The Complete

IB Handbook
WRITTEN BY MELINDA H. SCHRAMM
SPONSORED BY CME GROUP

Copyright © 2018 MHS Capital Resource, Inc. All rights reserved

TABLE OF CONTENTS
EACH CHAPTER INCLUDES A SELF-CHECKLIST

CHAPTER 1 INTRODUCING BROKERS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3

A look into the 2018 State of the IB Community, including forex, swaps and broker-dealer firms.

CHAPTER 2 REGISTRATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
IIB or GIB? Who has to register and how.

CHAPTER 3 FCMs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
The Big Question: How to choose your FCM, and how an FCM chooses you.

CHAPTER 4 BUSINESS PLAN . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32

Your trading plan is NOT your business plan – a common sense approach to operating an IB.

CHAPTER 5 THE REGULATORS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41

CFTC? NFA? Who are these folks and why it matters.

CHAPTER 6 FIRST AUDIT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53

You’re having an Audit!

CHAPTER 7 RESOURCES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62
Web designers, ethics training providers, white papers and lawyers – oh my!

CHAPTER 8 TRADE ASSOCIATIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 74

Conferences, newsletters and networking – get it all and more with a trade
association membership
 The Complete IB Handbook
Introduction

INTRODUCTION

So you decided to become an Introducing Broker During the summer of 2015, the CME Group closed
(IB)… Congratulations. most of its futures trading pits on its several
It’s been over 35 years since the IB came into exchange floors. And, at the end of 2017, the
existence, and the futures industry has changed exchange began trading a futures contract based
dramatically. off bitcoin. These events are part of the end of one
era in the futures industry and the start of another.
Many changes came about because of advances
in technology. Electronic order placement has Introducing Brokers have changed with the times,
replaced much of the in-person conversation too. Although agricultural products are still the
once necessary to place a trade, research is easily most actively traded markets by customers of IBs,
accessible online and cryptocurrencies are an all IB offices report they place client transactions
actual thing! in significant numbers for financial products such
as the S&P 500 futures contracts, interest rate
Many regulatory changes were brought about as
futures and foreign currencies futures and options.
a response to the September 11, 2001 attacks on
Markets which were once considered primarily for
the U.S., and to the unprecedented failures of two
professional traders – such as metals, energies,
brokerage firms in 2011 and 2012. Legislation,
dairy and options transactions – are widely traded
including the Dodd-Frank Act, has had a substantial
in IB offices today.
impact on all registrants in the futures industry.
Introducing Brokers are a valuable and effective
And, of course, changes have happened simply
part of the overall market scheme. They provide
because the way the industry is conducted has
research and advice, along with risk management
changed. In July 2007, the Chicago Board of Trade
control and expert market knowledge to a wide
and the Chicago Mercantile Exchange merged
range of customers.
to form CME Group, creating the world’s leading
and most diverse derivatives marketplace. Today, Running an IB office is a business like any other.
CME Group also includes the operations of the To be successful in the derivatives industry, you’ll
exchanges we used to know as the New York need a good business plan, you’ll have to work
Mercantile Exchange, COMEX and the Kansas City hard and you’ll have to stay in strict compliance
Board of Trade. with industry regulations. The Complete IB
Handbook, 8th Edition, 2018, will help you make
Brokerage houses have merged or terminated
good decisions, and support your efforts as an
business, so that there are fewer firms with which
Introducing Broker.
to clear retail customer business than at the first
printing of this Handbook in 1999. That makes your
FCM choice more important than ever before.

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cmegroup.com

CME Group assists the IB community in many The information contained in The Complete IB
ways. Whether it is education, market information Handbook, 8th Edition, is based upon responses to
or research data and reports you need, you’ll find it a survey of all registered IBs conducted during the
by contacting a CME Group Product Manager, or at fall of 2017, by MHS Capital Resource, Inc. and CME
their website, www.cmegroup.com. Group. No individual response has been identified.
The National Introducing Brokers Association Graphs, numbers and charts summarize or further
(NIBA) can also help your IB grow. NIBA is a trade detail the responses. Registration, regulatory and
association which I founded in 1991, for industry association information was obtained from the
professionals whose customers transact business agencies or organizations themselves. Additional
primarily in retail markets. NIBA’s purpose is to materials and assistance can be found on their
provide education for derivatives professionals – individual websites.
IBs, CTAs and APs registered with the NFA which Melinda Schramm
aid their efforts to operate a successful business. President, MHS Capital Resource, Inc.
NIBA posts an electronic newsletter twice-monthly, Founder & Chairman, NIBA
and holds four in-person member meetings melinda@futuresrep.com
annually. Each newsletter and meeting includes
articles and presentations by industry experts on
issues such as regulation, compliance, marketing
and products. You can join the association and
view the benefits, including the newsletter, at
www.theniba.com.

2
 The Complete IB Handbook
Introducing Brokers

CHAPTER 1
INTRODUCING BROKERS

Introducing Broker (IB): An individual or to an individual. The firm can be organized as a sole
organization that solicits or accepts orders to buy proprietorship, partnership or corporation, and will be
or sell futures contracts, options on futures, retail registered as such.
off-exchange forex contracts or swaps, but does not
Why do customers open their accounts with an
accept money or other assets from customers to
Introducing Brokers? Because IBs offer valuable
support such orders.
services for those customers which include:

Introducing Brokers (IBs) handle transactions for • Help for new investors who may not fully understand

customers in futures and options markets, for managed the risks of the markets.

accounts and in the forex and swap markets. IBs are • Training that can prevent a customer from making a
sometimes viewed as the field sales force of the futures costly mistake during the order entry process.
industry because they deal directly with the customer.
• Experience which is necessary in order to evaluate
market moves and spot opportunities for trading.
TOTAL IBS REGISTERED: 1,220
IIBS REGISTERED: 602 • Research the public often does not have access to.

GIBS REGISTERED: 618 • Understanding of regulatory changes which may

Source: NFA, Feb. 2018

impact a customer’s trading plan.

Each IB must have a relationship with at least one • Expertise to help develop a strategy which meets

Futures Commission Merchant (FCM). The FCM, the customer’s needs, including using options,

referred to as the “clearing firm,” handles trade forex, swaps and managed accounts if necessary.

execution and back office service for the customers IBs

IBs are federally registered – with the Commodity
bring to the FCM.
Futures Trading Commission (CFTC). The largest

IBs do not hold money or other customer assets in number of currently registered IBs are located in Illinois,

support of their customers’ orders. They forward with New York, Florida, California, Texas, Iowa and

checks, bank transfers and other forms of payment Kansas rounding out the top seven states with the most

directly to the FCM. All the accounts introduced by the IB offices.

IB office are carried on the books of the clearing firm on

IB offices can be located outside the United States.
a fully disclosed basis.
Those firms may be exempted from registration if they

FCMs charge IBs a fee for each trade executed for a meet certain criteria with the NFA. SEC-registered

customer. IBs set the commission fees charged to the broker-dealers that limit their futures-related activities

customer. to the sale of security futures products on contract

markets, or derivative transaction execution facilities
Introducing Brokers must be registered and members can “notice register” to become an IB.
of the National Futures Association (NFA) in order
to do business with the public. IBs can register as Customer accounts of GIBs must be carried on the

either Independent (IIB) or Guaranteed (GIB). The “IB” books by the guarantor clearing firm. Customer

designation refers to the entity (the firm itself), not accounts of IIBs maybe carried by one or more clearing
firms. Each IB, including those primarily handling

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cmegroup.com

forex and swaps transactions, must have at least one It should be noted that during this period, FCM
employee registered as an Associated Person (AP), and registrations also decreased from 205 firms in 2002 to
approved as a forex AP or swap AP, respectively. 63 in 2018. Approximately 15 of those 63 firms carry
nearly all of the trades transacted by IBs, resulting in IB
Some IB offices transact other related business at
having fewer FCMs with which to do business.
their offices such as securities brokerage, auditing/
accounting services, grain or feedlot operations or Per the NFA, becoming an IB with a temporary license
insurance. (TL) to do business can take as few as three to four days
after the required documentation is received if:
Total Number of IBs
Total Number of IBs • the application is for a GIB
2000
• all the principles/APs have no disciplinary history
1500 that disqualifies the application, and
1000 • all other documentation is in good order. The
paperwork for GIBs must include a Guarantee
500
Agreement from the sponsoring clearing firm.
0
1998 2000 2002 2004 2007 2008 2010 2012 2014 2016 2018
Associated Person (APs) are the individuals who work in
GIB IB Total IB offices. Every registered IB office, including those who
handle forex, swaps and are notice-registered broker-
Source: NFA; MHS Capital Resource, 2018
dealers, must have at least one AP registered with that
The total number of Introducing Brokers has decreased office. APs, referred to by the NFA as “associates,” must
by about 50 firms since publication of the last IB complete certain standardized mandatory exams in
Handbook in 2016. IIB registration increased. GIB order to become an AP. APs whose activities are solely
registration has decreased over the same period of time, limited to swaps are exempt from exam requirements.
and rather significantly since 2000. That is in part due to:
NFA records indicate there are 50,965 persons
1. The collapse of MF Global and Peregrine Financial registered as APs as of February, 2018. This number
Group. After the 2011 and 2012 failures of these two is down from 55,755 reported in the 2016 edition of
firms, many GIBs changed their registration status The Complete IB Handbook, and is reflective of the
to IIB in order to clear their customer business decrease in NFA registrants as a whole. The high of
through more than one FCM 56,745 AP registrations was reported by the NFA in
February, 2014, and was likely the result of new swaps
2. Changes in regulation and accounting requirements. registration requirements implemented by NFA in late
FCMs have become less likely to take on the legal 2012 becoming effective.
liability and financial responsibility of a GIB versus IIB.

3. Difficulty in keeping up with the costs and

requirements of increased regulation, including
cybersecurity, and recording programs for some
smaller offices.

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 The Complete IB Handbook
Introducing Brokers

How many APs do you have? Industry and Related Experience

45% The average IB responding to the 2017 Industry Survey
40%
has been registered for approximately 15 years. Over
35%
30% 65 percent have held the registration for as least 9
25% years and about 28 registrants replied they have been
20%
in business for over 25 years. Less than 3% of the total
15%
10% respondents have been in business for four years or less.
5%
0% How many years have you been a registered IB?
1 to 5 6 to 11 12 to 19 20-24 Over 25
25%

Source: 2017 Industry Survey 20%

In late November, 2017, CME Group and MHS Capital 15%

Resource, Inc. asked all registered Introducing Brokers
10%
to participate in an online survey in order to determine
5%
the state of the IB community.
0%
Among the questions asked on the survey were those
s

s
ar

ar

ar

ar

ar

ar
ye

ye

ye

ye

ye

ye
related directly to the IB office, such as the number
4

12

5
-2
1-

r2
5-

-1
9-

13

20

ve
of years the IB has been registered, what markets are

O
Source: 2017 Industry Survey
primarily traded by customers of that office and what
factors influence an IB’s choice of FCM. The replies to Many IB owners have experience in agricultural
the survey questions formed the basis for the graphics operations such as at a grain elevator or cash grain
and text of this Handbook in substantial part. firm prior to becoming an IB. More IB owners have been
involved in banking or other financial industries than in
previous years. There are no clear experience indicators
IIB or GIB will clearly lead to success for the IB. Jobs IB owners
have held are quite varied – teaching, law, construction,
As of 2018 and for the first time in NFA registration
real estate, insurance and the service in the military,
history, the number of IIBs and GIBs is nearly equal –
in addition to financial and agri-businesses. As more
602 IIBs versus 618 GIBs. IIB registration has increased,
colleges and university offer degrees in the workings of
GIB registration has decreased since the last IB
the marketplace, IB owners report they have completed
Handbook was published in 2016.
a college course or degree which focused on the
Those firms who register as GIBs cite capital financial industry prior to joining the business.
requirements, less documentation and no required
Some IBs register in other NFA categories or hold
financial audits as the top three reasons for the decision
licenses to do business in other related industries.
not to register as an IIBs. Registrants new to the futures A swaps or forex designation or Commodity Trading
industry felt they did not have the experience necessary Advisor (CTA) registration are the ones most often held
to operate as an IIB, and desired the closer supervisory by IBs. Securities licenses, insurance and real estate
relationship with an FCM which a GIB registration affords. licenses are often held by IB owners.

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cmegroup.com

Specialization and Markets Traded increased transparency, those markets have become
less dominated by professional and commercial traders.
In the mid-1980’s when the Introducing Broker category
first came into being, agricultural products were the Electronic order placement on platforms such as
markets overwhelming traded by IB offices. In 2018, ag Globex, Clearport and others are giving IB customers
and ag-related products – grains, livestock – are still the increased opportunities to participate in all markets.
most heavily traded markets but not by much. Some IBs While most IBs still do all or most of their trading in
reported that over 25% of their customers’ transactions domestic markets, several IBs report that up to 10% of
were in either the interest rate markets, currencies or their trading is done outside U.S. markets.
indexes.
Industry survey respondents reported that they transact
Additionally, about 1% of the IBs responding to the customer business most often with CME Group. Eurex,
2017 Industry Survey traded up to 50% of their total the London Metal Exchange and the InterContinental
transactions in swaps markets, while about the same Exchange are the next most often used trading facilities.
number traded 15% in forex products and slightly more
traded about 10% of their total in the metals markets. What exchanges do you use?

40%
Agricultural hedging clients remained the largest single
35%
percent type of customer trading through IB offices. The 30%
majority of IBs do not specializes in any type of client. 25%
Those who did indicate a specialty, named institutional 20%
15%
sales and commercial accounts most often.
10%
5%
What types of clients do you serve?
0%
CME Group ICE Eurex LME CFE Other
No Specialization
Source: 2017 Industry Survey
Institutional Sales Only

Speculators Only
Accounts and Commissions
Hedgers Only
While about 50 percent of IBs indicated they have up to
Commercial Sales Only
500 accounts, including those opened by their branch
0% 5% 10% 15% 20% 25% 30% 35% 40%
offices, another 20% percent have between 501 and
Source: 2017 Industry Survey 1,000 accounts. Ten percent of the total reported they

Trading by IB offices in the “softs” – cotton, cocoa, service over 1,001 accounts and about 2 percent of IBs

sugar and orange juice – has increased slightly since have 2,000 or more customer accounts

the 2016 Handbook. As the markets become more

Some offices which service specific types of clients such
accessible through the public’s access to market
as hedgers, service as few as 40-50 customers per year.
data, including cash market information and through

6
 The Complete IB Handbook
Introducing Brokers

How many accounts? What is the average funding amount for a

30% new account?
18%
25%
16%
20% 14%
12%
15% 10%
10% 8%
6%
5% 4%
2%
0%
0%
0

00

00

00

00

00
0
0
25

50

00
00

0
00

00
00
1,0

,5

,0

,0

50

,0
1-

1-

,0
,0
,5
-1

-2

r2

5,
0,
1-
25

7,

20
01

-2

20
-5
01

-1
ve
50

0-

-1
00

00

0-
1,0

00

r$
1,5

00
O

,10

00
,0

,6

ve
1,0
,6
$5
$2
$1

6,
$7

O
$1

$1
Source: 2017 Industry Survey

About half of IB offices have no non-domestic customers; Source: 2017 Industry Survey

about 12% report between 10 percent and 40 percent Approximately 14 percent of IBs report that accounts
of their total accounts are non-domestic owned. Three remain open with their office for at least seven years.
offices stated that up to 65 percent of all their business Over half said they had the same clients trading through
comes from non-domestic customer accounts. the IB for over 12 years. And about 16% of IBs are
currently servicing clients whose accounts were opened
Most IB offices do not establish a minimum account
over 20 years ago.
size in order to open an account. However, some FCMs
establish minimum requirements for certain customers
How long do your accounts typically stay open?
or specific markets. Managed accounts will require a
14%
standardized minimum deposit to begin trading.
12%

For about 20 percent of IBs responding to the Industry 10%

Survey, the initial account funding required is less than 8%

6%
$10,000. Approximately 15 percent require a deposit of
4%
at least $20,000 before a customer can trade.
2%
0%
1 -3 Years 4 - 7 years 8 - 12 years 13 - 19 years More than
20 years

Source: 2017 Industry Survey

Customer commission rates are most often between

$5 – $35.00 per side of a futures contract. While a few
IBs charge less than $5 per side and a few others charge
over $65.00, customer commission rates have remained
consistent since the 2014 edition of the IB Handbook.

Slightly over two-thirds of all IBs charge the entire

options transaction fees upfront.

7
cmegroup.com

Income and Expenses APs

About 16 percent of Introducing Broker offices There are some sole proprietor registered IBs operating
reported average monthly income generated by gross without additional AP assistance. The average IB office
commissions was in excess of $200,000, consistent has three to five APs. This year’s survey showed that
with the 2016 Industry Survey. No IB reported monthly there are a number of offices supported by over 25 APs,
gross commissions of less than $25,000. About 10% including those in the IB’s branch offices.
said their office generated between $25,000 and
APs are most often recruited for IB offices through
$50,000 monthly. These numbers are generally slightly
referrals from other APs, networking within the
higher than in 2016.
community or word-of-mouth among friends, rather
The five largest monthly expenses for IB offices are, in than through advertising for APs. Some IBs have found
order of largest to smallest: highly qualified interns through a college or university

• Broker payouts program.

• Clearing costs Those IBs who support branch office systems generally
have between four and seven remote locations.
• Market quotes/data fees
Becoming a branch office of an established firm is one
• Rent and other normal office overhead
way to start off in the IB business. Adding branch offices
• Costs associated with compliance requirements, and their customers is also one way an established IB
including recording and cybersecurity can grow its business.

What percentage of the monthly gross revenue

generated by this IB is spent on the following? Website and Social Media
50% Several of IBs responding to the 2017 Industry Survey
45%
40% do not have a firm website. In some cases, the FCM
35% site links to the IB office or there is contact information
30%
25% on the FCM site for individual IB offices. All IBs open
20%
15% accounts electronically.
10%
5%
0% Most IBs do not use social media to communicate with
ns

ne

ts

their customers. The NFA regulates client solicitation of

st

st

ad

at

al

os
o

ho
Co

Co

ic
Le
si

/C
s/

p
ys
is

al

any kind whether it is print, electronic or tweeting.

m

es
te

Ph

l
rin

Te
ic
om

uo

Fe
er
ea

er
Q
Cl
C

er
Cl

th
er

th
/O
ok

O
nt
Br

Re

FCMs and Clearing Relationships

Source: 2017 Industry Survey
In Chapter 3 of this Handbook – FCMs, we discuss various
reasons IBs choose their FCM. After the collapse of MF
Global (MFG) and the failure of Peregrine Financial Group
(PFG), it became more important than ever before to know
your FCM’s reputation and be aware of its financial health.

8
 The Complete IB Handbook
Introducing Brokers

The MFG and PFG situations are highly unusual. Many IB Contact information for NIBA and other associations to
offices will stay with their FCM relationships throughout which IBs belong is found in Chapter 8 of this Handbook.
their entire business career.

