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Futures Broker Due Diligence Notes post PFG


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Futures Broker Due Diligence Notes post PFG

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  #101 (permalink)
Nikopol
Bogota
 
 
Posts: 13 since Aug 2012
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Thanks everybody for keeping alive this important topic ( the return of principal aspect), I have a doubt, if you have your account with an IB, where is your risk? is it in the Clearing firm (FCM) or in both institutions?

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  #102 (permalink)
FCMReform
New York/NY
 
 
Posts: 45 since Aug 2012
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Nikopol View Post
Thanks everybody for keeping alive this important topic ( the return of principal aspect), I have a doubt, if you have your account with an IB, where is your risk? is it in the Clearing firm (FCM) or in both institutions?

Our focus has been on the FCM's since this is where the funds are housed.

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  #103 (permalink)
FCMReform
New York/NY
 
 
Posts: 45 since Aug 2012
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The Futures Industry Association has submitted a comment letter to CFTC requesting the comment period be extended for one month due its concern that "increased costs imposed on FCMs will adversely affect the ability of many FCMs to compete effectively."

View Comment - CFTC

CFTC has received over 30 comment letters regarding their proposals to date. Most of the letters are coming from retail forex/metals traders (many inspired by the events taking place at PFG) asking for additional customer protections for retail forex. You can leave your comments below:

Public Comment Form - CFTC

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  #104 (permalink)
Nikopol
Bogota
 
 
Posts: 13 since Aug 2012
Thanks: 3 given, 4 received

This is a serious situation, it looks to me like regulators are focusing in increasing costs and increasing margins, they are just diminishing the appeal and the viability of the derivatives market for speculators and hedgers (and in general society will receive the extra cost of illiquid markets and of limited insurance possibilities and costs) , I believe the focus and the reason of this situation and the reforms is in the protection of the customer funds, but it looks like regulators are taking advantage of the situation for imposing more rules, in my opinion they must focus more in generating more control in the FCMs transparency, and in the control of the segregated funds:

Also if regulators don't find a cost efficient solution, this can generate some kind of self fulfilling prediction, where Merchants in a difficult situation will be in a more difficult one if their costs grow substantially. (merchants lose, market lose, Big Auditing firms win)

Is the solution some kind of real time or end of day public accountability system in sync with the FCM´s bank accounts, in sync with a surveillance system from the CFTC, an the Exchange system? Well this is just an possibility (that seems included -in some way- in the proposal). But what is clear to me is that it is necessary to call regulators attention to the transparency and accounts protection (attainable with technology systems), instead of changing the rules of the market, and putting merchants under more financial pressure.

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  #105 (permalink)
 djkiwi 
Mercer Island WA
 
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Nikopol View Post
This is a serious situation, it looks to me like regulators are focusing in increasing costs and increasing margins, they are just diminishing the appeal and the viability of the derivatives market for speculators and hedgers (and in general society will receive the extra cost of illiquid markets and of limited insurance possibilities and costs) , I believe the focus and the reason of this situation and the reforms is in the protection of the customer funds, but it looks like regulators are taking advantage of the situation for imposing more rules, in my opinion they must focus more in generating more control in the FCMs transparency, and in the control of the segregated funds:

Also if regulators don't find a cost efficient solution, this can generate some kind of self fulfilling prediction, where Merchants in a difficult situation will be in a more difficult one if their costs grow substantially. (merchants lose, market lose, Big Auditing firms win)

Is the solution some kind of real time or end of day public accountability system in sync with the FCM´s bank accounts, in sync with a surveillance system from the CFTC, an the Exchange system? Well this is just an possibility (that seems included -in some way- in the proposal). But what is clear to me is that it is necessary to call regulators attention to the transparency and accounts protection (attainable with technology systems), instead of changing the rules of the market, and putting merchants under more financial pressure.

@Nikopol

I agree 100%. This issue is merely one of effective segregated bank account control and monitoring. If this had been in place and operating effectively the issue would never have occurred in the first place.

There is one fundamental point in all of this. When we place our money with the FCM we are not "investing" in the FCM which is why financials are irrelevant. All the FCM is doing is holding funds on our behalf. For this reason the regulator must focus on implementing effective safeguards to protect these funds.

