Futures Commission Merchant

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A Futures Commission Merchant (FCM)[1] is an individual or organization that does both of the following:

FCMs are required to be registered with National Futures Association (NFA). FCM may also be members of one or more Designated Contract Markets.[2]

Registration is required unless the person handles transactions only for himself or his firm or firm's affiliates, top officers or directors; or if the person is a non-U.S. resident or firm with only non-U.S. customers and he or the firm submits all trades for clearing to an FCM.[3]

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.[4]

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[edit]

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[edit]