In addition to looking for the right clearing rate and trade Business Plans, Challenges and
execution for its customers, IBs choose FCMs which offer the Future
services they believe will help grow the IB. These include:
Business plans are discussed in Chapter 4 of this
• An annual firm meeting Handbook. Approximately 70% of IBs have a business
• Education (webinars/seminars/etc) plan, most for over 5 years into the future. It is reviewed

• Cybersecurity risk management oversight and updated every six months.

• Required audits free of additional charge The increased cost of regulation, including the cost of
• Risk management software cybersecurity and other compliance costs is the number
one concern of 2018’s IB community. Many IBs are still
• Research that is necessary to their clients
uncertain if they are meeting cybersecurity threats
% IBs who reported their FCM Providing effectively and whether they are in compliance with NFA
90%
requirements. Most IBs see these costs increasing.
80%
70%
60% IBs also reported their data equipment and fees are also
50%
40% increasing, adding to the overall cost of operating an IB.
30%
20%
10% IBs are concerned about the diminishing number of
0%
FCMs willing to guarantee IB business, which limits their
tin al

ar t

tc ,

rg ee
, E rs
tw ne

ad
ee u

choices. They are worried about finding the right fit for
ha Fr
rs ina
g

.)

es
M ann

of m

Le

l C its
/S ge

pe eb
i-

na ud
ht a
/B

Pa (W

their clients and the strangle-hold a few FCMs might

ig an

tio A
al

rs M

te n

di ed
nu

hi io
ve k

Ad uir
W at

eventually have over the IB community.

O Ris
An

s, uc

ny eq
ity

ar d

R
in E
ur
ec

Finding qualified APs is always on the minds of IBs.

-S

of
r

m
be

Se
Cy

Some have turned to intern programs successfully,

Source: 2017 Industry Survey but work-of-mouth and referrals from current APs and
clients remain the major way APs come to work with IBs.
Trade Associations
In 2017, IB offices who were affected by the failures
IBs most often belong to the National Introducing
of MF Global in 2011 and Peregrine Financial Group in
Brokers Association (NIBA), a trade association for
2012, had, for the most part, recovered customer and
registered professionals who transact customer
revenue loss, and had a generally optimist outlook for
business primarily in the retail sector of the futures and
the futures.
options business. Founded in 1991, the mission of NIBA
is education. The mission is accomplished with three All industry participants, including customers, agree
to four in-person member meetings annually, a twice that Introducing Brokers hold a unique, valuable and
monthly electronic newsletter, and representation of its essential position in the business.
members’ opinions with industry regulators.

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cmegroup.com

Checklist for Chapter 1 – Introducing Brokers

1. Do I need to register – or do I really just want to

trade?

2. Does the type of business I want to do require an

IB license?

3. Do I have the experience necessary to own and

operate an IB?

4. Do I fully understand the financial and time

commitment that is necessary to operate an IB?
Is my family fully informed and stand behind that
commitment?

5. How will I build my customer base?

6. How will I find qualified APs and clerical staff?

7. Will I offer managed futures, forex or swaps

transactions, and does that require an additional
registration?

8. Do I need a firm website, who will develop it and

how much will it cost to build and maintain?

9. Have I full investigated my FCM choices?

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 The Complete IB Handbook
Registration

CHAPTER 2
REGISTRATION

Registration: The act or process of entering Registration forms, including templates to help you
information on an official list understand the process, are available on NFA’s website.
When you complete those forms for CFTC registration,
Registration with the CFTC and NFA membership is you are also applying for NFA membership. Required
required for all Introducing Brokers (IBs). forms and actions include:

• designating a “Security Manager” in order to get

The following types of business entities must register
secure access to NFA’s Online Registration System
and be members of the NFA:
(ORS)
• “The tradition entity” solicits or accepts orders to
• completing the Form 7R — the IB’s firm application
buy or sell futures contracts or commodity options,
including transactions in managed accounts • satisfying all compliance requirements in order to
become an IB
• “The forex entity” introduces forex customers to
FCMs or Retail Foreign Exchange Dealers (RFEDs) • completing the Annual Questionnaire
(with narrow registration exceptions) • paying the non-refundable application fee of $200
• The “swaps entity” is subject to the jurisdiction of
• Paying non-refundable membership dues of $750
the CFTC
(or $2,500 for forex IBs)
• The “securities-registered entity” limits its
• proof that each branch office manager has passed
futures-related activities to the sale of security
the required exam
futures products to contract markets or derivative
execution facilities. • for IIBs, a statement describing the source(s) of
the current assets of the IB, and that it has been
TOTAL IBS REGISTERED 2018: 1,220 contributed and will continue to be used for the IB
TOTAL IIBS REGISTERED 1/2018: 602 • for IIBs, a completed NFA Form 1-FR-IB (Part A) or a
TOTAL GIBS REGISTERED 1.2018 618 certified audit
Source: NFA, 2018 • for GIBs, the NFA Form 1-FR-IB (Part B) completed
Registration is not required for an IB if you are: by an FCM

• registered as, and acting in the capacity of, an An IB registrant is also required to file certain
Associated Person (AP) documents for its principals and associated persons.
• registered as a Futures Commissions Merchant (FCM) Required documentation and actions include:
• registered as a Commodity Pool Operator (CPO) • NFA Form 8-R for each principal and AP
and only operate pools
• fingerprint cards
• registered as a Commodity Trading Advisor (CTA)
• proof that all proficiency requirements have been
and don’t receive per-trade commissions, or only
satisfied for every sole proprietor, AP and forex AP
manage accounts under a power of attorney
• a non-U.S. resident or firm with only non-U.S. • paying a non-refundable application of $85 for each
customers, and the firm submits all trades for principal and AP
clearing to an FCM

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cmegroup.com

IBs engaged in retail off-exchange forex activities while NFA is conducting the required background
or swap transactions are required to file additional checks. It may take six to ten weeks to complete
documentation with the NFA. Broker-dealers registered those background checks before the NFA grants a full
by the securities industry can simply file a complete registration to initial applicants.
Notice Form. All necessary forms are found on the NFA’s
If an individual is already registered or listed as a
website. The NFA has also posted a video tutorial to help
principal, it is possible to be registered in a new category
you understand the registration process.
as soon as the application if filed. For example, if a
How long have you been a registed IB? registered IB with no disciplinary information to be
reviewed files a Commodity Trading Advisor (CTA)
25%
registration application, the CTA approval can happen
20%
overnight if all fees are paid.
15%
Independent Introducing Brokers (IIBs) have to meet and
10% maintain a financial requirement set by CFTC and NFA
5% requirements. To determine your requirement, review
NFA’s Financial Requirements found on their website. IIBs
0%
must have an accounting system that records all of the
s

s
ar

ar

ar

ar

ar

ar
ye

ye

ye

ye

ye

ye

firm’s financial activity. Additionally, they are required to

4

12

5
-2
1-

r2
5-

-1
9-

13

20

ve

maintain at all times Adjusted Net Capital greater than

O

Source: 2017 IB Survey the minimum net capital requirement for that IB.

The Applications IIBs file financial reports with the NFA semi-annually,
including a fiscal year report which must be certified by
NFA advises all applicants to rely only on advice from
an independent public accountant. These reports can be
NFA staff. This is particularly important with regard to
filed electronically with the NFA’s Chicago Office.
questions in the Disciplinary Information Section of the
forms, even if you have received assistance from your Guaranteed Introducing Brokers (GIBs) do not
lawyer, employer or a judge. have minimum net capital or financial reporting
requirements. However, they must have an executed
Initial applications for registration can be filed as soon
Guarantee Agreement with the FCM to which they are
as entry of the required data is completed. Guaranteed
introducing business. NFA Form 1 FR-IB (Part B) is the
IBs can be granted a temporary license (TL) after all
only form the NFA accepts for a guarantee agreement.
filings for the IB have been received by the NFA, and
it is determined that the IB and each of its individual GIBs should be aware of their guaranteeing FCM’s
principals meet the eligibility requirements. The FCM financial situation at all times. If the FCM’s minimum
which guarantees the IB must also file its certification required adjusted net capital falls below the regulatory-
before the TL is issued. determined early warning level for a specified period of
time, the FCM may be forced to terminate the Guarantee
Temporary licenses allow applicants to conduct
Agreement. Conversely, any FCM which enters into a
business in the capacity for which they have applied
Guarantee Agreement is jointly and severally subject to

12
 The Complete IB Handbook
Registration

discipline for acts and omissions by its guaranteed IB if Notice Registration

that IB violates NFA rules.
The Commodity Futures Modernization Act of 2000
All IIBs and GIBs must have compliance procedures provided for certain broker-dealers who are registered
(commonly referred to as a Policy & Procedures Manual) with the Financial Industry Regulatory Authority
and additional documents ready for review by the NFA (FINRA) to “passport” into CFTC registration. If the
as part of the initial application. These include your FINRA-registered broker-dealer limits its futures-related
Anti-Money Laundering (AML) compliance program, activities to trading securities futures products, it can be
Business Continuity and Disaster Recovery Procedures, registered as a Security Futures Product Broker-Dealer.
Promotional Material and Review Program, Customer The firm must be registered with the CFTC as a FCM or
Complaint Procedures, Source of Assets Letter and your IB, and must be a member of the NFA. Registration form
Information Systems Security Program (ISSP). IBs are BD-N is available on the NFA’s website. It is a two-page
not required to designate an individual as the firm’s Chief application which includes an execution page. It is filed
Compliance Officer (CCO), but if the firm appoints a with the NFA’s Chicago Office. There is no cost for filing.
CCO, that person must be listed as a principal of the firm.
IBs which are registered with the CFTC and members of
Notice-registered IBs will need a copy of the most recent the NFA, who wish to offer and trade security futures,
report from the designated securities self-regulatory must notify the NFA and meet certain requirements.
organization and the IB’s response. Forex IBs will need a IBs who complete this process are exempt from
copy of any signed agreement the firm has entered into requirements of the securities laws that duplicate futures
with counterparties. requirements, including financial requirements and risk
assessment rules. The IB is not required to become a
IBs, including sole proprietors, are required to establish member of FINRA as long as its securities business is
an online security account with the NFA, and designate limited to offering and trading security futures products.
a Security Manager in order to use most of NFA’s
electronic filing systems. The security manager has
complete authority and responsibility to establish and Annual Registration Update Requirements
maintain security account for other users at the firm. The NFA requires that certain updates be made annually
This information is used to file registration updates so that your filings are complete and reflect the true,
including withdrawal requests for individuals and current nature of your business. Those updates include:
the firm. Security managers can also enter financial
• completion of the Annual Questionnaire
information and submit that information for the firm if
(electronically)
the manager is the sole proprietor, the general partner
or the chief executive or financial officer. For forex firms, • completion of the Annual Registrations Update
the individual submitting the weekly required reports (electronically)
must be a supervisory employee who is, or is under, the • payment of your annual dues, including a records
supervision of a listed Principal. maintenance fee on the anniversary of your firm’s
registration

• completion of the Self-Examination Questionnaire

• submission of applicable financial statements

13
cmegroup.com

• conducting Anti-Money Laundering training for your liability company, limited liability partnership, trust
APs, including an audit of your AML procedures and or other form of business organization. Using these
of the training itself definitions, those people/entities who are required to

• an annual onsite inspection of each branch office registered with your IB are:

• sending your Privacy Policy to each current customer • An individual who is:

• verifying customer information – a sole proprietor

• testing your Disaster Recovery Plan – a general partner

• conducting or otherwise providing Ethics Training – a director, president, CEO, COO, CFO or person
in charge of a business unit or division subject
• monitoring and reviewing the effectiveness of your
to regulation by the CFTC
ISSP, and updating where needed
– a manager or managing member

– a chief compliance officer

Common Mistakes Made on IB
– owner of 10% or more of the outstanding
Registration Applications
shares of any class of the IB’s equity
Mistakes or omissions on your application, can slow
– entitled to vote 10% or more of the outstanding
your registration process or even cause your IB to
shares
be ineligible for a Temporary License. Some easily
avoidable mistakes are: – empowered to sell or direct the sale of 10% or
more of the outstanding shares
• Applicable dues or fees are not received with the
application – has the power to exercise a controlling influence
over the IB
• No financial information or Guarantee Agreement
is received with your Form 7R so the NFA cannot – is entitled to receive 10% or more of the IB’s net
determine if the IB is applying to be a GIB or an IIB profits

• Form 8R is not included for a principal • An entity that:

• Principals who are in the “supervisory chain of – is a general partner of a partnership
command” have not filed to become APs if that
– is the direct owner of 10% of the outstanding
registration is necessary
equity of the IB

– has contributed 10% or more of the IB’s capital

Who Must be Listed as a Principal
How long after filing for CFTC registration and NFA
Deciding who should be listed as a principal on the NFA
membership does it take before my IB registration is
forms can be a bit confusing. The Form 7R Template
granted and membership approved?
found on NFA’s website should help. In general,
“principal” means a registrant or person required to The process will generally take eight to ten weeks in
be registered under the Act. “Person” is defined as an situations where fingerprint checks must clear the
individual, association, partnership, corporation, limited FBI. In cases where all principals are either already

14
 The Complete IB Handbook
Registration

registered with the CFTC or are approved as principals Definitions of Some Commonly Used
of another CFTC registrant, the process can be Terms on Registration Forms
complete in as few as two weeks. If the firm is applying
• 10% or more Interest: Direct or indirect ownership of
at a GIB and is eligible, a temporary license (TL) can
10% or more of an applicant’s or registrant’s stock;
be granted within a few days.
entitlement to vote or empowered to sell 10% or more
Can a GIB clear its customers’ futures and options of an applicant’s or registrant’s voting securities;
transactions through an FCM other than its guarantor contribution of 10% or more or an applicant’s or
FCM? registrant’s capital; or entitlement to 10% or more an
an applicant’s or registrant’s net profits.
No.
• Adjudication: In a criminal case, a determination by
If a Guarantee Agreement terminates, how long does
the court that the defendant is guilty or not guilty.
an IB have to file either a new guarantee agreement or
the appropriate financial filings to become an IIB? • Adversary Action: A lawsuit arising in, or related
Thirty days, otherwise the IB’s registration with the to, a bankruptcy case commenced by a creditor or
CFTC and its membership at the NFA will both be bankruptcy trustee by filing a complaint with the
terminated. bankruptcy court.

• Alias: Another name used by an individual or

Can an IB whose Guarantee Agreement terminated
previously used by an entity.
less than 30 days prior received an extension of time
in order to file a new agreement or the appropriate • Charge: A formal complaint, information, indictment
financial filing to become an IIB? or the equivalent containing an accusation of a crime.

No. • DBA: The abbreviation for Doing Business As. This

is used when the firm is doing its futures, retail
Does the NFA accept credit cards for registration fees off-exchange forex or swaps business under an
or membership dues? assumed name.
No. The NFA has three payment options: • Entity: Any person other than an individual.
1. O
 nline Payment Request – only available to • Financial Services Industry: The commodities,
U.S. Firms securities, accounting, banking, finance, insurance,
2. Wire Transfer law or real estate industries.

3. Check made payable to the NFA and sent to: • Found: Dispositions of any type, including but not
limited to consent decrees or settlements in which
National Futures Association
the findings are neither admitted not denied, or in
Box 98383
which the findings are neither admitted nor denied,
Chicago, IL 60693-0001
or in which the findings are for settlement or record
purposes only.

15
cmegroup.com

• Self-Regulatory Organization (SRO): a private, non- explanation can be sent in hard copy form to the NFA.
governmental organization authorized to set and Additional documents regarding the disclosed matter
enforce standards or conduct for an industry. NFA, generally must be sent to NFA. If the court documents
FINRA and the securities and futures exchanges in are not available, a letter from the court verifying that is
the U.S are examples of domestic SROs. so, is required.

The failure to disclose a disciplinary matter either in

Disciplinary, Regulatory and Financial an initial application or an update will result in a late
Disclosures disclosure fee of $1,000.

A sole proprietor IB must disclose personal disciplinary If you need some help understanding the forms or
actions on both NFA Forms 7R and 8R. interpreting the questions, the NFA suggest calling
their Registration Investigations or Legal staff. If you
“Expungement” literally means to strike out or erase.
seek advice from the NFA, make a written record of the
On NFA applications, you are required to answer “yes”
conversation, including the date of the conversation, the
even if there was no adjudication or finding of guilt, the
name of the staff person with which you spoke, as well
guilty plea was vacated or set aside, or the matter was
as a description of the matter and the advice received.
dismissed upon completion of the diversion program.

Another common error regarding disclosure of criminal

matters concerns those that do not involve the futures
Fingerprint Cards
industry. All criminal matters must be disclosed, even Any individual applying to register as an AP or for
if the matter is unrelated to the futures industry, unless approval as a principal must send a completed
the case was decided in a juvenile court or under a Youth fingerprint card to NFA. No additional cards are required
Offender law. if you are currently registered with the CFTC or listed as
a principal of a current CFTC registrant, or if you have
Regulatory actions taken by the CFTC, NFA or domestic
received fingerprint card results from the FBI within 90
futures exchanges do not need to be disclosed since
days preceding the date of filing. No additional cards will
NFA is already aware of them once they are entered
be necessary if the individual is foreign natural person or
into NFA’s BASIC system. You do not have to disclosure
the applicant is registered as a broker-dealer.
arbitration or CFTC reparations actions unless you
have failed to pay an award issued in a futures-related Once the NFA receives your fingerprint cards, it submits
arbitration or an order entered in a reparation matter. the images to the FBI to determine if the applicant has
a criminal record. NFA will only accept a completed and
Adversary actions that creditors file are disclosable.
signed FBI applicant card.
A person named as a party to an adversary action in a
bankruptcy proceeding must disclose the action, even if Results are generally received in three days or less from
the person is not the bankrupt person. the FBI. FBI must be able to analyze the print pattern
of all ten fingers, and will reject cards that do not have
You must provide a written explanation detailing the
legible patterns for all ten fingers. It is a good idea to
events and conduct for any questions to which you
submit more than one set of fingerprints with your
answer “yes.” You can provide that electronically, or the

16
 The Complete IB Handbook
Registration

application to avoid delays in obtaining additional sets There are a few alternatives to the Series 3. They are
should that become necessary. exam based on your registration status and the type of
business you conduct:
Completed fingerprint cards should be sent to NFA’s
Chicago office:
Futures Managed Funds Exam (Series 31):
National Futures Association For individuals registered with FINRA as a General
Attn: Registration Department Securities Representative, and whose sponsoring
300 S. Riverside Plaza, Ste. 1800 member firm is an NFA-registered IB. This is available to
Chicago, IL 60606-6615 individuals who limit their futures activities to soliciting
funds, securities or property for participation in a
NFA’s Chicago office offers a fingerprinting service for
commodity pool, soliciting discretionary accounts which
applicants for $15. You will need to present two forms
are managed by CTAs, or supervising persons who
of identification, including a valid picture ID issued by
perform these activities.
a government agency. Make an appointment at least
one day in advance by calling NFA’s information center, Number of Questions: 45.
(312)781-1300 during the work week. Length of exam: 60 minutes.
Cost: $85
You can also have your fingerprint cards prepared by a:

• bonding company
Limited Futures Examination – Regulations
• city hall or a county courthouse (Series 32):
This alternative is available to individuals who have been
• futures or securities exchange
registered or licensed to solicit customer business in
• police or sheriff’s office futures in either Canada or the UK for the two years
• U.S. Embassy prior to filing the exam application. The applicant must
submit proof of such registration or license to NFA.

