Futures Commission Merchant
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A Futures Commission Merchant (FCM)[1] is an individual or organization that does both of the following:
- Solicits or accepts orders to buy or sell futures contracts or options on futures, and
- Accepts money or other assets from customers to support such orders.
FCMs are required to be registered with National Futures Association (NFA).
An FCM may either be a clearing member firm of one or more exchanges (a "clearing FCM") or a non-clearing member firm (a "non-clearing FCM"). Clearing FCMs are required to hold substantial deposits with the clearing house of any exchange of which it is a member. A non-clearing FCM must have its customers' trades cleared by a clearing FCM. Additionally, FCMs must follow CFTC guidelines in the following areas:
- Segregation of customer funds from the FCM's funds;
- Maintenance of a minimum of $1,000,000 in adjusted net capital;
- Reporting, record keeping, and supervision of employees and affiliated brokers; and
- Monthly submission of financial reports to the CFTC.[2]
SEC-registered broker-dealers that limit their futures-related activities to transactions involving certain types of investments can notice register with NFA as an FCM.
Futures Commission Merchants and the Dodd-Frank Act
In accordance with the Dodd-Frank Act, the CFTC issued several final rules regarding FCMs, including:
- Investment of customer funds and funds held in an account for foreign futures and foreign options transactions;
- Conflicts of interest for swap dealers, major swap participants, FCMs, and introducing brokers;
- Required compliance policies; designation of chief compliance officer; and
- Protection of cleared swaps customers before and after commodity broker bankruptcies.
For more information, visit the FCM regulation page on MarketsReformWiki.
References
- ↑ Futures Commission Merchant. National Futures Association, FCM Registration.
- ↑ Futures Commission Merchants and Introducing Brokers. CFTC.
