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NIBA Journal

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

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Marketing
2 min read

NIBA’s Semi-Annual Legal Review Summary

Many introducing brokers (IBs) have claims in the MF Global Inc. (MFGI) SIPA liquidation. These claims have generally been for IB proprietary funds held in MFGI segregated futures accounts and for commissions earned during October 2011, although some IBs are also evaluating the potential for other claims based on damages and lost profits deriving from MFGI's collapse. Claims for funds held in futures accounts were commodity customer claims that needed to be filed by January 31, 2012. Claims for brokerage commissions earned during October 2011 are general unsecured claims that must be filed by June 2, 2012. The MFGI trustee has indicated that he will provide October 2011 commission run statements to IBs who request them to the extent the run statements are available. Claim traders are apparently offering around 20 cents on the dollar to purchase general unsecured claims, so IBs may be able to sell their claims for...

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Marketing
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...

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Marketing
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...

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Marketing
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...

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Marketing
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,...

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Marketing
2 min read

Introducing Broker--Net Capital Calculations

During a recent routine NFA audit of one of our Introducing Broker (IB) clients, it became apparent that NFA is enforcing the following: Security Deposits with your FCM are treated as 50% current and 50% noncurrent for capital purposes. Escrow Accounts (or other trading accounts) at your FCM are considered current for capital purposes but has a 50% haircut during the Net Capital Computation. If the Escrow account is being traded by your firm at a level equivalent to the dollars in the account, then the account is considered a firm trading account and the account balance is considered current without the 50% haircut. However, if there are uncovered open positions in the account, the standard haircut against net capital applies on those open positions. An Error account with your FCM may also be reviewed in the same manner as an Escrow account. Therefore, we recommend reviewing your accounts held...

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Marketing
5 min read

Top 10 Google AdWords Mistakes Brokers Make When Generating Futures Leads

Google AdWords is the most effective, budget-friendly, and powerful way to generate futures leads. Ads can be displayed not only on Google but on websites of all sizes from CNBC and Bloomberg to individual bloggers. Add the ability to view informative reports and set your own-budget (and stop-and-start on the fly) and you see why AdWords is the advertising method of choice. However, in the ongoing quest for futures leads, many of the brokers we speak with have tried Google AdWords or other Search Engine Marketing tools but have been disappointed with the results. Common complaints are that they spent a lot of money, didn’t generate many leads, and it was harder than they thought to set up. In our experience of executing and managing Search Engine Marketing campaigns for futures brokers, here’s what we’ve identified as the top 10 AdWords mistakes: AdWords Mistake #1: Buying Too Many Keywords When...

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Marketing
2 min read

ICE Futures U.S. Offers Weekly Option Contracts on Sugar No. 11, Cotton No. 2 and Coffee “C” Futures

ICE Futures U.S. now lists weekly option contracts on Sugar No. 11®, Cotton No. 2® and Coffee “C”® futures contracts. The new weekly option contracts are short-life options that share most of the contract terms of the existing monthly option contracts – including strike price, minimum price quote, trading hours and exercise and assignment provisions. The weekly options, however, expire on a different date than the monthly options, providing an expiration on each Friday that is not already the expiration date for a monthly option on the relevant futures contracts. For each product, three weekly option expirations are listed concurrently, so each weekly option has a trading life of approximately four weeks. A Frequently Asked Questions document is available for the weekly options that covers, for example, how to determine the underlying futures contract for a weekly option and the naming/product code convention for the ICE weekly options. You can...

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Marketing
2 min read

NFA Requires Updates, Disclosures and Filings from CTAs and CPOs That Managed MF Global Assets

In the wake of the MF Global collapse, NFA is requiring CTAs and CPOs that managed assets at the failed FCM to make certain updates, disclosures and filings. CTAs must calculate their performance capsules in accordance with NFA Notice to Members I-12-04. That notice essentially provides that CTAs with programs involving MF Global managed accounts that were not notionally funded and that were frozen by the bankruptcy should not include the MF Global account performance in the program's track record if the program also had accounts at one or more other FCMs or if the CTA was forced to close positions and cease trading during November, 2011 after positions and margin cash were transferred. In the latter case, the track record should show "NT" for the month, and in the former case only the accounts at other FCMs should be used to calculate performance. If the program had only non-notionally...

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Marketing
1 min read

NIBA Announces a New Service Provider Directory

The National Introducing Brokers Association has been the leading nexus between futures industry professionals since 1991. In keeping with its networking spirit the NIBA is excited to announce the new Service Provider/Vendor category of membership to encompass companies that supply products and services to our members. NIBA’s service and vendor providers understand the unique needs of futures professionals and can be found in the Association tab of the NIBA website under Service Providers. Here you will find a wealth of services that are tailored to your industry specific needs. In the directory you will find: Online Marketing Solutions Attorneys & Legal Counsel Lead Sources Accounting & Compliance Custodial Services Market & Data News Exclusive Discounts So whether you are looking to stay up to date on industry regulations, technology to help you grow your business, or niched oriented advice the NIBA Service Provider Directory is the one stop you need...

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