Proficiency Requirements Number of Questions: 35.

Length of exam: 45 minutes.
Each individual who is applying for NFA membership
Cost: $85.
as an IB or as an AP of the IB, is required to satisfy
proficiency requirements. In most cases those
requirements will be satisfied by taking and passing the
National Commodity Futures Examination (NCFE or
Series 3) within two years preceding the application. To
sign up for any of the futures industry exams, submit
an application through FINRA’s website. Generally, NFA
will receive evidence directly from FINRA that you have
passed the exam.

17
cmegroup.com

Referral of Securities Clients Branch Manager Examination – Futures

This alternative is open to individuals who are registered (Series 30)
with FINRA as a General Securities Representative with a
An individual who is a Branch Office Manager and an AP
FINRA member firm which is itself a NFA IB member firm.
of an NFA-member firm must have passed the Series 30
The individual must limit futures activity on behalf of the
exam within the two years prior to the application. You
IB to that which is are solely incidental to the individual’s
may not be required to take this test if:
business as a General Securities Representative.
• you passed it within two years of the date of your
application
Waivers for CPOs and CTAs Trading Primarily in
Securities: • you are currently approved as a Branch Office
Some individuals who are associated with CPOs solely Manager
registered to operate commodity pools principally
• you are qualified as a branch office manager or
engaged in securities transactions and/or who are
supervisor under FINRA rules
associated with CTAs that are required to register only
because their securities advisory services include advice Number of Questions: 50.
on the use of futures and options for risk management Length of exam: 60 minutes.
purposes, may apply for a waiver from the examination. Cost: $85.

APs Whose Activities are Limited to Swaps:

Retail Off-Exchange Forex Examination
Individuals are not required to take an exam if their
sole activities are subject to CFTC regulation are, and
(Series 34)
will continue to be limited to soliciting or accepting NFA Bylaw 301 requires any individual seeking approval
orders for swaps subject to the jurisdiction of the CFTC. as a forex firm or forex individual to pass the Series 34
APs whose activities are solely limited to swaps are exam before engaging in off-exchange forex business
automatically exempt from the exam requirements. with retail customers.

Do you have any branch offices? Number of Questions: 40.

Length of exam: 60 minutes.
Cost: $85.

All of the exams discussed above are administered

by FINRA, and the application forms can be accessed
41% Yes
on their website, FINRA.org. Once you submit the
No
59% application form and fees have been received by FINRA,
you will receive a confirmation and you can schedule an
appointment to take the specific exam. You may only
take the exam once within the next 120 days.
Source: 2017 Industry Survey

18
 The Complete IB Handbook
Registration

National Commodity Futures • FCM/IB regulations for both IIBs and GIBs, including
Examination (NCFE or Series 3) financial reports, collection of margins, promotional
materials
Individuals do not need a sponsoring firm to the
Series 3 exam, but you will need a sponsor to apply for • CPO/CTA disclosure documents, fees and records
registration with the CFTC as an IB. Simply passing one required to be maintained
of the industry exams does not allow you to act as a • arbitration procedures
registrant in the business.
• NFA disciplinary procedures
The NCFE is commonly called the “Series 3” by • CFTC Commodity Exchange Act enforcement
industry participants. It consists of two parts – market
knowledge and regulations. Included in the market Number of Questions: 120.
knowledge section of the exam are questions about: Length of exam: 2 1/2 hours.
Cost: $130
• futures trading general theory, including hedging
and speculative theory There is no examination in addition to the Series 3
• basic functions terminology required as a condition to registration as an IB.

• futures and options terminology

• futures and options margining, premiums, price Ethics Training

limits, settlements, delivery, exercise, settlement Ethics Training is one of an IB’s supervisory obligations
and assignment under NFA Compliance Rule 2-9. There is no pre-
• types of orders, customer accounts, price analysis proscribed program – instead each firm is allowed to
tailor its training program to suit its individual operations.
• basic hedging, basis calculations, hedging futures

• spreading All APs registered with your IB office must complete an

ethics training program, and must periodically update
• speculating in futures
that training. GIBs most often use a program provided
• option hedging, speculating and spreading by their FCM.

Included in the regulations section of the Series 3 exam Topics the NFA suggests which should be addressed in
are questions about: your ethics training program should include:
• all registration categories • an explanation of applicable laws and regulations,
• CFTC registrations and rules of the SRO or contract market and
registered derivatives transaction execution facility
• NFA membership
• an individual’s obligation to the public to observe
• futures account opening requirements
just and equitable principles of trade
• position reporting requirements
• how to act honestly and fairly and with due skill,
• speculative position limits care and diligence in the best interest of customers
and the integrity of the markets

19
cmegroup.com

• how to establish effective supervisory systems and Making Changes on your Paperwork
internal controls
Changes and additions to your paperwork are made by
• obtaining and assessing the financial situation and submitting a NFA Form 3R (Part 1). The form is available
investment experience of customers online and changes are entered electronically through
• disclosure of material information to customers NFA’s website.

• avoidance, proper disclosure and handling of

conflicts of interest Terminating a Guarantee Agreement
More information on your ethics training procedures and Either party to a Guarantee Agreement can initiate a
program is found on NFA’s website. termination process by providing written notice of intent
to the other party, to the NFA, the CFTC and the FCM’s
SRO at least 30 days prior to the planned termination
Contact Information date. On the termination date, your IB must cease
Each IB is required to provide the name, street address, doing business until it files either a new Guarantee
phone and fax number and email address of the individual Agreement or the required financial reports to become
to whom specific inquiries should be directed for contact an independent IB.
information to the NFA for the following areas:

• accounting Terminating your Registration

• arbitration If you decide to terminate your IB’s registration you
• compliance must notify the NFA. If a GIB’s guarantee agreement
is terminated by the FCM or the IB is unable to fulfill
• fee assessment
mandatory minimum requirements, the NFA may
• membership automatically terminate the IB registration.
• registration

Should you register as a CTA

If Your Application is Denied IBs Registered in Other Capacities
Approval for IB registration is not automatic. Persons
whose CFTC registration has been revoked or CTA, CPO & Swaps
suspended may be disqualified. Persons who have been
CPO
refused CFTC registration, persons who have been
CTA
enjoined by court order from doing business as financial
professionals, and persons who have been convicted of Swaps

a felony, or of certain misdemeanors, especially those None

involving cash or other funds, may be denied. These and 0% 10% 20% 30% 40% 50% 60%
other grounds for denial are listed in the NFA Manual,
Bylaw 301(c): “Restrictions on Becoming or Remaining Source: 2017 Industry Survey
a Member.”

20
 The Complete IB Handbook
Registration

A commodity trading advisor , or CTA, is an individual or – (3) seminars at which you are teaching attendees
organization which, for compensation or profit, advises how to trade commodity futures aided by a
others as to the value of, or the advisability of buying or software program that you sell.
selling futures contracts, options on futures, retail off-
All registered CTAs who manage or exercise discretion
exchange forex contracts or swaps. If you provide this
over customer accounts must be members of the NFA
service, you may need to register as a CTA.
in order to conduct futures business with the public.
“Providing advice” includes exercising trading authority Registration requirements, including documents and
over a customer’s account, as well as giving advice fees can be found on the NFA’s website.
based upon knowledge of, or tailored to, a customer’s
particular commodity interest account, particular
Checklist for Chapter 2 – Registration
commodity interest trading activity or other similar
types of information. 1. Do I meet the qualifications for registration as an
IIB, including the financial requirements?
You will not need to register as a CTA if:
2. D
 o I have the appropriate Guarantee Agreement
• you have provided advice to 15 people or less during
to register as a GIB?
the past 12 months, and do not generally hold
yourself to the public as a CTA, OR 3. Have I included the appropriate dues or fees with
my application?
• you are exempted, or you are registered in some
other capacity and your advice is solely incidental to 4. Did I properly disclose prior or current
your principal business, OR disciplinary, regulatory or adverse financial
issues?
• you are providing advice that is not based on
knowledge of, or tailored to, a customer’s particular 5. Are my Series 3 exam results or those of APs I
commodity interest account, particular commodity wish to employ current?
interest trading activity or other similar types of
6. Have I designated a Security Manager in order
information. Examples are:
to use the NFA electronic filing system (this
– (1) specific advice through emails, a website, includes sole proprietor filers)?
telephone calls or face-to-face meetings based
7. Do I have Anti-Money Laundering, Ethics Training
on a computerized trading system which is also
Programs and ISSP in Place?
available for purchase and distributes the same
advice to all customers. 8. Do I need to register as a CTA?

– (2) recommendations such as advice to buy or

sell a specific futures contract if a particular price
level is reached, through newsletters or books.

21
cmegroup.com

CHAPTER 3
FCMs

Futures Commission Merchant (FCM): an entity FCM Registrations (NFA, 2018)

FCM Registrations (NFA, 2018)
that solicits or accepts orders to buy or sell futures
250 228
contracts, options on futures, retail off-exchange
205 195
forex contracts or swaps, and accepts money or 200 180 175
159
other assets from customers to support such orders.
150
118
93
100
Each Introducing Broker (IB) has a contractual 71 63
arrangement with a Futures Commission Merchant 50
(FCMs). In addition to clearing your customer
0
transactions on various exchanges, the FCM bears 1999 2000 2002 2004 2007 2008 2012 2014 2016 2018
the ultimate responsibility of collecting margins for
Refco: Ceased operations in October, 2005
customers’ positions. Iowa Grain: Sold FCM operations in September, 2008
Alaron: Chapter 7 liquidation in October 2010
MF Global: Declared bankruptcy in October, 2011
FCMs that are not primarily and substantially engaged
Peregrine Financial Group: Collapsed in July, 2012
in on-exchange futures business activities must be Swaps registration became required in 2012
VFM: Withdrew registration as a FCM in April, 2015
registered as retail foreign exchange dealers (RFED) to
act as the counterparty to a retail off-exchange forex Source: MHS Capital Resource, Inc., 1/2018
transaction.
Until 2012, the decrease in FCM registrations were
primarily due to:
TOTAL FCMs REGISTERED: 63
TOTAL RFEDs REGISTERED: 2 • a buyout of one FCM by another registrant

Source: NFA, 2/2018 • the merger of two or more FCMs into one business
entity
Registrations for FCMs has remained stable since the
• the downsizing of an FCM to become an IIB
last update of The Complete IB Handbook in 2016.
RFED registrations have decreased slightly. During the In 2011 and 2012, the unprecedented failure of two
spring of 2016, the SEC closed an option that allowed FCMs along with normal mergers and acquisitions,
broker-dealers registered with the SEC to offer retail contributed to the decrease in the number of FCMs.
forex transactions by “notice-registering” with the NFA. One of those failures resulted in a criminal action with
Notice registering is essentially filing a simple one-page the person most responsible now serving a prison
notice in lieu of completing the full registration process. life-term. The other resulted in a bankruptcy. Although
FCMs may also transact transactions for crypto-currency customers for the most part have seen the return of all
futures but as of late March, 2018, very few were offering their funds, brokers feel that rebuilding the trust with
these contracts. the public which brings customers and funds to the
market, continues still. Those FCM failures caused both
FCM registrations have been decreasing since 1998, the
the CFTC and NFA to re-assess and re-draft customer
first printing of the Handbook.
segregation rules, including methods which make FCM
capital health more visible to the public.

22
 The Complete IB Handbook
FCMs

Interest rates for deposited funds have been very low for An FCM may be a firm whose purpose is to transact
many years, while costs for technology, cybersecurity business in the futures and options industry only, or it
compliance and personnel have all increased. All these may be a division of a national or regional brokerage
factors have contributed to mergers, buyouts and the company that also offers securities products. Several
ultimate decrease in FCM registrations. FCMs have a commercial bank, an agri-business
company or other commercial enterprise as a parent.
It is estimated that of the 63 registered FCMs, about 15
firms handle approximately 85% of all IB business. That Foreign entities that transact business directly with U.S.
is due in part to the fact that the largest FCMs are banks customers solely in futures contracts and commodity
or financial institutions which generally do not accept options traded on foreign exchanges are exempt from
transactions for retail customers. registration. The foreign entity must be subject to a
comparable regulatory structure by a foreign regulator
Some FCMs who do accept IB business, do not accept
which, in turn, has been granted an exemption by the
guaranteed introducing broker (GIB) relationships. In
CFTC, must file a request for exemptive relief. That
general, the FCMs who are members of NIBA accept
includes having an agreement with the NFA appointing
IBs and have extensive support systems in place. Those
an authorized U.S agent for service of process.
FCMs, including the appropriate contacts at the firm, are
listed on NIBA’s website at www.theniba.com. SEC-registered broker-dealers that limit their futures
related activities to the sale of security products on
Swaps Dealers and Major Swap Participants registration
contract markets or derivative transaction execution
was required for the first time as of October 2012. Firms
facilities can “notice register” by filing the appropriate
that were not registered in any capacity with the CFTC
NFA form. These firms will be primarily subject to SEC
as of that date, but acting as an FCM with respect to
regulation.
swaps came under the jurisdiction of the CFTC and
are now required to register. The NFA has an archived All NFA-registered FCMs must name a Chief Compliance
webinar posted on its website which explains the Officer (CCO), which must be listed as a principal of the
registration process and compliance issues for swaps firm. The CCO is required to prepare an annual report
participants. As of February 2018, there are 100 swaps according to CFTC regulations and provide that report
dealer members of the NFA. There are no major swaps to the firm’s senior management or board of directors.
participants members registered.
All registered FCMs must be members of the NFA in
The registration process for RFEDs is also posted on the order to conduct futures business with the public. The
NFA website, nfa.futures.org and mirror those for FCMs FCM is required to file:
in substantial part. Only two firms are registered with
• an online form 7R which includes a NFA membership
the NFA as RFEDs as of February 2018.
application

Most IBs will be transacting their business with one • appropriate compliance requirements
of the 15 or so FCMs who handle IBs. This chapter will
• a non-refundable application fee of $500
focus on that relationship.

23
cmegroup.com

• membership dues of $1,500 if the exchange is the FCMs are required to maintain adjusted net capital
designated self-regulatory organization (DSRO) or greater than the minimum net capital requirements at all
$5,625 if the NFA is the designated DSRO times. Adjust net capital is computed as follows:

In addition, all registered FCMs engaged in retail off- Current Assets – Liabilities – Charges against Capital =
exchange forex activities are required to: Adjusted Net Capital

• apply to become a forex firm by completing an

If an FCM’s adjusted net capital falls below its minimum
online form
net capital requirements, it must immediately notify the
• have at least one principal that is also an approved appropriate agencies. An early warning capital level is
Forex Associated Person also in place for FCMs. If the firm falls below the early

• apply to become a Forex Deal Member if it will warning level, it will be subject to additional reporting

be a counterparty to retail off-exchange forex requirements and may be prohibited from guaranteeing

transactions IBs.

• satisfy compliance requirements for applicants As safeguards, the Commodity Exchange Act (CEA)

• submit membership dues of $25,000 if an exchange and CFTC regulations require that all customer

is the designated DSRO, or $125,000 if the NFA is funds received by an FCM must be segregated from,

the designated DSRO and accounted for separately from, the FCM’s own
funds. FCMs must obtain acknowledgment letters
In addition, all registered FCMs engaged in swaps from depositories, including derivatives clearing
transactions must: organizations (DCOs) and other FCMs, that declare
• apply to become a swap firm by completing an NFA certain funds placed with it are customer funds. These
online form acknowledgment letters must be filed with the CFTC
and the firm’s DSRO. The accounts in which segregated
• have at least one principal who is also an approved
funds are kept must be titled for the benefit of the FCM’s
Swaps Associated Person
customers, and neither a bank or clearinghouse has the
• submit membership dues which are levied right of offset against the accounts for FCM’s debts.
according to a tiered-fee table which is posted on
the NFA’s website Customer funds in segregation have a bankruptcy
preference in the event of an FCM insolvency. To the
FCMs are required to maintain an accounting system extent that customer funds would not be sufficient to
that records all of the firm’s financial activity. The pay customer claims in the event of an FCM bankruptcy,
financial reports created from the accounting system the remainder of what customers are owed participate
must be prepared following U.S. generally accepted pro rata in any distributions to unsecured creditors of
accounting principles (GAAP), be done on an accrual that FCM.
basis and be kept current. Some of NFA’s requirements
are more restrictive than GAAP with respect to the An FCM must be adequately prepared with an
classification of current and non-current assets. appropriate back office system to account for customer
equities and for handling customer funds in an

24
 The Complete IB Handbook
FCMs

appropriate manner. An FCM must inform NFA of its • Business Continuity and Disaster Recovery Plan. This
intent to accept customer funds prior to doing so. plan would be used in the event of an emergency or
significant business disruption. FCMs are required to
All FCMs that hold customer funds are required to
submit the name and contact information for their
establish, maintain and enforce a system of risk
designated disaster recovery contacts.
management policies and procedures designed to
monitor and manage the risks associated with the FCM’s • Cybersecurity – Information Security Systems

activities. As a part of the Risk Management Program, Program (ISSP): ISSP procedures must be adopted

each FCM is required to provide its senior management and enforced which are appropriate to the firm’s

and its governing body with a quarterly Risk Exposure circumstances. The NFA requires those procedures

Report, as well as interim reports any time the FCM secure the firm’s electronic systems, as well as

detects a material change in the its risk exposure. customer data.

• Enhanced Supervision Policies (if applicable). Firms

FCMs must have in place:
that employ APs and principals who have worked at
• Anti-Money Laundering Procedures: This program firms that have been formally sanctioned or barred
is a set of procedures designed to guard against for using misleading or deceptive sales practices
someone using the firm to facilitate money laundering or promotional material may be required to adopt
or terrorist financing. The main components of the enhanced supervisory requirements which are
program which must be included are: designed to prevent sales practice abuse. A waiver
process is available from this requirement, but those
– internal policies, procedures and controls
meeting the criteria must, among other things:
reasonably designed to assure compliance
with the Bank Secrecy Act and implementing – maintain enhanced capital requirements;
regulations; – make complete audio recordings of all telephone
– appointment of a designated compliance officer conversations that occur between their APs and
to oversee the program’s day-to-day operations; existing and potential customers; and,

– A customer identification program (CIP), – file all promotional materials with NFA at least
including the identification of beneficial 10 days prior to its first use.
account owners • Security Futures Products (SFPs) Procedures. SFPs
– an ongoing training program; and, are futures whose underlying instrument is either
a single security or a narrow-based security index.
– an independent audit.
SFPs are considered both a futures and securities
• Certain Books and Records which are used in the contract., and are regulated by both the SEC and
daily activities of the business. They are required to CFTC. As such, there are numerous additional rules
be kept at the main office of the FCM for five years which apply to FCMs offering SFPs. Those rules can
and in readily accessible form for the most recent be viewed at the NFA’s website.
two years.
• Sales Practices and Promotional Materials are
addressed in NFA Compliance Rule 2-29 and 2-36.

