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NIBA Journal

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

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Marketing
2 min read

New NFA Rules: Customer Protection and Others

Over the past several months, NFA has worked with the industry to develop a number of rules to strengthen the protection of customer segregated funds. We will describe these rules in detail, including the adoption of NFA Financial Requirements Section 16, and steps we are proposing to obtain real-time information from FCMs' depositories. Additionally, the CFTC imposed new requirements under Regulation 1.71, which calls for the development of procedures for all IBs and FCMs relating to research reports. We will discuss some of the common questions relating to this regulation and how firms can comply with the new requirements. Jennifer Sunu is Director of Compliance at National Futures Association (NFA), where she has worked since July 1994. Ms. Sunu’s responsibilities include supervising the Compliance Department in its completion of its core functions, including audits, investigations, and financial surveillance; overseeing the development of enforcement cases; responding to Member inquiries; and informing...

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Marketing
2 min read

Rule 1.71 – Pay Attention, It's Now in Effect

At the Kansas City Conference we discussed CFTC Rule 1.71, which among other things, applies to conflicts of interests within a brokerage operation. That is to say that the “research” department and the “trading” desks must independently coexist. The genesis of the rule really comes from the securities industry where research departments tout trade recommendations to the brokers who in turn interact with their clients and often suggest the trade. Admittedly, there is some overlap with the commodities world, but not as much as one may suppose leading to a conclusion that trying to replicate this concept in our industry is like comparing apples and oranges. NIBA highly recommends you discuss your duties and obligations under this new rule with your FCM. However, the buck stops with you, the Introducing Broker. If you are sending out trading recommendation materials the consensus at this juncture is to conspicuously label them as...

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Marketing
4 min read

Your FCM: Hero or Villain?

To put it lightly, selecting a futures commission merchant (“FCM”) has become increasingly difficult during the last year. With the failure of MF Global (“MFG”), Peregrine Financial Group (“PFG”), and the missteps of Knight Capital Group fresh in our memories it’s no longer as simple as selecting a name off of a list. It doesn’t matter how low commission rates are, how good customer service is, or if you prefer a different order entry system. The only thing that matters is whether or not investor monies will be available for trading and your business will be around tomorrow. During these trying times what can an individual investor, commodity trading advisor (“CTA”), Introducing Broker (“IB”), or any other market participant do to try and protect themselves from the catastrophic loss of their FCM? Over the last year I have had conversations with individual customers, professional brokers, regulators, politicians, attorneys, and other...

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Marketing
2 min read

The Drought of 2012 - What It Means To Your Business

U.S. corn and soybean yields were dramatically reduced by the drought and heat wave of 2012. Hints of the drought began in mid-May as the coverage of subsoil dryness rapidly increased. Drought conditions reached a breaking point in mid-June when it became apparent that unusual warmth dating to November 2011 would continue. Throughout 2012, the Pacific Ocean warmed and the first El Niño event since July 2009 - April 2010 is near-imminent to begin. Although the upcoming El Niño is only expected to be weak or moderate, it decreases the odds for a repeat drought in South America during the upcoming corn and soybean growing season. However, it increases the chance for dryness to exist in Australia when its wheat is particularly sensitive. Recent history and the weakness of the upcoming El Niño limit potential weather implications for the U.S. over the next six to nine months. Our presentation at...

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Marketing
1 min read

NFA Aims to Bolster Protection for Futures Customers

The National Futures Association's board of directors has approved rules that would require futures brokerage to provide regulators with view-only online access to customers' account information. If the Commodity Futures Trading Commission approves the rules, they will apply to all futures commission merchants. Reuters (8/16), Bloomberg (8/16)  src: FIA SmartBrief   The Opinions expressed are the opinions of the author. The opinions, the trading styles, trading information and trading programs are not endorsed by the NIBA, but are the individual opinions, styles, information and programs of the author.