On IB risks look here:


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  #106 (permalink)
Nikopol
Bogota
 
 
Posts: 13 since Aug 2012
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@djkiwi


It looks like I made an error using this redundant acronym: "IB", I was trying to mean Introducing Broker.


Anyway thanks for kindly posting the link to the interactive brokers discussion.

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  #107 (permalink)
FCMReform
New York/NY
 
 
Posts: 45 since Aug 2012
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FCMReform View Post
The Futures Industry Association has submitted a comment letter to CFTC requesting the comment period be extended for one month due its concern that "increased costs imposed on FCMs will adversely affect the ability of many FCMs to compete effectively."

View Comment - CFTC

CFTC has received over 30 comment letters regarding their proposals to date. Most of the letters are coming from retail forex/metals traders (many inspired by the events taking place at PFG) asking for additional customer protections for retail forex. You can leave your comments below:

Public Comment Form - CFTC

The CFTC has now extended its open comment period:

CFTC Extends Public Comment Period on Rulemaking Enhancing Protections Afforded Customers and Customer Funds Held by Future Commission Merchants and Derivatives Clearing Organizations

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  #108 (permalink)
FCMReform
New York/NY
 
 
Posts: 45 since Aug 2012
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The bankruptcy judge for the PFG Best case is expected to decide on the complaint filed by the forex/metals account holders at PFG. AP has an article out detailing the conflict between futures and forex customers:

https://www.boston.com/business/marke...5VM/story.html



Quoting 
Customers who traded foreign currency through Peregrine Financial Group, Inc. say their money is sitting in bank accounts that can be traced directly to them — and they want it back. Yet seven months after the company collapsed when Chairman Russell Wasendorf Sr. confessed to a stunning fraud, they haven’t received a dime. Other customers who traded commodities such as oil and corn have received up to 40 percent back — even though Wasendorf looted their accounts to expand his business empire and fund his lavish lifestyle.

Retail forex traders still have an opportunity to tell Washington that this kind of disparate treatment of retail forex customers needs to end. The CFTC comment period on additional customer reforms remains open:

https://comments.cftc.gov/PublicComme...m.aspx?id=1320

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  #109 (permalink)
FCMReform
New York/NY
 
 
Posts: 45 since Aug 2012
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The CFTC held another public roundtable on the PFG/MF Global customer protection proposals that are now open for comment:

MF Global Customer Funds Rules Get Another CFTC Hearing - Bloomberg


FXCM continues to advocate for greater FCM/RFED transparency as detailed below. The CFTC will keep its comment period open for one more week.


Proposals to Bring Full Market Transparency and Accountability to the Futures/Forex Industry

1) Require All FCM’s to Publicly Publish Their Financials Once a Quarter:
Currently, the CFTC publishes monthly “Net Capital” reports that disclose to the public how much money a Futures Commission Merchant has set aside in capital. However, that report provides very little insight into how well the company is doing financially. By requiring FCM’s and RFED’s to publish their audited financials the trading public will know how much risk they are taking with each firm since investors will be able to weigh the liabilities along with the excess capital that these firms have.

Furthermore, the published financial statement should include everything (i.e. holding company’s financials) since what happens to other subsidiaries of the company can easily affect the regulated FCM/RFED. Each company should be required to provide a link to its financials on its own homepage so that the public can do its proper due diligence.

Too often, those firms that are teetering on the edge of bankruptcy lure customers in by offering unsustainable gimmicks (dirt cheap commissions, account opening bonuses) that temporarily puts off the inevitable. Customers should be aware of the perilous finances of those firms that would offer these kinds of gimmicks before opening an account with such a firm. PFG Best was a classic example of a firm that used such gimmicks as they routinely low balled their competitors with uneconomical discounts that no reputable, legally compliant firm could match.

2) Require all FCM’s to Employ a Top Ten Accounting Firm:
There need to be much higher accounting standards than currently exist in the FCM world. The Platt Group publishes an annual ranking of public accounting firms that could be used by FCM’s. Whether it is top 10 or top 25, the main point is that FCM’s must use a nationally recognized and respected accounting firm that could apply the same tough standards to FCM’s that publicly traded companies must meet.