25
cmegroup.com

The rules cover: It is easy to see that choosing your FCM is not simply

– general prohibitions a matter of finding the one which offers the lowest
clearing rates. Carefully and thoroughly perform your
– content of promotional material
due diligence on all aspects of the FCM’s history –
– treatment of hypothetical results financial, disciplinary and reputational.
– treatment of statements of opinion

– recordkeeping and supervisory requirement Choosing your Clearing Relationship

– radio and television advertisement The top three reasons IBs choose an FCM when looking

– NFA required filings for a clearing relationship are:

• Reputation of the FCM

NFA Compliance Rule 2-19 requires FCMs to submit
certain types of promotional material designed to reach • Back Office service

a public audience through mass media for pre-approval • Clearing rates

to the NFA 10 days prior to first use.
Overwhelmingly, IBs responding to our 2017 Industry
• Supervision of employees and agents is imposed by Survey said that the reputation of the FCM was
NFA Compliance Rules 2-9, 2-36 and 2-43. Because either the first or second most important factor they
each firm is different in size and complexity of considered when they looked for a clearing firm.
operations, there is a degree of flexibility when an Generally, reputation means the way others think about
FCM develops its supervision plan. you, or your actions or beliefs. So, IBs want to associate
with an FCM who the has both a reputation with the
Minimum financial requirements for clearing firms have
public for good business practices, and with the industry
long been established by the Commodity Exchange Act
for fair-dealing.
(CEA). Legislation also requires FCMs and RFEDs to
segregate customers’ margin deposits from company You might like the idea of having a bank-owned FCM,
funds, and prohibits using one customer’s funds to but that may not be realistic for your IB. Banks have
meet the margin requirements of another customer’s off-loaded customers as they deal with constricting
account. balance sheet capital, so it has become more difficult
to meet all their criteria, including trading volume and
The CFTC has enforcement power over FCMs, RFEDs
total customer equity. Conversely, as your IB grows your
and swaps registrants. Information regarding the
smaller FCM may not be able to accommodate your
principals of those companies, which includes firm and
capital and trading needs.
individual disciplinary history, can be found online at
the NFA’s BASIC search site, nfa.futures.org/BASIC. You should be aware which exchange memberships the
Information on a FCM’s capitalization and other financial FCM holds. If the FCM you choose has to use another
information can be found on both the NFA website and FCM to access those exchanges your customers want
the CFTC website, www.cftc.gov. to trade, your IB and your clients will be charged for that
access.

26
 The Complete IB Handbook
FCMs

IBs also report that a good FCM back office is essential Additionally, most FCMs offer some type of risk
to being able to adequately serve customers. You want management and cyber-security oversight or software
to know what the policies of the FCM are before entering which the IB can or is required to use. Only one IB
the clearing relationship regarding: told us his/her FCM offered assistance with website
• opening accounts development, and only four IBs reported that the FCM
had a lead program in which the IB could participate.
• bank wire transfer procedures
• check requests Although a great deal of research is now available online,
research is still a factor for many IBs when choosing an
Many clearing firms require IBs, particularly GIBs, to use
FCM. IBs which are servicing customers with particular
the platform(s) they have developed or supply in order
needs, such as farmers who want cash commodity
to enter customers’ orders. Make sure you know what
prices or metals traders who need information on
platforms your FCM supports and endorses, including its
corporate data, look for FCMs who produce or have
technology requirements, and its costs and limitations.
access to that research. Be sure you have discussed
If online account viewing at intervals during the day is
what research you need access to, what will be available
important to your customers’ trading strategies, be
to you regularly, and whether your IB will be charged any
sure to ask the FCM what their capability and policy is,
additional fees by the FCM.
because many FCMs only provide an end-of-day feed that
summarizes all the trades done during that day.
Negotiating the Terms of your Clearing
Over 50 percent of IBs responding to our Industry Survey
Agreement
report that their clearing FCM offers an annual or bi-
annual meeting for both educational and social purposes. The term “Clearing Agreement” means the contract
between your IB and the FCM or clearing firm. It is
% IBs who reported their FCM Providing: negotiable.
90%
80% The term “Guarantee Agreement” is the form required by
70%
60% the CFTC in order to be registered as a GIB. The language
50%
40% of that form is mandated by the CFTC. It is not negotiable.
30%
20%
10% The Clearing Agreement is a legally binding contract
0%
and includes sections detailing your clearing rates,
tin al

ar et

tc ,

rg ee
, E rs

ad
ee u

ftw n

ha Fr
rs ina
g

.)

es

interest payments on cash balances in customers’

M ann

So em

Le

l C its
pe eb
t/ ag
-

na ud
Bi

Pa (W
ig an

accounts, restrictive agreements, account transfer

/

tio A
al

rs M

te n

di d
nu

hi io

e
h
ve k

Ad ir
W at
O Ris
An

alternatives and security deposit requirements, if any.

y qu
s, uc

An Re
y

ar d
rit

in E

It is individually negotiated and prepared by the FCM for

cu
Se

of
r-

each of its IB relationships.

m
be

Se
Cy

Source: 2017 Industry Survey There is no standard rate charged by all FCMs to IBs for
handling customer transactions. Your clearing rate will
depend on various factors, including:

27
cmegroup.com

1. Volume of business transacted through your office: 6. Order entry platform:

Many FCMs will write a “sliding scale” rate which Many FCMs require IBs to use the one or several
decreases the cost per transaction as volume of of the platforms which they provide or approve. If
transactions though your IB increases. you registered as an IIB, you will likely use multiple
platforms to place orders to your various FCMs
2. Markets traded:
Some FCMs charge different rates for trades on 7. Direct access to filling (floor) brokers:
different exchanges or platforms. The rates may CME Group continues to support open outcry
depend on whether the FCM is a member of the for options and the larger S&P 500 contract in
particular exchange or facility. Over half of the Chicago.
IB responding to the Industry Survey said they
Most FCMs require IBs to fund a “security deposit”
handled no non-domestic market transactions.
or escrow account” when they enter a clearing
But if your customers need non-domestic market
relationship. The fund could be an initial amount set by
access, make sure the FCM you choose can
the clearing firm, or it could be established, then funded
handle it, and at what cost.
by percentages or other set amounts of your office’s
3. Products traded: monthly gross revenue. Some FCMs do not require any
If your customers place trades for foreign security deposit. About 50 percent of the IBs in the
exchange or swaps, products, costs may be Industry Survey said they had a set-aside account which
different than for standard futures and options they funded monthly with a percentage of the total
transactions. FCMs also often determine and commissions earned that month. The fund was used in
charge different rates for IBs using managed the case of a errors, or customers debits or complaints.
futures and CTA directed accounts.
Does your IB have an error fund?
4 Customer balances and the form in which they
are kept:
 Although interest rates have remained at low
levels for past several years, the interest on funds Yes
deposited by your customers generally belongs No
to the FCM. If your IB negotiates a portion of any
accrued interest on Treasury Bill deposits or if
that interest is returned to the customer, it could
affect your clearing rate.

Source: 2017 Industry Survey

5. Compliance or disciplinary issues:
IIBs are generally thought by FCMs to require less
compliance oversight than GIBs. But, if your office
has customer complaint or disciplinary issues, it will
be difficult to obtain and keep an FCM relationship
regardless of your registration category.

28
 The Complete IB Handbook
FCMs

What FCMs look for in the IB Compliance with Regulations and Financial
Requirements
Relationship
For most FCMs, compliance and risk management
The clearing relationship is not a one-sided affair. Each techniques are two of the most important factors they
FCM has specific criteria for entering into the relationship examine when considering a relationship with an IB.
with you, and they will look for particular characteristics.
All FCMs who clear IB business agree they value long- Any action which causes the NFA to impose an
term relationships, and will work hard to keep them. enhanced surveillance of your office activities will be
reason for most FCMs to hesitate to do business with
Some of the specific criteria which an FCM will look at are: your IB. Enhanced supervision can include additional
audits, recording of all your dealings with customers,
Your Risk Management Technique or even additional monetary requirements or fines. A
Being able to manage risk is what sets the winners GIB relationship will be very hard to find if your office
apart from the losers in the derivatives business. is subject to any of these, and even IIB relationships
Developing techniques or habits which ensure that will suffer.
your customers are not over-extended or on margin
call, will keep you and your business in good standing Compliances problems or customer complaints
with the regulators and your clearing firm. during the term of your contract can be cause for
immediate termination by your FCM.
Each customer’s capacity for risk and capital
investment must be evaluated by your office before Your Business Plan
the account is opened. It should be re-evaluated Chapter 4 of this Handbook discusses your business
from time to time while the account remains open. plan – how to develop one and how to use it. A
Evaluation can be done on a trade by trade basis or methodical scheme for professional growth is a big
by viewing the customer’s overall account balance in part of your business plan and includes the following
relationship to trading practices, or some combination considerations:
of the two strategies. Several software packages
• initial number of APs at your IB
are available to help you make risk management
decisions. Use those along with the filters your FCM • how you will recruit qualified APs and clerical staff
has in place. • how your business will be funded initially

You are responsible for discussing a risk management • how large your “nest egg” is, and how long you
plan with your customer. You are responsible for can operate without showing a profit
monitoring the trading in the account, and adjusting • whether you will specialize in one or a few markets
that plan with your customer as needed. Your Clearing
• whether you will offer full-service or discounted
Agreement will detail the circumstances in which you
service
are responsible for any debts or errors incurred in
your customers’ accounts, and when your security • whether you will offer forex transactions
or escrow account can be used to cover those • whether you will add a swaps designation
circumstances.
• whether you will offer managed accounts

29
cmegroup.com

• whether you will register as CTA in addition to Discuss your relationship with your clearing firm
the IB annually, including the amount of your security

• what order entry processes you are familiar with deposit. You can originate the discussion of terms. If
the discussion reveals a one-sided relationship or one
• costs associated with market data costs
that is not profitable for both sides, get a head-start
• costs associated with the order entry process you on a more mutually satisfying relationship.
have chosen

• how you will solicit new customers Mutual Trust

Even taking into account the FCM failures of 2011 and
• whether you will develop your own website
2012, and their eventual collapse, changing clearing
• whether you will conduct seminars, webinars or firms is a rare event. This record of stability is a result
publish a newsletter of many factors affecting the clearing relationship,
including satisfaction with clearing rates and back
Both Parties Must Make Money office services. All FCMs and IBs agree that mutual
 A renegotiation of your Clearing Agreement will take trust is one of the top five most important factors in a
place sooner than you anticipated if the FCM/IB stable relationship.
relationship is not profitable for both parties.
When parties initiate a business relationship, they
Most firms will negotiate a sliding scale arrangement must trust that the other party will professionally
that lowers the clearing costs for transactions as your handle their side of the partnership, and fulfill the
volume and account balances grow. Conversely the terms upon which they have agreed. Over time, the
FCM may reserve the right to raise your clearing rate if trust initially invested can develop into respect, and
your IB does not generate anticipated profits within a often into friendship. Even an office whose volume
specified time after the relationship begins. has fallen off, or who experiences personal problems,
will find it easier to maintain business dealings with
There are many reasons to review your Clearing
their FCMs if the relationship is founded on trust and
Agreement from time-to-time. Compliance problems,
respect.
or the addition of branch offices or products which
trigger the IB’s need for additional supervision and Meet with your attorney and accountant before
audits, will definitely signal the need for a review. investigating FCMs to be sure your financial plan
is viable, and you can fulfill the legal and account
Managed accounts or funds are usually compensated
requirements of the industry.
at a different rate than full-service speculative
accounts because they often require a different type I encourage you to visit the home office of the FCM you
of service. If you add managed accounts to your select prior to negotiating your Clearing Agreement.
office offerings, you will renegotiate your agreement. Meet the risk management supervisors, the compliance
Likewise, adding forex and swaps could call for a close managers, the IB service director, the new accounts
look at the agreement. supervisory, the research department personnel and the

30
 The Complete IB Handbook
FCMs

information technology managers. Understand which

trading platforms you will be using. Discuss fully all
costs associated with your Clearing Agreement. You will
be glad you took the time to make personal contact with
all these people – they are your business partners in a
very real sense.

Checklist for Chapter 3 – FCMs

1. What is the FCM’s reputation in the industry?

2. What do my customers know about the FCM?

3. Have I checked the FCM’s financial health by

looking at both the CFTC and NFA websites?

4. What trading platforms will I be using and what

are the associated costs?

5. Is the research my customers need available,

and at what cost?

6. Does the FCM handle swaps, forex or

cryptocurrency transactions?

7. Will I have to pay additional charges for my

required audits?

8. Do I like what I see?

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cmegroup.com

CHAPTER 4
BUSINESS PLAN

A business plan: A written document that that Do you have a business plan?
details how a business is going to achieve its goals.

Why do you need a business plan?

Yes
Whether you are a start-up IB or have an existing office, No
you will use your plan to:

• define your business

• define your objectives and describe the strategies

for achieving them Source: 2017 Industry Survey

• support a loan application A successful business plan is like a calling card. It can
• describe the relationships between partners both get you in the door of a clearing firm or a banker. It will
within the IB and external (FCMs, Service Providers, also help create trust with clients or investors in your IB.
etc.)
Important to Remember:
• define your business cyber-risk and set a cost on
Your trading plan is not your business plan. Take the
implementing your information systems security
time to explore and evaluate your professional and
program (ISSP)
personal goals. Lay out your strategy from the viewpoint
• evaluate the time and methods for expansion of of marketing, finances and operations. Be able to
your business demonstrate that you have the tools, talent and support
• create a regular review cycle of the state of necessary to make it in the derivatives business.
business, and recognize when and where
corrections in strategies should be made
What type business plan is best for me?
• set a value on your business in the event you decide
Business plans can also be called strategic plans,
to sell or merge, or for other legal purposes
expansion plans, operational plans, investment plans
About 70 percent of the IBs who responded to our 2017 or annual plans. The trading plan or strategy you’ve
Industry Survey replied that they had a business plan. developed is not your business plan.
Most often IBs have plans that look out at least five
The best plan for you is the one that matches your
years into the future, with a review and reevaluation
unique situation. If you are talking to an FCM for the
periodically, most often every six months.
first time or applying for a bank loan, financial and
compliance history of your IB and its employees is very
important. If you are talking to a potential customer,
a description of your management team and how it
makes decisions is most important. If you are reviewing
the plan for internal purposes such as expansion or a
merger, background information will not be as important
as your ideas for the future.

32
 The Complete IB Handbook
Business Plan

Some simple ways to approach the type of plan best for Prepare a balance sheet which details your present
your situation are: financial position. Include:

Start-Up Plan: This plan will help define the steps • income from all sources – savings, salary,

necessary for a new business venture. It will cover investments and other family income

topics such as who the principals are, what types of • debts from loans and credit card balances
customers you will serve, what services you intend
• amount(s) needed for start-up capital
to offer, what ideas your IB will employ to attract
• tax Identification information
customers, what your costs of doing business
are (clearing fees, broker payouts, etc.), how the • partnership or incorporation documents
relationship with your clearing firm and APs will be • NFA and other professional registrations and
handled and who your management team is. approvals

Growth or Expansion Plan: This plan generally • lease agreements for data information devices,
focuses on a specific area of your business. It might telephones, computers
include explanation and cost analysis of adding APs • rental agreements for office and document
to your main office, upgrading your technology or storage space
moving your office. Include detailed forecasts of
– loan agreements
expenses for the expansion in this plan.
– your personal credit report
Feasibility Plan: This plan includes a preliminary
– your business plan timetable
analysis of costs and expenses you expect to incur
operating the IB. This type of plan can help you decide Other components of your plan can include:
whether to add a CTA registration, offer managed
accounts or forex transactions, or even whether you • An executive summary: This is an introduction to
should add another FCM. The detail will help you decide you and your business, and should include the IB’s
whether you plan is feasibly worth pursuing. business highlights. You may find it is easier to write
these pages after you have completed the other
parts of the plan.
Business Plans Basics
• A company description: Describe the legal organization
Introducing Brokers most often have business plans of your IB, its history and your start-up plan.
for five years into the future or longer. Since the futures
• Your market focus: Will you handle only traditional
business itself has both bullish and bearish years just
futures and options transactions or include forex
like the markets, you will need to take a hard, realistic
business? Do you have a clear understanding of
look at your projected cash flow work sheet.
the markets in which you will participate, and the
Pay particular attention to your first year’s income benefits of the marketplace in general?
projection and expenses. Calculate revenue for each • Customer Analysis: Who are your customers and
month using number of transactions, commission what are their needs. How will you reach new
rate(s) charged, clearing and other fees, along with other customers?
planned expenses.

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cmegroup.com

• Strategy and Implementations: Include way of structuring your IB. A sole proprietorship can
management responsibilities with specific dates be formed by obtaining a business name registration,
and budgets for completion. Make sure you have a fictitious name certificate and any other necessary
procedures in place to track the results. business licenses. Attorney’s fees for starting up a sole

• Web/Media Strategy: Your website can be a proprietorship are typically less than other forms of

valuable education tool which draws customers. set-up because less document preparation is required,

Include development and maintenance costs in and the owner of the IB has absolute authority over all

your plan. Remember – your website is considered business decisions.

promotional material by the NFA, and falls under

Partnership: A partnership is a business in which
its regulations. Develop and use the site with
partners share profits and/or losses of the business
compliance in mind.
in which all have invested. There are several ways
• Management Team: Do you have a partner? Who partnership can be formed.
is your compliance officer, your sales manager and
The most often used form is a general partnership
your research/analysis department? Each member
in which all partners manage the business, and are
of your team has specific responsibility under NFA
personally liable for its debt. A general partnership can
regulations, so review the NFA website carefully again.
be formed by oral agreement between two or more
• Financial analysis: How much capital do you need
persons, but a legal partnership agreement drawn
to start up? Where will it come from? What are your
up by an attorney is highly recommended and much
profit and loss projections?
preferred by the NFA. Legal fees for drawing up a
partnership agreement are higher than those for a sole
How long does your business plan go?
proprietorship, but often less than incorporation.
Longer than 5 years
A partnership will be helpful in solving any disputes
5 Years arising in connection with operating your IB, and will
be required in order to open a trading account for
3 years
the benefit of the partnership. Evidence of a written
1 year agreement should be maintained as it will likely be
0% 2% 4% 6% 8% 10% 12% reviewed by your FCM and the NFA during your audit.