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Marketing
2 min read

The Plan, Stan—Moving Forward on a Futures Insurance Fund

Statement of Commissioner Bart Chilton on the Futures Investor and Customer Protection Act (FICPA) Proposal August 9, 2012 Last November, in the wake of the MF Global debacle, I called for a futures insurance fund. It made no sense to me that banking customers had insurance (up to $250,000) through the Federal Deposit Insurance Corporation (FDIC) and that security customers had similar protections up to $500,000 through the SIPC Fund. The support for such a futures insurance fund, at the time, was essentially zero. Nobody said they liked it. A few folks said they didn't like it. Perhaps it would only encourage risky behavior by firms if they knew there was insurance, one Member of Congress suggested to me. That's a good point, which is why such a fund (if it were to exist) should never pay out for trading losses or losses as a result of a downturn in...

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Marketing
1 min read

Giddens seeks $160 million deal between CME and MF Global unit

James Giddens, the trustee liquidating the broker-dealer unit of MF Global Holdings, has asked Bankruptcy Judge Martin Glenn to approve a deal where CME Group would return $160 million to the division's estate. Glenn said he will rule later. The settlement deal is backed by the Commodity Futures Trading Commission. » Read Full Article on Reuters   The Opinions expressed are the opinions of the author. The opinions, the trading styles, trading information and trading programs are not endorsed by the NIBA, but are the individual opinions, styles, information and programs of the author.

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Marketing
3 min read

Drought Pattern Appears Well-Established

» Drought Monitor Presentation Omaha (DTN) – What a season the crop year 2012 has turned into. A season which began with bright hopes for good production, which were bolstered by rapid planting progress, has instead turned into a nightmare of disastrously hot and dry conditions. The Drought of 2012 has carved itself a huge niche in history--alongside the droughts of 1988, the mid-1950s, and the mid-1930s. The scope of this drought is mind-boggling. As of July 19, about 80 percent of the U.S. was experiencing some form of drought conditions. This was a stunning reversal of fortune from just a few months earlier, when it looked like corn growers were going to have an historically large harvest and drought was limited to the southern tier of the country. Scientists trace the drought's origins to a combination of factors, ranging from La Niña conditions in the Pacific Ocean, which tend...

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Marketing
3 min read

Wake Up Call– Rule 1.71 Effective Date August 3

CFTC Rule 1.71, applies to conflicts of interests within a brokerage operation, among other things. That is to say that the “research” department and the “trading” desks must independently coexist. The genesis of the rule really comes from the securities industry where research departments tout trade recommendations to the brokers who in turn interact with their clients and often suggest the trade. Admittedly, there is some overlap with the commodities world, but not as much as one may suppose, leading to a conclusion that trying to replicate this concept in our industry is like comparing apples and oranges. This Rule was originally scheduled to be effective on June 4, 2012 but with the lobbying of the NIBA, FIA and others a 60 day extension was granted. Now it’s time to pay attention - August 3 the rule becomes effective. FCMs appear to be ahead of the curve on this rule...

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Marketing
1 min read

NIBA Chicago Conference Registration Now Open

The NIBA Fall Membership Meeting is scheduled for the afternoon of September 12, 2012 at the UBS Center in Chicago. The Agenda includes: Business Sessions: Weather - the effects of this year’s extreme weather on the markets The Economy - the Federal Reserve Bank of Chicago will share their take on the economic outlook, nationally and locally Assessing the Risks of Doing Business with your FCM - a panel discusses how to spot distress signals, and how to protect yourself and your clients. Legal Update - among the topics: implementation of CFTC Rule 1.71 - Conflicts of Interest, NFA rule changes, CME Group responses to events of the past year Break-out Sessions: Ask NFA - two open-door sessions with NFA staff Ask Viaquest - NIBA’s new insurance benefits program explained by the provider Social Sessions: Coffee & Tea Breaks throughout the afternoon Networking Cocktail Reception held jointly with CTA Expo...

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