from the financial crisis of 2008 in terms of segregated funds. However, in February and July 2011,...

By NIBARead article
MF Global Customers Face Tax Reporting Issues
MF Global Updates
March 9, 2012
3 min read

MF Global Customers Face Tax Reporting Issues

Commodity customers of failed futures broker MF Global, Inc., face several tax issues relating to the broker's liquidation.  First, the customers must determine what tax items relating to their MF Global accounts to include in the preparation of their 2011 tax returns.  Second, the customers may need to decide when and whether they can deduct a loss for any amounts not recovered. Normally, commodity customers of an FCM receive from the FCM Forms 1099-B (which generally report trading gains and losses) and 1099-INT (which report interest income) that indicate what items the customers should include in their tax reporting.  The SIPC trustee administering MF Global's liquidation currently indicates on the trustee's website that he has requested an extension of the deadline for filing and mailing Forms 1099 to mid-March.  Notably, the trustee faces challenges in preparing the Forms 1099-B.  For customers that traded on foreign exchanges, the trustee must calculate...

By NIBARead article
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