Source: 2017 Industry Survey Limited Liability Partnership: LLPs are allowed by
the NFA. They are essentially a general partnership
in form, but the LLP provides each of its individual
Legal Organization
partners protection against personal liability for certain
The NFA allows you to choose the legal organization
partnership liabilities. The limit of an individual partners’
under which you will register. Your business plan may
liability depends on the scope of your residence state
depend on your decision type of legal form.
LLP legislation. Many states provide protection only

Sole Proprietorship: In a sole proprietorship, the against tort claims, and do not extend to a partner’s own

business entity has no separate existence from its negligence, incompetence or the partner’s involvement

owner. This is the easiest, and often the least costly in supervising wrongful activity.

34
 The Complete IB Handbook
Business Plan

All states require a filing and registration. They also corporate structure itself is generally more complex.
require that an LLP include the “Registered Limited Control depends on stock or other interest ownership.
Liability Partnership” or “LLP” in its name. Some Records must be kept to document decisions made by
states require proof that the partnership has obtained the controllers of the corporation, most often a board
adequate insurance, or has adequate assets to satisfy of directors. With control of stock shares or 51 percent
potential claims. In New York, only professional service of stock, a person or group is generally able to make
providers such as attorneys, physician, dentist and policy decisions. Small, closely held corporations can
accountants can register as LLPs. operate more informally, but recordkeeping cannot be
eliminated entirely. Officers of a corporation can be held
It is highly recommended that you use the services of an
liable to stockholders for improper actions or conduct.
attorney to form an LLP. The LLP documents should be
kept on readily accessible for review by your FCM and Incorporation documents will be reviewed by the NFA
the NFA during an audit. and are required by an FCM prior to entering onto a
clearing relationship. Your incorporation documents will
Limited Liability Company: LLC is just another form
be required in order to open a trading account.
of partnership. LLC’s are organized with a document
called the “articles of organization” or “the rules of Your lawyer and accountant should be consulted when
organization” which is specified by individual state you are deciding which legal business entity will be
requirements. Owners of the LLC are called members, best for you. The FCM(s) with which you choose to
and since most states do not restrict ownership to do business will require information about your legal
natural people, the owners may be corporations, foreign organization. The NFA will require disclosure of the form
entities and other LLCs. Most states also allow single- of organization, and will require certain of the principals
member LLCs – those having only one member. and others in control to be disclosed or individually
registered. More information about these requirements
If you register as an LLC, you should consult with your
is found in Chapter 2 of this Handbook – Registration,
lawyer because states have widely varying requirements
and on the NFA website.
for LLC designation. LLC documentation should be kept
on file for review by your FCM and by the NFA during an
audit. Typical IB Business Plan Areas
The derivatives business, including IBs, have specific
Corporation: A corporation is a legal entity which can
considerations when constructing a business plan. Here
exist completely separate from its owners, whether
is a basic guide.
they are natural persons or other legal entities. This
separation gives the corporation unique standing that
other legal entitles lack. The extent and scope of the Introduction:
corporation’s status and capacity are determined by the • a detailed description of your business and its goals
law of the place of incorporation. • the ownership and legal structure of the IB

You can incorporate without using an attorney, but • listing of skills and experience you bring to the
it is not recommended. Corporations can be more business
costlier to organize than other legal structures because • the advantages you have over your competitors

35
cmegroup.com

Marketing: Operations:
- identify your customer audience – type of trader, • identify the day-to-day manager of the office and
markets traded management procedure
- identify your geographical restrictions, if any • identify your Compliance Officer
- explain your advertising and marketing plan • identify your Risk Management Officer
- explain your commission structure and the strategy • identify your Sales Supervisor
you used to develop it
• identify your Information Systems Supervisor
What % of your clients are non-US? • identify your New Accounts Supervisor
30
• identify your AML and Cybersecurity
25
Contacts/Supervisors
20
• discuss hiring and personnel procedures
15
• understand your insurance, lease and rental
10
agreements for space/equipment
5

0
Concluding Statements
0%

0%

0%

5%

6%
10

-6

r6
-2

-4

• summarize your business goals and objectives

1-

41
11

21

ve
O

Source: 2017 Industry Survey • consider whether you have the mental and emotional
attitude to implement your business plans and reach
Financial Management: your goals. Are you physically healthy?
• identify the source and amount of your initial • does your spouse fully support your goals, business
equity capital plan and ideas?
• develop a monthly operating budget for the first
When you complete your business plan, review it with
year of operations
your attorney, your accountant, a business associate
• develop an expected return on the initial investment
who can tell you how realistic it is, and most importantly,
and monthly cash flow for at least the first 12
your family.
months of operations
• understand your breakeven point
• create your personal balance sheet, including how Using Your Business Plan
you compensate yourself A good business plan is a tool to help you build a better
• identify the person(s) who will maintain accounting business, it is not a homework assignment. It requires
records and how they will be kept that you return to it on a regular basis and update as you
learn more about your customers’ needs. A business
• identify and account for costs associated with your
plan is a living document. To use it effectively, first
ISSP
understand its three basic purposes – communication,
• account for alternative approaches to handle
management and planning.
problems that might arise

36
 The Complete IB Handbook
Business Plan

As a communication tool, the business plan is most 3. A

 nticipate trends that may affect your IB’s growth.
often used to attract investment capital, secure loans, Talk to your clearing firm and APs about changes
convince employees to hire on and assist in attracting that may have an impact on your IB. Attend
strategic business partners, including your FCM. The conferences and industry meetings, and subscribe
development of a comprehensive plan can identify to industry newsletters and alerts to learn how
whether the business has the potential to make a others in the business are handling compliance
profit. It requires a realistic look at every phase of a issues, changes in taxation, and technology. Stay
business, and allows you to demonstrate your strengths, informed. Meet product managers and other
including that there are alternatives in place to deal with exchange staff who can help your business grow.
anticipated problem areas. Consider whether you should register as a CTA or
add forex/swaps to your client offerings.
As a management tool, the business plan helps you
track, monitor and evaluate your progress. The plan Be prepared for errors or customer debits by funding an
is a living document that you modify as you gain account to use specifically in that situation.
knowledge and experience. You gauge your progress by
establishing milestones and timelines, then assessing Do you have an error fund?
your actual accomplishments to your projections and
modifying or moving the “goal lines.”

As a planning tool, the business plan guides you through Yes

various phases of your business life. The thoughtful plan No
identifies roadblocks and obstacles, including business
trends and changing regulation, and establishes
alternative directions for growth or methods for changes
to compliance procedures.
Source: 2017 Industry Survey
Here’s a few more tips to help you develop a business 4. I nventory your resources. List your assets. Do you
plan for your IB: have enough money to realize your objectives? What
equipment will you need? Is your physical space
1. S
 ummarize your business activity concisely.
adequate? Do you have a plan to attract more APs and
Describe the nature of the office (traditional IB,
the clerical staff to support them? Some questions to
options only, hedgers only, managed business/third
include in your inventory are:
party CTAs, etc.), and its goals in a single sentence.
This harder than you think! • How much cash and other assets do you have
easily accessible?
2. S
 tate your objectives. What do you want your
business to become? What do you want the • How long could I operate unprofitably without
business to accomplish in the first year? In the first changing my family’s lifestyle?
3 years? What do you expect to accomplish with • Do I have the skills and knowledge necessary to
your career – both financially and personally? operate an IB office?

37
cmegroup.com

• Do I need more experience before I open my physical act of writing is important. It makes your
own IB? plan tangible, and helps the plan feel “real.” Include

• How many APs will I need to meet my the cost of any equipment or training you need to

objectives? meet your goals.

• How will I recruit, train and supervise APs? You must be an NFA member before you can solicit

• Do I need clerical staff? for clients. Advertisements, dissemination of printed

or electronic information, seminars or other in-person
• Where can I find backup personnel and
representations, newsletters, promotional materials
service vendors who are knowledgeable and
and other forms of communication with the public are
experienced in futures industry?
specifically discussed in the NFA Compliance Rules. NFA
Bylaw 1101 states that registrants must be diligent when
How do you recruit APs?
conducting business with other registrants, third-party
account controllers and branch office managers because
these parties must also be members of the NFA.

NFA Rule 2-29 deals with the content of promotional

materials, certain written supervisory procedures,
recordkeeping requirements and necessary reports.
0% 5% 10% 15% 20% 25% 30%
Rule 2-30 inventories the items of information that must
Don't Online Job Boards Internships
be obtained from a customer when opening an account
Personal Contacts Word of Mouth
and when/what risk disclosure are minimally required.

Source: 2017 Industry Survey 7. Evaluate your managerial skills. What do you
5. Set some realistic immediate objectives – the do best? What do you like to do? What are your
“baby-steps” approach. Set one or two goals which professional credentials, and do they apply to
are achievable within a few weeks or a few months. building a successful IB?
Achieving these first objectives will help you get
Consider your philosophy or basic beliefs. Answers to
into the routine of setting goals, meeting them
questions such as how you run your current business,
and setting new ones. It makes it easier to tackle
how you approach planning projects, how management
the larger or longer-term projects when you break
of your IB office will be organized and how you handle
them up. Accomplish one task at a time and mark it
ethical dilemmas are important factors in evaluating
off your list. Move on to the next item feeling good
your personal abilities. What commitments have
about what you have done. This is the “baby-steps”
you made, or are you prepared to make, toward the
approach — and it really works.
achievement of your objectives? What commitments do
6. Write down the steps necessary to meet your you expect from your APs? And, very importantly – ask
objectives. Here you plan marketing objectives for yourself how the commitments you are undertaking will
your office such as how to reach new clients or how affect your family.
to introduce existing clients to a new product. The

38
 The Complete IB Handbook
Business Plan

8. Work your plan. Once your objectives are set and Among the biggest concerns of IBs in 2017-18 is the
your resources are evaluated, you must take action proliferation and cost of increased regulation. The cost
to move yourself along. Break down tasks into steps of cybersecurity and uncertainty of whether or not their
that progressively move you in a positive direction. ISSP and their FCM’s ISSP is even working, worries
Physically write down or enter into your calendar IBs. The dwindling number of FCMs with which to do
those things you want to accomplish each week. customer business and the on-going search for qualified
Breaking down larger projects into steps which can APs in an era of aging IBs owners are also high on the list
easily be completed, encourages you – it will give of things that concern IBs.
you the support you need to keep moving.
Despite those concerns, the IB community is still
Update or revise your objectives periodically. When you a valued, essential component of the derivatives
reach a goal, plan for the next one. Evaluate your plan on community. Customers understand the value of having a
a regular schedule. broker who understands and plans for each individual’s
unique needs and situation. FCMs and exchanges
One of the lessons of the MF Global and Peregrine
understand the value of having an experienced
Financial Group tragedies of 2011 and 2012, is that
professional speak and act directly with the customer to
things don’t always go the way they’ve been planned.
help him/her navigate the marketplace.
Successful IBs are flexible, evaluate the situation and
plan for the future. Your success as an IB will not be automatic or
accidental – you’ll have to plan for it.

IBs Look into the Future

Introducing Broker businesses, along with all other
NFA registrants were impacted by the failures of MF
Global and Peregrine Financial Group. In both of those
cases, the sanctity of customers’ segregated funds was
breached or otherwise misused. In the years since, both
the CFTC and NFA have responded with regulation to
provide transparency and clarity to the accounting and
reporting functions associated with segregated funds.

Now it is much easier to check on the financial health of

an FCM because certain financial reports are required to
be filed with the regulatory agencies, and made public,
either through the agency websites or other means.
These changes make it easier for IBs to explain and
demonstrate how and where customers’ money is held
and safeguarded.

39
cmegroup.com

Checklist for Chapter 4- Business Plan

1. Do I have a written document that covers my

business plans for at least 12 months into the
future?

2. Have I fully discussed my business plan with my

lawyer, accountant and my family?

3. Do I have a “nest egg?”

4. Have I assessed my weaknesses and taken into

account options for overcoming them?

5. Do I have a complete and readily accessible

listing of all my bank accounts and business
investments, including the access information
for each account?

6. Do I have a complete and readily accessible

listing of all my promotional information,
including client communications, website
contents and print communications which I use
with both existing clients and prospects?

7. Do I review my business plans regularly, and

amend or update them?

8. Do I need to register, or do I really just want to

trade for myself?

40
 The Complete IB Handbook
The Regulators

CHAPTER 5
THE REGULATORS

Regulator: a person or body that supervises a If you do not remain in compliance with CFTC rules and
particular industry or business activity NFA regulations, your will not find a clearing firm willing
to work with you. It doesn’t matter how much equity
Introducing Brokers are required to register with the your customers have on the books or how many trades
Commodity Futures Trading Commission (CFTC) your office transacts during the month, FCMs will not
and be members of the National Futures Association take the risk and liability of working with IBs who have a
(NFA) in order to deal with the public with regard to the history of disciplinary problems or customer complaints.
derivatives markets.
Remember the three top ingredients for a successful IB
Your Introducing Broker (IB) is required to update business are:
registration information annually and when changes 1. Good business plan
make updates necessary. An IB’s business activities are
2. Willingness to work hard
subject to supervision and scrutiny by the NFA on an
ongoing basis. 3. Strict compliance to regulations and policies

TOTAL # IBS REGISTERED: 1,197 On July 21, 2010, Congress signed into law the Dodd-

TOTAL # CTAS REGISTERED: 1,601 Frank Wall Street Reform and Consumer Protection Act

TOTAL # CPOS REGISTERED 1,527 (Dodd-Frank Act). Dodd-Frank was basically a response

TOTAL # FCMS REGISTERED 63 to the recession of the late 2000s, and brought

TOTAL # RFEDS REGISTERED 2 significant changes to financial regulation in the U.S.

TOTAL # OF SWAPS DEALER REGISTERED 100 The Act is meant to promote the financial stability of the

TOTAL # OF EXCHANGES REGISTERED 6 country by improving transparency and accountability in

TOTAL # OF ASSOCIATED PERSONS 50,965 the financial system, to protect consumers from abusive
financial services practices and to end “to big to fail.”
Source: NFA Records 2/2018
Over the past 18 years, it has made and continues to
Although the majority of your regulatory and compliance make, changes in the financial regulatory environment
contact will be with the NFA, it is the CFTC which is that affect all federal financial regulatory agencies,
the top regulator in the industry. From its creation in including the CFTC.
1974 until it approved the creation of the NFA in 1981,
Included in the Act is comprehensive regulation of
the CFTC was the main agency for regulation of both
financial markets, including bringing derivatives onto
individuals and firms.
exchanges. Dodd-Frank includes IBs in the definition
Get to know your regulators. In this chapter, you’ll of “financial institutions” which makes many of the
learn what each agency is responsible for, and how it resulting rules applicable directly to the IB.
is organized. The websites of both agencies are very
To date, CFTC has issued 79 new rules, exemptive
helpful, and are a valuable resource for your IB. The
orders and guidance actions, plus seven other actions as
individuals who work at the CFTC and NFA are true
a result of Dodd-Frank.
professionals who should be your first contact when you
have questions about the rules of the industry. NFA initially identified 38 areas in which they would
eventually make new regulation. Those areas include

41
cmegroup.com

regulation of swap clearing and trading, data particular enhanced reporting requirements and increased criminal
products, enforcement of regulation and position limits. penalties for manipulation and other violations of the CEA.

In 1973, grain and soybean futures prices reached highs

A Short History of Futures Regulation never before seen. Allegations of market manipulation

From the early 1880’s to about 1920, over 200 bills were and excessive speculation prompted Congress to

introduced in Congress to regulate, ban or tax futures consider revising the federal regulatory scheme,

trading in the United States. The Futures Trading Act, which ultimately resulted in the Commodity Futures

which was a response to intense speculation in grain Trading Commission Act of 1974. That act created the

futures during the farm depression following World Commodity Futures Trading Commission (CFTC), and

War I, was enacted in August 1921 to regulate futures expanded its exclusive jurisdiction over futures trading

trading in the grain market. That act was declared in all commodities.

unconstitutional because it included a prohibitive tax

By 1975, the CFTC had approved the first two futures
whose primary purpose was to force boards of trade
contracts on financial instruments for trading – Ginnie
to submit to federal regulation, which was deemed an
Maes and 90-day U.S. Treasury bill futures.
unconstitutional use of Congress’ taxing power.
In 1979, the activities of commodity pool operators
In 1922, the Grain Futures Act was passed. Because
(CPOs) and commodity trading advisors (CTAs) were
it was based on the interstate commerce clause and
added to those overseen by the CFTC. In 1981, the NFA
banned off-contract market futures trading rather than
was grated registration as a self-regulatory futures
taxing it, the act was found to be constitutional. The
association.
Grain Futures Administration was soon made an agency
of the U.S. Department of Agriculture (USDA). By 1983, final rules governing introducing brokers (IBs)
and associated persons (APs) were adopted. Shortly
The 1922 Act was replaced in 1936 by the Commodity
thereafter, the CFTC approved options on domestic
Exchange Act (CEA) which extended federal regulation
agricultural futures contracts on six exchanges; authorized
to many more commodities such as cotton, rice, butter
the NFA to perform registration processing functions
and eggs. The CEA also required FCMs to segregate
for FCMs, CPOs, CTAs, IBs and their APs; developed and
customer funds that are deposited for margin, and
adopted improved surveillance, such as early warning
prohibited fictitious and fraudulent transactions such
procedures for adverse financial situations and better
as wash sales and accommodation trades, as well as
margining policies; and ultimately, allowed options trading
banning all commodity option trading. The option ban
in non-agricultural and physical commodities.
remained in effect until 1981.
On October 19, 1987, the U.S. stock market took the
Over the years, the CEA was amended to include more
biggest one-day plunge recorded. No firms defaulted on
commodities such as fats and oils, wool, livestock and
customer obligations, and all CFTC-regulated systems
livestock products, and orange juice.
functioned.

In 1968, the CEA was amended in the first major During 1992-93, market reports from exchanges were
commodities legislation since 1936. The amendments beginning to be sent electronically to the CFTC for the
instituted minimum net financial requirements for FCMs,

42
 The Complete IB Handbook
The Regulators

first time, and a total of 46 new futures and options and protecting the public using those markets.
contracts were approved for trading. In 1995, the CFTC
In 2012, CME Group acquired the Kansas City Board of
launched its website: www.cftc.gov.
Trade, and consolidated its operations with the Chicago
The Commodity Futures Modernization Act of 2000 office.
(CFMA) was signed into law. The CFMA overhauled the
Swaps regulation began in 2014, creating a large pool of
CEA, creating a more flexible structure for regulation
new registrants.
futures and options trading; clarified CFTC jurisdiction over
certain retail foreign currency transactions and repealed In November 2015, the CFTC brought its first legal case
the 18-year old ban on trading of single stock futures. against “spoofing.”

Following the September 11, 2001, attacks on the United During 2017, the CFTC addressed identification and
States, the CFTC restructured its staff in order to more review of regulations which can be simplified under a
effectively deal with anti-money laundering legislation program called “Project KISS.” It is ongoing.
and increased globalization of the markets. Domestic
trading of single stock futures was permitted in 2002. Also in 2017, the CFTC issued guidance for the regulation
The first designated contract market owned by a foreign of bitcoin. In early 2018, a federal court ruled that
futures exchange was approved. bitcoin and other cryptocurrencies can be commodities.
This means that derivatives on cryptocurrencies that
In July 2007, the Chicago Mercantile Exchange and the are not securities, such as bitcoin futures, will be
Chicago Board of Trade announced the completion of a exclusively regulated by the CFTC. On the other hand,
merger, forming the world’s largest futures exchange – some derivatives based on cryptocurrencies may be
the CME Group. In 2008, New York Mercantile Exchange jointly regulated by the CFTC and SEC if the underlying
and COMEX, both located in New York City, became a cryptocurrency is classified as a security. In late 2017,
part of CME Group. CME Group began transacting cryptocurrency futures

In 2010, the CFTC and the Securities Exchange contracts.