While no one proposal will guarantee that a future FCM will not fail, these proposals will enhance the public’s due diligence capabilities by bringing greater market transparency and accountability to the world of futures/forex trading.

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  #110 (permalink)
FCMReform
New York/NY
 
 
Posts: 45 since Aug 2012
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The comment period for the CFTC’s additional customer funds protection proposal is now closed. But there will be additional opportunities to advance the cause of greater retail forex protections this summer. Yesterday, Senate Agriculture Committee Chairwoman Debbie Stabenow announced that she and Ranking Member Thad Cochran are soliciting comments from the general public in the run up to this year’s CFTC Reauthorization:

Sen. Stabenow Announces CFTC Reauthorization Plan - Farm Futures


Quoting 
"These comments and recommendations will become part of the public conversation," Chairwoman Stabenow said. "We would like to hear from the public on a couple of fronts: concerns with commodity market oversight generally and on the need for additional customer protections in light of the failures at MF Global and Peregrine Financial. Senator Cochran and I will work together closely on this issue. The process will be open and bipartisan while the product will be consensus-driven."

Retail foreign exchange has long been in need of additional customer protections, in particular segregation of customer funds and account insurance. We expect these issues to be front and center this summer and customer backing will be necessary if we are to have any success convincing Capitol Hill to support these necessary reforms. More to come in the weeks and months ahead.

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  #111 (permalink)
 Big Mike 
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I received this today from the Commodity Customer Coalition:


Quoting 
The Commodity Customer Coalition has launched its survey for commodity account insurance and we need your help. We are asking public commodity customers complete our customer survey.

The information collected from this survey will provide data critical for modeling insurance plans and determining market sentiment for a protection fund. Your information will be kept anonymous and not used for any other purpose than to present anonymous summary data in aggregate.

Link for survey:
https://www.surveymonkey.com/s/FJTMH85

Mike

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  #112 (permalink)
 nakachalet 
siam, west coast andaman sea
 
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Big Mike View Post
I received this today from the Commodity Customer Coalition:



Link for survey:
https://www.surveymonkey.com/s/FJTMH85

Mike

hi mike, may i pls ride on the back of your post, as an addition to what actually still exists in the pitiful world of traders, brokers and clearing houses....

here is an example of the recent correspondence as of 2013/03/01:

r...., mind you, you might have only solved my problem only in your head. but in all practicality and reality, my existing difficulties have never been even touched on.

r....., i am asking again, and for all practical purpose--you should on your own initiative have already attached a copy of what you claimed to have been resent to me, with your last email claiming that this case is closed. it is preposterous for you to make such a one sided claim.

r....., just, plse resend me those forms that you claimed to have been sent to me; if what you claimed is the fact. for i am just too tired to fill out those forms again and again just to get my very own money back from your company after pfg's bankruptcy proceedings reducing my trading account to only a few pitiful dollars.

r....., thx again for your help.

and much thx to everyone, particularly; b... and r... who have been helping in the background to get me to the right spot. much appreciation indeed.

nakachalet@gmail.com

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  #113 (permalink)
 mongoose 
Chicago, IL
 
Experience: None
Platform: oil super computer
Trading: multiple
 
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nakachalet View Post
hi mike, may i pls ride on the back of your post, as an addition to what actually still exists in the pitiful world of traders, brokers and clearing houses....

here is an example of the recent correspondence as of 2013/03/01:

r...., mind you, you might have only solved my problem only in your head. but in all practicality and reality, my existing difficulties have never been even touched on.

r....., i am asking again, and for all practical purpose--you should on your own initiative have already attached a copy of what you claimed to have been resent to me, with your last email claiming that this case is closed. it is preposterous for you to make such a one sided claim.

r....., just, plse resend me those forms that you claimed to have been sent to me; if what you claimed is the fact. for i am just too tired to fill out those forms again and again just to get my very own money back from your company after pfg's bankruptcy proceedings reducing my trading account to only a few pitiful dollars.

r....., thx again for your help.

and much thx to everyone, particularly; b... and r... who have been helping in the background to get me to the right spot. much appreciation indeed.

nakachalet@gmail.com

Comparing Vision to pfg?

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