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Futures Commission Merchants (FCMs) & Introducing Brokers (IBs)

  • Segregation of Customer Funds

    • All customer funds for trading on designated contract markets (exchanges) must be kept apart (“segregated”) from the futures commission merchant’s (FCM’s) own funds—this includes cash deposits and any securities or other property deposited by such customers to margin or guarantee futures trading.
    • Segregated accounts must be titled for the benefit of the FCM’s customers.
    • Acknowledgements must be provided that would preclude a bank or clearinghouse from recognizing a right of offset against the account for the FCM’s debts.
    • Customer funds in segregation have a bankruptcy preference in the event of FCM insolvency.
    • To the extent that customer funds are not sufficient to pay customer claims, the remainder of what customers are owed will participate pro rata in the distributions to unsecured creditors of the bankrupt FCM.

    Part 30 Secured Amount

    • Part 30 of the CFTC’s regulations also requires FCMs to hold apart from their own funds a “secured amount” for U.S. customers trading on foreign boards of trade through FCMs.
    • The secured amount requirement is based on the lesser of:
      • Margin plus unrealized gains/losses plus long option value, minus short option value; or
      • Net liquidating equity (including market value of securities deposited).

    If the foreign jurisdiction has a segregation rule, the secured amount requirement cannot be less than the amount required by the foreign jurisdiction.

    Other Futures Commission Merchant and Introducing Broker Requirements