Commission (SEC) formed an advisory committee
Compliance Office Types
to address emerging common regulatory issues. In
70%
July 2010, the Dodd-Frank Act was signed. Title VII
60%
of Dodd-Frank allowed the CFTC to establish a new 50%
framework for swaps trading. From mid-2010 much of 40%
the regulation proposed by the Commission has been in 30%
20%
response to the requirements on financial institutions
10%
imposed by Dodd-Frank. 0%
e

FC ion

ne Fi t

ffi o
im

n ce en

O ls
M

ed rm

r
Ti

In October 2011, and again in July 2012, the sanctity

e is a
ce
om ct
ll T

he n nd

ed
fr ire
rt

w lia pe
Fu

nc r
Pa

ia e
D

p e

pl wn

of customers’ segregated funds was breached by two

m nd
e
nc

m o
Co y I
ia

Co IB
o

separate FCMs. Much of the focus of both the NFA and

pl

pl
m

Em
Co

CFTC during the years since those breaches has been on

Source: 2017 Industry Survey
updating existing regulations and instituting new rules
with the purpose of restoring integrity in the markets

43
cmegroup.com

The Commodity Futures Trading The CFTC also mandates ethical standards of behavior
Commission (CFTC) for registrant, and monitors sales practices and internal
controls. The registration process itself is handled by
Three Lafayette Centre
the NFA in their Chicago office.
1155 21st Street, N.W.
Washington, DC 20581 The main office of the CFTC is in Washington, DC. There
(202)418-5000 are also field offices in Chicago, New York City and
www.cftc.gov Kansas City.

The CFTC or Commission was created by Congress Funding for CFTC operations comes from Congress. For
in 1974. It is an independent agency whose original 2018 and again for 2019, the agency has requested a
purpose was to regulate futures, options and forex budget of 218.5 million dollars (source: www.cftc.gov).
markets in the United States. The enactment of the CFTC currently employs approximately 700 people, and
Dodd-Frank Act brought the regulation of swaps under has requested authority to add about 50 more.
the authority of the Commission.
The CFTC website, www.cftc.gov, includes information
The mission of the CFTC is to “foster open, transparent, about:
competitive, and financially sound markets. By working
• new products and trading facilities
to avoid systemic risk, the Commission aims to protect
market users and their funds, consumers, and the public • forex and foreign contracts approved for trading
from fraud, manipulation, and abusive practices related • swaps trading and regulation
to derivatives and other products that are subject to the
• disciplinary and enforcement action taken by the
Commodity Exchange Act.”
Commission
Source: CFTC website, 2/2018
• financial reports required to be filed with the
The CFTC reviews the terms and conditions of all proposed Commission, including those of FCMs
futures and options contracts, and requires daily reporting
• market reports such as Commitments of Traders
to assure normal market flow and to prevent manipulation,
abusive trade practices and fraud. The CFTC must be • bitcoin and other cyrptocurrency
reauthorized by Congress every five years.

The CFTC requires, among other requirements, that: Organization of the CFTC
• FCMs keep customer funds in segregated accounts The CFTC is made up of Commissioners, four separate

away from company funds; divisions and various offices which support and advise
the Commission.
• customer accounts be adjusted to reflect their
current market value at the end of each trading day; Five Commissioners are appointed by the President
and that, of the United States to lead the CFTC. They must

• all registrants disclose market risks and past be approved by the Senate. The Commissioners

performance information to prospective customers. serve staggered five-year terms, and the President
designates one to act as the Chairman at the time

44
 The Complete IB Handbook
The Regulators

that Commissioner is appointed. No more than three Commissioner Rostin Behnam

Commissioners concurrently serving may be from the (term 9/2017-6/2021)
same political party. Rostin served as senior counsel to Senator Debbie
Stabenow (MI), focusing on policy and legislation
As of the writing of this Handbook, there are only three related to the CFTC and the Department of Agriculture.
Commissioners approved and sitting in the Washington, Prior to joining Senator Stabenow’s team, he practiced
D.C. office. In recent times it is not unusual to have law in New York and New Jersey. Rostin earned a law
less than the full number of five commissioners to do degree from Syracuse University College of Law.
the work of the CFTC. Commissioners are supported
by several hundred staff who work for the federal CFTC is organized into four separate divisions:
government. Many of the “staffers” have been employed
1. Clearing and Risk (DCR): The Division of Clearing
at the CFTC for over 20 years, are highly experienced
and Risk oversees derivatives clearing organizations
and are very open to answering your questions about
(DCOs) and other market participants including
CFTC rules.
FCMs, swap dealers, major swap participants and
large traders. It monitors the clearing of futures,
Commissioners serving as of February 2018, per the
CFTC website, are: options on futures and swaps, and assesses
compliance with regulations, including conducting risk
Chairman J. Christopher “Chris” Giancarlo assessment and surveillance. This division also makes
(term 8/2014-4/2019)
recommendations on DCO applications and eligibility,
Prior to entering public service, Chris served
rule submissions and which types of swaps should be
as Executive Vice President of GFI Group Inc., a
cleared.
financial services firm. He is a founding co-editor of
eSecurities, Trading and Regulation on the Internet. 2. Enforcement (DOE): The Division of Enforcement
Chris initiated Project KISS, a review and identification investigates and prosecutes alleged violations of the
of existing rules at the CFTC with a view toward CEA and Commission regulations. Potential violations
simplification. He is from Jersey City, NJ and has a law include fraud, manipulation and other abuses
degree from Vanderbilt University School of Law concerning commodity derivatives and swaps that
Commissioner Brian D. Quintenz threaten market integrity, market participants and the
(term 8/2017-4/2020) general public. According to its records, DOE imposed
Brian founded and was the managing principal and about $413 million in sanctions in 49 actions during
CIO of a commodity pool operator that specialized in fiscal year 2017. Most of these cases involved retail
risk management and technical analysis investment fraud or manipulation/false reporting. (Source: CFTC,
strategies. He started his career with a registered 2018).
investment advisor where he implemented proprietary
3. Market Oversight (DMO): The Division of Market
hedging strategies among other duties. Brian also
Oversight fosters derivatives markets that accurately
served as the senior policy advisor to Congresswoman
reflect the forces of supply and demand, and
Deborah Pryce (OH). He holds a MBA from
are free of disruptive activity. It oversees trade
Georgetown University.
execution facilities and data repositories, conducts
surveillance, reviews new exchange applications and

45
cmegroup.com

examines existing exchanges to ensure compliance measured and tracked through the agency. The OED
with applicable core principles. DMO also evaluates also oversees the Whistleblower and Consumer
new products to ensure they are not susceptible to Affairs programs, as well as the Office of Diversity and
manipulation. Inclusion.

4. Swap Dealers and Intermediary Oversight (DSIO): General Counsel (OGC): The OGC provides legal
This division oversees the registration and compliance services and support to the Commission and all of
of intermediaries, including futures industry self- its programs. OGC represents the CFTC in appellate,
regulatory organization (SROs) such as the NFA and bankruptcy and other litigation, provides legal
U.S. derivatives exchanges, FCMs and IBs. Under advice for CFTC programs, drafts CFTC regulations
Dodd-Frank, DSIO is also responsible for developing and advises the CFTC on legislative, regulatory and
and monitoring compliance with regulations operational issues.
addressing registration, business conduct standards,
Inspector General (OIG): This office is an
capital adequacy and margin requirements for swap
independent unit at the CFTC. Its purpose is to
dealers and major swap participants.
detect waste, fraud and abuse, and to promote
integrity, economy, efficiency and effectiveness of
Offices which support and advise the Commission
include: CFTC programs. It reviews all of the Commission’s
Chief Economist (OCE): OCE provides economic programs, activities and records, and issues
support and advice to the Commission, conducts semiannual reports detailing its activities, findings
research on policy issues, and educates and trains and recommendations.
the staff of the CFTC. The OCE plays a significant
International Affairs (OIA): The OIA advises
role in the implementation of new financial market
the Commission on international matters, and
regulations by providing economic expertise and cost-
coordinates policy as it relates to the initiatives of the
benefit considerations underlying those regulations.
G20 and U.S. Treasury Department, and the Financial
Data and Technology (ODT): ODT provides Stability Board.
technology and data management support for
Legislative Affairs (OLA): This office liaisons with
the Commission, market and financial oversight,
Congress. OLA coordinates reports, briefings and
surveillance, enforcement, legal support, and public
informational materials provided to Congressional
transparency activities. ODT also provides general
offices and testimony before Congressional
network, communications, storage, computing and
committees. It also manages CFTC’s response
information management infrastructure and services.
to inquiries on behalf of constituents and other
Executive Director (OED): The Executive Director communications from the legislative branch.
ensures that the Commission adapts to changes
Office of Minority and Women Inclusion (OMW):
in the marketplace with regard to its regulation,
This office focuses on civil rights, equal employment
directs the allocation of CFTC resources, develops
issues and diversity inclusion within the CFTC.
and implements management and administrative
policy, and ensures that program performance is

46
 The Complete IB Handbook
The Regulators

Public Affairs (OPA): The OPA interacts with the CFTC’s Whistleblower Program
general public and news media. OPA issues press
In January 2012, the CFTC instituted a Whistleblower
releases and media alerts, and maintains the
Program created as a result of the Dodd-Frank Act,
Commission’s website and social media presence.
which allows for the payment of monetary awards to
eligible whistleblowers and provides anti-retaliation
CFTC’s Reparations Program protections for whistleblowers who share information
with, or assist the CFTC. The total amount of a
Most disputed issues between customers and IB
whistleblower award will between 10 and 30 percent
offices are handled through the arbitration or mediation
of the monetary sanctions collected in either a
process administered by the NFA. However, customers
Commission action or related action. The largest single
who allege that an IB has engaged in activities which
payout under this program was $10 million.
violate the CEA or CFTC rules can file their complaint
directly with the CFTC. Those violations include A whistleblower can be any person who voluntarily
transactions that involve futures contracts, options, provides the CFTC with original information about a
physical commodities and leverage contracts. Types violation of the CEA that leads to a CFTC enforcement
of violations include fraud, breach of fiduciary duty, action that results in more than $1 million in monetary
unauthorized trading, misappropriation, churning, sanctions. The information can be based on either
wrongful liquidation, failure to supervise and the person’s independent knowledge or independent
nondisclosure. analysis. A whistleblower may file anonymously on
the form found on the CFTC website. The Commission
The claimant in a reparations action must (i) file their
reports 58 whistleblower tips were filed in 2012, the
complaint within two years after the date she/he
first year of the program. By 2017, that number had
knew, or should have known of the wrongdoing; (ii) not
increased to 465 tips. CFTC believes the increase is due
file against a respondent who is in bankruptcy (The
in part to their outreach program in combination with
bankruptcy trustee appointed by a court administers
their new website approach and design.
those claims.); and, (iii) not be pursuing a claim based on
the same set of facts in arbitration or a civil court.
CFTC’s Market Reports
There are three ways to proceed in a reparations case
– voluntary, summary and formal. The determination The Commission produces several market reports
of how to proceed is made by the filing party, includes which are available to the public on the CFTC’s website,
consideration of the amount claimed. The action www.cftc.gov. These easily accessible, free reports are
may be decided by submission of exhibits and other a great way to keep up with the financial and trading
documentation only, or a hearing may be required. The information collected by the Commission. You should
parties may be represented by attorneys. The decision use this information to access the ongoing health of
of the reparations program is final if both parties your FCM, to update your knowledge of open and trade
consented to the voluntary procedure method. interest in various markets and to provide support and
documentation when developing trading strategies. A
few of the reports available are:

47
cmegroup.com

Bank Participation Reports: Compiled monthly, this National Futures Association (NFA)
futures and option positions report includes the 300 So. Riverside Plaza, Ste. 1800
commodity type, open interest and bank type. Chicago, IL 60606
(312) 781-1300
Cleared Margin Reports: Derivatives Clearing
Organizations such as CME Group and others are One New York Plaza, Ste. 4300
required to file initial margin deposits daily. New York, NY 10002
(212) 608-8660
Commitment of Traders (COT): A breakdown of each
Tuesday’s open interest for markets in which 20 or more Information Center: 800-621-3570/ 312-781-1410
traders hold positions equal to, or above the reporting Website: www.nfa.futures.org
levels established by the CFTC. The reports are released
The NFA is the self-regulatory organization for the U.S.
on Friday afternoon.
futures, options, foreign exchange and swaps industry.
Financial Data for FCMs: These monthly reports provide It is a not-for-profit membership corporation. It began
a look at the financial health of FCMs and RFEDs. They operations in October 1982, after being granted formal
include information on both adjusted and net capital, designation as a registered futures association by the
customer assets held in segregation at the FCM/RFED CFTC in 1981.
and several other benchmarks. Currently 63 registrants
The CFTC provides governmental oversight for the
file these monthly reports.
entire industry. Each futures exchange governs its
Index Investment Data (IID): Monthly reports by swap traders and member firms. The NFA regulates every
dealers and index traders responding to a “special firm and individual who conducts futures, options,
call” as it is described in CFTC Rule 18.05, showing forex and swaps trading business with the public. NFA
the notional values and equivalent number of futures Membership is mandatory for all futures professionals
contracts for all U.S. markets with more than $0.5 billion doing business with the public.
of reported net notional value of index investment at the
The NFA is completely self-funded. Futures compliance
end of any one month.
is primarily funded by assessment fees on futures and
Net Position Changes: The Large trader report shows options transactions, and through the dues of swaps
the daily average net position for large traders in 27 and forex members.
physical and eight financial futures markets for any
NFA’s primary focus is on investor protection and
given week. Trading Account Net Position Changes
market integrity. NFA develops the rules, programs
tracks the same information at the trading account level
and services that ensure industry integrity, protects
for 20 physical and eight financial futures markets. The
market participants and helps its members meet their
data depicts trading that changes or creates an end-of-
regulatory requirements.
day net position, such as spread or day trading.

48
 The Complete IB Handbook
The Regulators

All futures professionals who do business with the NFA officers and key personnel as of February 2018:
public, including IBs, must join the NFA. As a registrant, Tom Sexton: President & CEO
you may not accept orders for another person (except a Dan Driscoll: Executive Vice-President & COO
direct customer) unless that person belongs to the NFA Regina Thoele: Senior Vice-President, Compliance
or another registered futures association, such as an David Hawrysz: Senior Vice-President,
exchange. CFO & Treasurer
Karen Wuerz: Senior Vice-President,
TOTAL # OF NFA MEMBERS Strategic Planning
A/O FEB. 2018 4,546 Edward Dasso: Vice-President, Market Regulation

Source: NFA Website, 2/2018

Carol Wooding: Vice-President, General Counsel &
*Associates (APs) not included as members. Secretary
Yvette Christman: Vice-President, Membership &
Individuals apply for membership in the NFA at the
Registration
same time they apply for registration by the CFTC. As of
Jamila Piracci: Vice-President, OTC Derivatives
Feb. 2018, there were 4,546 members of the NFA (legal
Tim McHenry: Vice-President, Information Systems
entities or firms such as IBs, CTAs, etc.). Numbers are
up about 550 applications from mid-2016. NFA records NFA policy is defined by its Board of Directors (BoD).
show 50,965 Associates (these are the individuals Representatives for all registration categories are
employed by members firms as APs) – down about elected from the general membership to serve on the
3,300 individuals from 54,299 mid-2016. BoD, along with a few appointees. Policy Supervision is
handled by a 15-member Executive Committee elected
NFA is an independent organization with no ties to any
by the BoD. Most BoD members are registered APs.
specific marketplace.
Introducing Brokers have two representatives on the
There are approximately 500 people working for the NFA
NFA BoD, one each from the Guaranteed IB (GIB) and
in its two offices. Policy implementation is handled by NFA
Independent IB (IIB) category. As of February 2018, IB
offices a nd staff. All NFA personnel can be reached by
representatives are:
email or phone through the NFA website, nfa.futures.org.
GIBs: Scott Stewart: CEO, Stewart-Peterson Group
West Bend, WI
sstewart@stewart-peterson.com

IIBs: M
 ike Burke: CEO, Highground Trading
Chicago, IL
mikeb@highgroundtrading.com

The NFA issues a financial report to members annually

and holds an annual membership meeting at its Chicago
office each year in February. All members of the NFA are
qualified to attend. NFA also posts a video report on its
website following its quarterly meetings.

49
cmegroup.com

IBs and their APs may be appointed to the various Rulemaking & Compliance: NFA monitors all member
committees of the NFA. These committees meet firms and individuals to assure they are in compliance with
periodically to advise staff on proposed regulation NFA and CFTC rules. The NFA Compliance Department
and respond to CFTC requests and other membership oversees your daily activities as an IB, including the
issues. As of February 2018, NFA committee include: manner in which you interact with your customers. Each

Advisory (FCM, CPO/CTA, IB, SD) IB is subject to a face-to-face audit performed by the NFA

Executive staff approximately every three years.

Appeals
In 2017, the Business Conduct Committee of the NFA
Finance
issued 21 complaints against 39 members for violations
Audit
of NFA rules. Discipline Panels issued 28 decisions
Floor Broker/Trader Subcommittee
which included 22 expulsions from membership and 22
Business Conduct
suspensions. NFA collected approximately $700,000 in
Hearing
fines during 2017.
Compensation
Membership Dispute Resolution: In 1983, NFA began an arbitration
Compliance/Risk program which became the primary venue for dispute
Nominating resolution in the industry. Since 1991, they have also
Discretionary Accounts Waiver Panel offered a mediation program. Arbitration proceedings
Telemarketing Procedures Waiver are generally conducted by other members of the
NFA, often sitting as a panel. Lawyers, accountants
and others with special knowledge of the industry be
NFA’s Areas of Responsibility included in an arbitration hearing. The hearing can

NFA works to develop rules, programs and services be conducted in-person or by each party submitting

that safeguard market integrity, protect investors documents for review to the hearing officer or panel.

and help NFA members meet their regulatory

NFA dispute resolution is open for member-to-member
responsibilities.
disputes, such as IB versus FCM, and for customer-to-
Source: NFA Website, 2018 member disputes, such as customer versus IB. Cost

Registration: All firms and individuals who conduct of dispute resolution is determined by the amount in

futures business with the public must be registered with in dispute. Forms for filing an arbitration or mediation

the CFTC and members of the NFA. Most registration request are found on the NFA website, nfa.futures.org.

forms and explanatory materials are found online at

In the past year, NFA distributed restitution awards to
the NFA’s website, nfa.futures.org. Annual registration
approximately 1,800 customers who claimed harm as a
updates are required for IBs and can be filed electronically.
result of a broker’s action.

NFA reports it processed 540 firm registrations and

Education: NFA provides education resources to both
9,600 individual registrations including update reports
members and investors. It conducts member meetings
during 2017.
throughout the U.S. to discuss issues of current
importance. Recent webinar topics have included the

50
 The Complete IB Handbook
The Regulators

new website launch (6/2017); a Town Hall (3/2017); Cybersecurity: During February of 2016, NFA issued
and, cybersecurity (2/2016). Audio recordings of those an Interpretive Notice requiring members to adopt
meetings are posted online at NFA’s website. and enforce written policies and procedures to secure
customer data and access to their electronic systems.
Additionally, NFA has print and electronic educational
The Notice became effective March 1, 2016 and applies
materials available for investors. Some of those topics
to all membership categories.
include the basics of trading futures and forex, and a
glossary of basic terminology. Other materials booklets Recognizing that a one-size-does-not-fit-all approach
defining often used terms, opportunities and risks of would not work for the varied business models engaged
trading futures and how to use of securities futures in the derivatives business it regulates, the NFA adopted
products, as well as cybersecurity issues are also a principles-based risk approach. This approach allows
available. member firms a degree of flexibility in determining what
constitutes “diligent supervision” given the differences
in firm sizes and complexities of their operations, the
Good to Know about the NFA make-up of their customer bases and counterparties and
The NFA is the regulatory agency with which your IB extent of the firm’s interconnectedness. Each Member
will have most contact. From your initial registration to is required to adopt and enforce an information systems
submitting your advertising materials, the NFA has quite security program (ISSP) appropriate to its circumstances.
literally become your everyday business partner.
This written program must be maintained with the firm’s
BASIC: In 1998, the NFA introduced the Background written procedures, it must be implemented, followed
Affiliation Status Information Center (BASIC), an online and reviewed at least annually to keep it current and
clearing house of disciplinary information about firms complete. An audio recording and materials from the
and APs. BASIC is accessed through the NFA website – Chicago Cybersecurity Workshop held in February 2016
you do not have to be a member to view the directory. is viewable on NFA’s website.
NFA reports more than 800,000 individual BASIC
searches each year. Enhanced Supervision: NFA Compliance Rule 2-9 was
designed to prevent deceptive sales practices by putting
BASIC contains current and historical registration continuing responsibilities on each member to supervise
information about all current and former CFTC its APs in all aspects of their industry activities,
registrants, including business address and listed including sales practices. In 2007, the NFA added
principals of the firm. Information can be searched by specific criteria to be measured against every firm to
individual name or by firm name. Information concerning determine if that firm and its APs should be subject to
disciplinary actions taken by the NFA, CFTC and all U.S. “enhanced supervision.”
futures exchanges can be found in BASIC.
Enhanced supervision includes the recording of all
Prior to associating with an FCM, CTA or CPO or prior conversations with existing and potential customers,
to hiring any AP, check BASIC to review the information additional capital requirements, filing of all promotional
reported. And check periodically to ensure the materials with the NFA, and written supervisory
information displayed about you and your firm has been procedures to ensure that all NFA compliance rules are
reported and updated correctly. being followed.

51
cmegroup.com

This supervision requirement could affect your choice IBs can also access their annual questionnaire, use the
of FCM, and most definitely should be considered when system to develop their AML procedure and submit
you hire APs. A list of Disciplined Firms is found on required regulatory documentation.
the NFA’s website and includes firms that have been
Both the CFTC and the NFA employ a highly
disciplined by the CFTC or NFA in connection with sales
professional, experienced group of people who are open
practices.
to direct communication with you – the people and firms
In January 2018, NFA issued an Interpretive Notice they regulate. Don’t hesitate to contact them if you need
addressing and updating issues surrounding Enhanced help in understanding the rules and regulations.
Supervision. That notice can be accessed through the
NFA website. Checklist for Chapter 5 – Regulators

Compliance Office Types 1. Do I understand who the CFTC is, and my
70% obligations?
60%
50% 2. Do I understand who the NFA is, and my
40% obligations?
30%
20%
3. Have I checked my BASIC listing to ensure the
10%
0% information posted is correct?
e

FC ion

ne Fi t

ffi o
im

n ce en

O ls
M

ed rm

r
Ti

4. Have I registered for electronic filing with the

e is a
ce
om ct
ll T

he n nd

ed
fr ire
rt

w lia pe
Fu

nc r
Pa

ia e
D

p e

pl wn

NFA and named an account manager?

m nd
e
nc

m o
Co y I
ia

Co IB
o
pl

pl
m

Em
Co

5. Should I request an appointment with NFA to

Source: 2017 Industry Survey

review my promotional materials?

Electronic Filing: An IIB can use NFA’s electronic filing 6. Do I regularly check the NFA website listing

system to meet its regulatory filing requirements. before hiring any APs or associating with any

You can register with the CFTC and apply for NFA clearing FCM?

membership electronically. Audited and unaudited

7. Have I watched, and instructed my APs to watch
financial statement can be sent to the NFA through
the NFA’s cybersecurity webinar?
either EasyFile or WinJammer.
8. Are any of the CFTC’s Market Reports useful to
Firms can designate an Executive Representative Contact
my business?
who has the Member’s sole authority to sign nominating
petitions, receive notices of member meetings and proxy
materials, complete proxy cards and provide voting
instruction and cast votes on behalf of the member.

52
 The Complete IB Handbook
First Audit

CHAPTER 6
FIRST AUDIT

Audit: an official inspection of accounts, records NFA audits have two major objectives:
and documents to check their accuracy.
• to determine whether the firm is maintaining
records in accordance with NFA rules and CFTC
Members of the NFA are required to comply with NFA regulations
rules and CFTC regulations. As a member, you will
• to ensure that the firm is being operated in a
be monitored to assure your office is in compliance.
professional manner, and that customers are
One means of monitoring is periodic on-site exams –
protected against unscrupulous activities and
commonly referred to in the industry as “audits.” All IBs
fraudulent or high pressure sales practices.
can expect to be audited in their office by the NFA at
least once every three years. Independent IBs are also subject to audits of their
financial records. The financial audit will focus on the
Your FCM also has a responsibility to supervise all
preparation and presentation of the financial statement
aspects of your futures, options, forex and swaps
and internal accounting controls. The primary objective
activities. NFA Interpretative Notices have suggested
of the financial audit is to determine that the financial
over the years that it is appropriate for FCMs to inspect
statements are complete, accurate, and prepared
IBs on-site periodically, and that procedures detailed
in accordance with NFA rules, CFTC regulations and
for that visit will help ensure that the review process is
generally accepted accounting principles.
performed in a consistent manner.
The NFA conducts about 400 audits of IBs each year.
HAVE YOU BEEN AUDITED BY FCM/NFA That means you can expect to be audited by the NFA
FCM – YES 85% about every three years.
NFA – YES 95%

Source: 2017 Industry Source

NFA’s audit program is designed so that the examiners
(NFA staff) must perform a certain amount of work in
The timing and frequency of audits, or examinations
your office. As part of the examination, an IB’s records
by the NFA, depends on several factors including your
and relevant documents will be required to be produced,
office’s:
and relevant personnel must be available. If documents
• customer complaints or personnel are not readily available, the audit will
• net capital history take longer. Additionally, if the firm, a principal or AP is
registered in another capacity other than IB, the exam
• prior audit findings
may take longer. Audits of IBs most generally last one
• concerns noted during the review of your financial to five days depending on the nature of your operations
statements or other filings typically made with the and areas of concern.
NFA

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cmegroup.com

The NFA will conduct the audit in three phrases: A preliminary list of records needed for the audit will be
provided when the exam is announced. NFA staff will
1. Planning: The NFA most often calls the IB to
also talk to the individual that is most knowledgeable
announce an upcoming exam. They follow-up with a
about the firm’s business. That individual is most often
more formal notice, known as a First Day Letter, to
your Compliance Officer or you if you are the Sole
confirm the date and time NFA staff will be in your
Proprietor. Questions asked will include information
office.
on the types of customers the firm has, the solicitation
2. F
 ieldwork: During the time NFA staff are in your methods used and the types of promotional material
office, you can expect them to: used. This pre-audit conversation helps NFA to plan the
time they will need to be on-site in your office.
• review reports and documentation

• interview key personnel

During the Audit Process
• monitor the firm’s operations
On the first day of your audit, a member of the exam
• conduct an oral exit interview
team will explain the purpose and scope of the audit and
3. R
 eporting: Upon completion of their fieldwork, indicate what books, statements and other information
NFA will hold an examination closing meeting (“exit will be reviewed. During the course of the exam,
interview”) to discuss findings with IB personnel, additional records or documentation will most likely be
and issue a written audit report. requested. Some of those documents include:

• sales materials and practices

Preparing for an Audit • performance representations

NFA staff will tell you there is only one way to prepare • trading records
for an audit – that is by having properly prepared and
NFA staff will observe the IBs operations and they can
maintained books and records available for review at all
conduct interviews with your personnel. They may
times. That will enhance the likelihood of a satisfactory
ask you to copy certain documents or may ask to take
exam report.
documents back to the NFA office. Ask for a receipt if
Introducing Brokers should review the information any documentation is removed from your office.
published by the NFA and posted on their website for
All required books and records must be kept for five
advice and assistance with regard to establishing and
years and must be readily accessible for the most
maintaining the required records. Additionally, NFA
recent two years of that period. You can store most
suggests reviewing the NFA Manual itself.
records with an electronic storage media system. Any
I have found the Self-Examination Checklist which all digital storage system that preserves information in a
NFA Members complete on a yearly basis is a very permanent format, indexes the data and records the
valuable source of information with regard to your date, and can be converted to hard copy immediately,
regulatory responsibilities and internal procedures, and can be used. Any physically created customer order
great resource for preparing for the audit. It is available tickets or trading cards must be retained in their original
on NFA’s website. hard copy form.

54
 The Complete IB Handbook
First Audit

All documents your IB files with the NFA must be in If the audit indicates serious or repeated violations of
English. If you prepare any promotional materials in any NFA rules, the Compliance Department will forward the
other language, you must keep English translations of matter to the Business Conduct Committee (BCC). The
that material. BCC is made up of NFA members. Depending on the
seriousness of the violation, the BCC may direct that a
The required IIB financial reports must also be prepared
Warning Letter be sent to the IB or it may issue a formal
in English, using U.S. dollars and U.S. accounting
complaint charging the IB with specific violations of
standards. If you handle any business in any language
NFA rules.
other than English, you will be required to assure
the NFA that an English-speaking individual who is If a complaint is issued, the NFA member IB is given
knowledgeable about the IB’s business is available to the the opportunity to answer, and is entitled to a hearing
NFA during the audit process. before the Hearing Committee, which is also made up
of NFA members. If the Hearing Committee finds that a
member violated NFA rules, that IB is subject to several
After the Audit possible disciplinary actions, including expulsion from
After your audit is completed, but before the examiners NFA membership, suspension for a fixed period of time,
leave your office, they generally meet with you for the prohibition from future association with any NFA Member,
“exit interview.” The purpose of the exit interview is censure, reprimand and/or a fine of up to $250,000 for
to discuss the findings of the exam – particularly any each violation. The IB can appeal any adverse decision
deficiencies which were noted, and the ways in which by the Hearing Committee to a committee of directors
they can be corrected. The audit team will also obtain created by the NFA Board of Directors – the Appeals
oral representations from the appropriate IB personnel Committee. Decisions of the Appeals Committee are
about how the firm will correct those deficiencies. final, subject to review by the CFTC.

Upon returning to the NFA office, the auditors will In emergency cases — essentially when an infraction by
prepare an Exam Report. If no material deficiencies an IB is deems to pose an imminent danger to markets,
were found during the exam, the Exam Report will state customers or other NFA members, the President of
that the audit has been completed and no material NFA with the concurrence of the Board of Directors
deficiencies were noted. If there were deficiencies, the or the Executive Committee, may initiate a Member
Exam Report will note them. Your written response to Responsibility Action (MRA). This action can require the
the Exam Report may be required. firm to immediately cease doing business, restrict a firm’s
operation or impose other remedial actions. Any member
Even if the NFA audit discloses relatively few
subject to an MRA will be offered a hearing before
deficiencies, you cannot represent that the firm has
several members of the Hearing Committee as quickly as
been approved or recommended by the NFA. NFA
possible. An MRA may be initiated following an audit or
Compliance Rule 2-22 prohibits any representation that
investigation, or event during the course of the audit or
any member’s abilities have been passed upon by the
exam if circumstances call for such emergency action.
NFA, or any federal or state regulatory body.

55
cmegroup.com

Some of the records and documents the NFA will • Segregation Requirements
generally examine during the course of an IB audit are:
• Margins
• Basic Records: Most of these may be stored for the
• Requirements for a GIB Agreement
required five years electronically except trading
• Termination of a Guarantee Agreement
cards and customer orders. All records must be
readily available for the first two years of storage. * NFA suggests an IB review the Appendix which it has
• Customer Statements published for each of these areas. They are posted on
NFA’s website.
• Customer Orders

• Operations and Activities of the IB

• Position Limit and Reportable Positions at the IB

General Registration
NFA staff will review specific documentations and
• Policies Against During Business With
records in regard to general registration requirements.
Non-Members
They include:
• Customer Information, Including Risk Disclosure
• That all individuals required to be listed as principals
• Your Anti-Money Laundering Program* are listed.
• Privacy Policy* • That anyone responsible for supervising aps is
• Customer Protection Information registered as an ap.

• Your Risk Management Program • That a list of all branch office locations and their
managers is included on your filings. Branch
• Discretionary Accounts
managers must complete the branch manager exam.
• Disclosure of Costs Associated with Futures
• That any personnel transacting security futures
Transactions
business has completed specific and additional
• Ethics Training*
requirements.
• Your Business Continuity and Disaster Recover
• That you are only doing business with registered
Plans*
firms, and that they are nfa members, if required to
• Plan for General Supervision (including Branch be.
Offices)
• That commissions for customer transactions are
• Cybersecurity being paid only to nfa members.

• Your Chief Compliance Officer • That no unregistered office personnel are handling

• Accounting Requirements for IIBs customer accounts.

• Financial Requirements for IIBS • That guarantee agreements and terminations have
been filed with nfa.
• Required Accounting Records for IIBs
• That gibs have a copy of their guarantee agreement
• Financial Reporting
on file.
• Subordinated Loan Agreement

56
 The Complete IB Handbook
First Audit

General Supervision Day-to-Day Supervision: As a general rule, NFA expects

GIBs and branch offices to be inspected annually. After
NFA Compliance Rule 2-9 puts a continuing
the inspection, a written report will be prepared by your
responsibility on each IB to diligently supervise its
FCM or you, if you inspected a branch office, and its
employees and agents in all aspects of their futures
findings should be discussed with the principals and
activities. The exact form of supervision is up to the
appropriate supervisors.
individual member so that the procedures are flexible
enough to be developed with the IBs own business Procedures to review the day-to-day activities of your
situation in mind. office should include the following:

Other NFA Compliance Rules impose additional • Hiring: IBs must conduct thorough screening
duties with respect to supervision. Rule 2-8 requires procedures for prospective employees to ensure
detailed supervision of discretionary accounts. Rule they are qualified and to determine the extent
2-29(e) requires each IB to adopt and enforce written of supervision required. You must obtain any
procedures regarding communications with the public, documentation necessary to support any “yes”
including advance review and approval of all promotional answer of the AP’s registration form and review for
material by a supervisory person. Rule 2-30(h) requires any disqualifying information.
each IB to adopt and enforce procedures regarding
You should check with NFA for any futures-related
customer information and risk disclosure.
disciplinary proceedings against any AP’s prior
Supervision of Branch Offices: Although IBs may employers by reviewing the candidate’s history on
tailor their supervisory procedures to meet their BASIC.
particular circumstances, an adequate program for
• Registration: Commission records generated
supervision must include procedures for performing
by the IB or GIB should be broken down by AP
day-to-day monitoring and surveillance activities,
and should be frequently reviewed to ensure that
conducting on-site visits of remote locations and
no commissions are being paid to unregistered
conducting ongoing training for firm personnel. The IBs
individuals.
policies and procedures for the supervision of branch
offices must be in writing, and be on file with each • Customer Information: NFA procedures require
branch office. that appropriate account documentation be kept by
both the FCM and the IB, and any branch office. The
Do you have any branch offices?
documentation should be reviewed to ensure the
account was appropriately approved and that the
customer received the appropriate risk disclosure.
It might be necessary to contact your customer
41% Yes
to verify that the disclosure was provided and
No
59% the customer understood its meaning. Customer
identification includes identification of beneficial
account owners.

Source: 2017 Industry Survey

57
cmegroup.com

• Account Activity: Trading activity in customer • Chief Compliance Officer: IBs are not required by
and AP personal accounts should be reviewed and CFTC Regulation 3.3 to designate an individual at
analyzed in order to discover any account which may the firm’s CCO. But if the firm appoints a CCO, that
require further scrutiny. Reviewing order tickets, person must be listed as a principal of the firm.
trade registers as well as talking to the broker or even
contacting your customer may be necessary.
Anti-Money Laundering
• Discretionary Accounts: NFA compliance rules The International Money Laundering Abatement and
contain detailed requirements concerning the Anti-Terrorist Financing Act of 2001 was signed into law
supervision and review of discretionary accounts. in October of that year. IBs are included in the definition
Be sure to check NFA records to ensure the of a financial institution, which means that significant
AP handling the accounts have had the proper responsibilities were place upon them by the Act. The
registration for the requisite two-year minimum. NFA requires all IBs to adopt a written Anti-Money
Laundering (AML) program which should be appropriate
• Promotional Material: All promotional material
to its operations. GIBs will generally be provided with an
should be submitted by the branch manager or
appropriate program by their FCM. Before developing
the GIB to the home office or FCM for review and
your own AML program, carefully review the NFA’s Anti-
approval prior to its first use. Review and approval of
Money Laundering Questionnaire found on their website.
the material should be documented.

NFA Compliance Rule 2-9 specifically discusses certain

• Customer Complaints: A written record of all
minimum standards which must be part of any program.
customer complaints should be maintained.
IBs may tailor the AML program based on the type of
Complaints which meet certain criteria described by
business, size and complexity of operations, customer
your FCM or NFA must be sent to the main office of
base, number of APs and other employees and the
the FCM. The branch manager and FCM is required
firm’s resources. Among other items, an IB’s policy must
to review the complaint for possible rule violations
clearly state:
and similarity to other complaints which may
indicate a pattern of abuse. • that the IB’s policy is firmly against money-
laundering and terrorist financing
• Ongoing Training: An IB’s supervisory
• that the firm is committed to following all applicable
responsibilities include the obligation to ensure
laws and regulations to ensure its business is not
that its employees are properly trained to perform
used to facilitate money laundering
their duties. Written procedures must be in place to
ensure that APs receive adequate training to abide • that a member of the IB’s senior management
by industry rules and obligation and to properly approved the AML program in writing
handle customer accounts. The form of the training • that the IB provides training at least every 12
program depends on the size of the firm and the months to all its employees that work in areas
nature of its business. susceptive to money laundering

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• that the program has been subject to an Business Continuity and Disaster
independent review which tests the adequacy of the Recovery
program at least every 12 months
Each IB must adopt a written Business Continuity
• that your Customer Identification Program (CIP) is and Disaster Recovery plan which is tailored to your
adequate. CIP is the portion of your AML procedures operations. Carefully consider the following questions
which requires an IB to have in place a written when you are designing your plan. These areas address
program to detect, prevent and mitigate identity minimums which your IB’s program will include:
theft in connection with the opening of accounts and
• Where are the IB’s backup facilities — are they
maintaining an existing account. The CIP needs to
located in separate geographical areas from your
include sufficient information to enable the IB to form
primary office?
a reasonable belief that it knows the true identity of
each customer, including beneficial owners. • What are the IB’s procedures for backing up or
copying essential documents and data?
More information regarding CIPs can be found on the
• Does the IB store the information in hard copy
NFA website. Some items required at a minimum to be
or electronic format, and where is the backup
included in the program are:
information stored?
• customer’s name
• Which staff members are critical to continuing your
• customer’s date of birth operations and how has the IB duplicated the staff
• customer’s residence or business address (individuals) competencies if the IB loses primary staff?

• customer’s principal place of business, local office • What specific steps will the IB take to minimize
or other physical location (non-natural persons) the impact of any business interruptions at banks,
FCMs, order routers, data providers or other third
• customer’s social security number or taxpayer
parties?
identification number
• How often is the plan reviewed and updated?
• for non-U.S. persons, a government issued document
such as a passport or alien identification card • Which key employees have received the plan?

• Have you updated the NFA with emergency contact

If you detect suspicious activity, you must consult
information?
with your FCM and/or your attorney. Some triggering
activities might include:

• any activity that is designed to conceal the funds Cybersecurity

being deposited are from illegal activity NFA has issued an Interpretive Notice entitled
• any funds that are from an obvious illegal activity Information Systems and Security Programs (ISSPs)
which requires IBs to adopt and enforce written policies
• that the activity observed does not appear to serve
and procedures to secure customer data and access to
any business or apparent lawful purpose
their electronic systems. This Notice applies to all NFA
• any attempt to involve you and your IB to facilitate a members.
criminal activity

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The Notice adopts a principles-based risk approach • Who conducts the training? The policy must include
to allow firms a degree of flexibility when determining the name and title of the specific person or outside
what their policies will include taking into account the provider.
differences in firms’ size and complexity of operations,
• What are the provider’s qualifications?
the make-up of customers and counterparties, and the
• What medium is used for the training course –
extent of the firm’s interconnectedness.
Internet, tapes, in-person?
Your cybersecurity ISSP should contain:
• How frequently must APs complete the training?
• a security and risk analysis
• How long is the program for new registrants?
• a description of the safeguards against identified Existing registrants?
system threats and vulnerabilities
• What topics does the training program address?
• the process used to evaluate the nature of a
• What written materials are distributed during the
detected security event, tounderstand its potential
training, and how are they maintained?
impact and to take appropriate measures to contain
• What documentation does the IB maintain as proof
and mitigate the breach
the APs have completed the ethics training?
• a description of the IB’s ongoing education and
• How often is the training policy reviewed?
training related to information systems security for
all appropriate personnel

Your ISSP must be approved by an executive level

Privacy Policy
official, and requires monitoring and regular review at Your IB is required to comply with federal privacy laws
least every 12 months. IBs must provide employees a and CFTC’s regulations which apply those laws to
copy of the ISSP upon hiring and periodically update and future registrants. The CFTC’s regulations require that
re-train. ISSPs must address risk posed by any critical customer information be protected. Each IB’s privacy
third-party service providers. policy must be described in the privacy notice given
to customers when the account is opened. There also
NFA has a Cybersecurity section in its Self-examination must be a separate writing describing the IB’s policy for
Questionnaire, which can be accessed through their protecting customer records and information. The policy
website. should be updated periodically.

FCMs will generally provide the approved policy and

Ethics Training Policy notice to GIBs. NFA’s website includes general guidelines
Each NFA member firm must adopt a written ethics for developing and updating your Privacy Policy.
training policy tailored to its operations. The training
format is flexible and can be tailored to the IB’s particular
situation. IBs can fulfill this requirement by completing
Promotional Materials
training provided by outside providers. Whether you All GIBs must submit their promotional material to their
decide to use a third-party provider or develop your own FCM for review and approval prior to its first use. Review
program, you can use these questions as a guide: and approval of the materials must be documented by

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supervisory personnel. All registrants can also submit

promotional matter directly to the NFA’s Chicago office. Checklist for Chapter 6 – Audit

In additional to your clearing firm and the NFA, both 1. Are my policies and procedures for all required
the CFTC and exchanges have the right to examine the areas being kept where I can review and update
activities of your IB in an audit. If you are registered to them periodically?
handle securities or cash commodities transactions,
2. Have I designated a Compliance Officer?
those industry regulators may also audit your office
activities. 3. Have I reviewed the NFA Checklist prior to my
audit date?
Exchanges generally limit their review to members firms
such as FCMs, because they can discover information 4. Have I notified my FCM of the upcoming NFA
about the FCM’s IB system and individual IBs with a audit date?
thorough examination of the FCM’s books and records.
5. Have I prepared a desk or other space in
The CFTC will audit or review an IB occasionally, my office for the auditors, and informed my
particularly if that office has a number of customer employees of the audit date?
complaints, or if there is reason to believe the IB is using
questionable sales practice techniques. The CFTC and 6. Do I have a copy of my Guarantee Agreement?
NFA are widely considered by the industry in general
7. If I moved my office location or made other
to be effective in identifying “bad apples,” and running
changes at the IB, have I notified NFA and
them out of the business.
updated my Business Continuity and Disaster
You must notify your FCM if you are notified that your Recovery Plan?
office will be audited. Most IBs also notify their lawyers
8. Following my audit, did I follow up with the NFA
and accounts. Although audits are serious, you should
and my FCM to ensure that any deficiencies
have no trouble if you keep your books and records in
found during the audit have been addressed?
compliance with all NFA regulations and other applicable
rules, you communicate your policies to your APs and
you review all your policies and procedures regularly.

I think you will find NFA staff to be knowledgeable and

willing to respond to inquiries you have about running
your business. Take advantage of a good relationship
with the regulator and your FCM by reaching out for help
when you have questions about regulations or about
keeping your records updated and complete.

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CHAPTER 7
RESOURCES

Resource: A source or supply of assets that can be promotional information without first checking with
drawn on in order to function effectively your compliance officer and your FCM if you are a GIB.
Electronic solicitation is regulated by the NFA in the
In this chapter, I’ve listed some websites and other same manner as print or telephone solicitation, and
resources which IBs use for information on the markets, is subject to the same rules. Solicitation related to
compliance and networking. Many of these resources derivatives trading which is meant to attract business to
are free. the IB is regulated for all Introducing Brokers.

Websites and networking group communications are Do not link to any site without prior permission.
regulated by NFA Compliance Rules 2-9 and 2-29.
Any materials approved and used for communication
Whether you link to another site, develop your own or use
with prospective or existing customers, must be sourced
information from a site or other source, NFA requires you to:
and properly retained for your records. They are subject
• have written procedures which supervise the to NFA review.
preparation and use of sites
Listings in this chapter do not constitute or imply
• meet the standards of content established by NFA
endorsement by the author or by CME Group.
Compliance Rule 2-29
All examples in this chapter are hypothetical
• ensure that any paid hyperlinks to your IB’s website
interpretations of situations and are used for
do not contain deceptive information regarding
explanation purposes only. The views in this
derivative trading
report reflect solely those of the authors and not
• monitor the general content of any website to which necessarily those of CME Group or its affiliated
you link institutions. This handbook and the information
• perform adequate reviews on the personal websites herein should not be considered investment advice
or online social networking groups your APs may or the results of actual market experience.
use to attract business to the firm
Resources listed in this chapter include many that IBs
Email Communications are also regulated. You must have told me they find useful. The categories include:
make your APs aware of, and review from time-to-time, • Regulatory, Government and Association sites
issues around email use including:
• News and Market Commentary
• ensuring your written procedures regarding the use
• Futures, Stocks, Options, Forex and Swaps
of futures-related email identifies by title or position
Exchanges/Facilities
the person responsible for conducting the review
• Educational Institutions
of the communication, how often the emails are
reviewed, how the review is documented by your IB • Ethics and Anti-Money Laundering Training Providers
and which emails will be pre- and post-reviewed. • Data vendors and Equipment
• ensuring emails are in compliance with NFA’s • Accountants, Compliance, Lawyers and Other
promotional material content and review procedures Professional Service Providers
• Web Design and Marketing
IBs should not use any materials found on any website
or other sources of information in your solicitation or • Print and Electronic Publications

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Regulatory, Government and Association Sites

You will find registration forms, rule change information and member meeting details on regulatory sites such as
the CFTC’s, www.cftc.gov and NFA’s, www.nfa.futures.org. You can also find a number of industry reports which are
regularly produced and posted by these groups.

Check the CFTC site regularly for the financial health of your FCM. Check BASIC on the NFA website before you hire
any AP or associate with any CTA to see any disciplinary actions. Also check to make sure the information listed about
you and your IB is correct.

Government sites often include well-researched white-papers and industry reports.

Association sites generally post their newsletters, as well as meeting announcements, regulatory submission letters
and member contributions.

American Petroleum Institute (API) www.api.org

Bank for International Settlements www.bis.org
Briefing.com www.briefing.com
Chartered Market Technicians (CMT) www.cmtassociation.org
Commodity Futures Trading Commission (CFTC) www.cftc.gov
Commodity Markets Council (CMC) www.commoditymkts.org
CTA Intelligence www.ctaintelligence.com
Energy Institute www.emi.org
Financial Industry Regulatory Authority (FINRA) www.finra.org
Financial Management Association, Intl. www.fma.org
Futures Industry Association (FIA) www.fia.org
Gallup Organization, The www.gallup.com
Global Association of Risk Professionals (GARP) www.garp.org
International Swaps and Derivatives Association (ISDA) www.isda.org
Managed Funds Association (MFA) managedfunds.org
National Cattlemen’s Beef Association (NCBA) www.beefusa.com
National Futures Association (NFA) www.nfa.futures.org
National Grain & Feed Association (NGFA) www.nfga.org
National Introducing Broker Association (NIBA) www.theniba.com
Securities Exchange Commission (SEC) www.sec.gov
Securities Industry and Financial Markets Association www.securtiesindustry.org

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U.S. Department of Agriculture (USDA) www.usda.gov

U.S Department of Commerce www.commerce.gov
U.S. Treasury www.treas.gov
Women in Technical Analysis (WTA) www.cmtassociation.org

News and Market Commentary

News and market commentary can be found on all exchange websites, as well as on the sites of many FCMs. Your
local newspaper can be found online. IBs have found the following sites useful. Some of them are electronically
produced only.

A Commodity Trading World www.acommodity.com

Active Trader www.activetradermag.com
Advantages in Options www.tradecaddie.com
Ag Resource www.agresource.com
Agricultural Marketing Services www.ams.usda.gov
Allendale, Inc. www.allendale-inc.com
Bank Credit Analyst www.bcaresearch.com
Barclay Hedge www.barclayhedge.com
Barrons www.online.barrons.com
Bloomberg www.bloomberg.com
Business Monitor International www.bmiresearch.com
CattleFax www.cattlefax.com
Chartist, The www.thechartist.com
Cheese Market News www.cheesemarketnews.com
Chicago Business www.chicagobusiness.com
Chicago Sun-Times www.suntimes.com
Chicago Tribune www.chicagotribune.com
CIS, Inc. www.cis-okc.com
CNBC.com www.cnbc.com
CNN www.cnn.com
Commstock Investments, Inc. www.commstock.com
Consensus www.consensus-inc.com
Derivatives Intelligence www.globalcapital.com/derivatives

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Resources

Dow Theory Letters www.dowtheoryletters.com

EContent www.econtentmag.com
Economist, The www.economist.com
Elliot Wave International www.elliottwave.com
EQ Derivatives www.eqderivatives.com
Farm Week www.farmweeknow.com
Fast Company www.fastcompany.com
Feedstuffs www.feedstuffs.com
Financial Times www.ft.com
Fox Business News www.foxbusiness.com
Futures and Options World www.fow.com
Futures Truth www.thefinancials.com
Grant’s Interest Rate Observer www.grantspub.com
Hightower Report, The www.futures-research.com
International Investor www.institutionalinvestor.com
Investor’s Business Daily www.investors.com
John Lothian News www.johnlothainnews.com
Lowry’s Market Trend Analysis www.lowryresearch.com
Market Watch www.marketwatch.com
Managed Account Research, Inc. www.ma-research.com
Mergers & Acquisitions www.themiddlemarket.com
Modern Trader www.monderntrader.com
Moore Research Center www.mrci.com
Morningstar Mutual Funds www.morningstar.com
MSNBC www.msnbc.com
National Hog Farmer www.nationalhogfarmer.com
New York Times www.nytimes.com
NIBA Journal, The www.theniba.com
Opalesque.com www.opalesque.com
Optima Investment Reserach www.optimaresearch.com
ProFarmer Ag Trader www.agweb.com

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QuikStrike www.cmegroup.com/tools-information/quikstrike
Reuters www.reuters.com
Technical Analysis, Stocks & Commodities www.traders.com
Trader’s Edge www.atradersedge.com
U.S. News & World Report www.usnews.com
USA Today www.usatoday.com
Wall Street Journal, The www.wsj.com
Wall Street Letter www.fundintelligence.global
Wall Street & Technology www.wallstreetandtech.com
Waters Technology www.waterstechnology.com

Futures, Stocks, Options, Forex and Swaps Facilities

Exchange and trading platform sites are terrific resources. Most offer free education pages which include everything
from basic trading techniques to webinars and other sales support materials. Exchange-produced materials, including
well-researched white papers and state-of-the-industry reports are generally free.

Australian Securities Exchange www.asx.com.au

Bombay Stock Exchange www.bseindia.com
Bourse de Montreal www.m-x.ca
Brazilian Securities, Commodities & Futures Exchange www.bmfbovespa.com.br
Chicago Board Options Exchange www.cboe.com
CME Group www.cmegroup.com
Dubai Gold & Commodities Exchange www.dgcx.ae
Eurex Group www.eurexchange.com
Frankfurt Stock Exchange www.deutsche-boerse-cash-market.com
Hong Kong Exchange & Clearing, Ltd. www.hkex.com
InterContinental Exchange www.theice.com
Johannesburg Stock Exchange www.jse.co.za
Korea Exchange www.eng.krx.co.kr
London Metals Exchange www.lme.com
London Stock Exchange www.londonstockexchange.com
Mexican Derivatives Exchange www.mexder.com.mx
Minneapolis Grain Exchange www.mgex.com

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Moscow Exchange www.moex.com

NADEX www.nadex.com
NASDAQ www.nasdaq.com
New York Stock Exchange www.nyse.com
OneChicago www.onechicago.com
Singapore eExchange, Ltd www.sgx.com
Taiwan Futures Exchange www.taifex.com.tw/eng
Tel Aviv Stock Exchange www.tase.co.il/eng
Tokyo Commodity Exchange, The www.tocom.or.jp
Tokyo Stock Exchange, Inc. www2.tse.or.jp

Education Institutions
University and college sites include research papers prepared by the staff in their agriculture, economics and
financial departments. Most of the data is available to download free of charge, but be sure to check the date of
preparation of the data and whether it has been updated since it was initially posted

Alaska, University of – Anchorage www.uaa.alaska.edu

Arizona, University of – College of Agriculture & Life Sciences www.cals.arizona.edu
Auburn University www.auburn.edu.
Arkansas, University of www.uark.edu
California, Berkeley, University of www.berkeley.edu
Clemson University www.clemson.edu
Connecticut, University of www.uconn.edu
Colorado State University www.colostate.edu
Delaware, University of www.udel.edu
DePaul University www.depaul.edu
Florida, University of www.ufl.edu
Georgia Institute of Technology www.gatech.edu
Hawaii, University of www.hawaii.edu
Idaho, University of www.uidaho.edu
Illinois, University of – Ag College www.aces.illinois.edu
Illinois State University www.illinoisstate.edu
Iowa State University www.iastate.edu

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Kansas State University www.k-state.edu

Kentucky, University of www.uky.edu
Louisiana State University www.isu.edu
Massachusetts at Amherst, Univ. of www.umass.edu
Michigan State University www.msu.edu
Minnesota, University of www.umn.edu
Mississippi State University www.msstate.edu
Missouri, University of www.missouri.edu
Montana State, University – Bozeman www.montana.edu
Nebraska, University of www.nebraska.edu
New Hampshire, University of www.unh.edu
New Mexico State University www.nmsu.edu
North Carolina State University www.ncsu.edu
North Dakota State University www.ndsu.edu
Ohio State University Extension www.extension.osa.edu
Oklahoma State University www.osuokc.edu
Oregon State University www.oregonstate.edu
Penn State University www.psu.edu
Purdue University, Dept. of Agriculture www.ag.purdue.edu
Rice University, Dept. of Economics www.economics.rice.edu
South Dakota State University www.sdstate.edu
Southern Illinois University www.siu.edu
Tennessee, University of www.tennessee.edu
Texas A&M University www.tamu.edu
Texas, University of www.utexas.edu
Utah State University www.usu.edu
Vermont, University of www.uvm.edu
Virginia Tech www.vt.edu
Washington State University www.wsu.edu
Wisconsin, University of www.wisc.edu
Wyoming, University of www.uwyo.com

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Ethics and Anti-Money Laundering Training Providers

The NFA requires periodic training regarding its Anti-Money Laundering provisions and ethical behavior regulations.
If you do not develop your own training programs, you will use one of the firms who offer programs specifically
targeted to the derivatives industry with NFA rules in mind. Most firms offer in-person or computer-based training.

Center for Futures Education www.thectr.com

Compliance Supervisors, Inc. www.compliancesupervisors.com
Exchange Analytics www.xanalytics.com
FINRA www.finra.org
Futures Industry Association www.fia.org
Institute for Financial Markets www.theifm.org
Walsh Agency, The www.walshagencyinc.com

Data Vendors and Equipment

Check with your FCM to see if any vendors are required to be used or preferred by the FCM. Check with trade
associations to see if your association membership entitles you to discounts or special member packages.

Barchart.com www.barchart.com
Bloomberg, LP www.bloomberg.com
Commodity Systems, Inc. www.csidata.com
CQG www.cqg.com
DTN/The Progressive Farmer www.dtnprogressivefarmer.com
eSignal www.esignal.com
Marketsource Online www.msodata.com
Metal Prices.com www.metalprices.com
QT Info Systems www.qtmarketcenter.com
Reuters Data Link www.metastock.com
Schneider Electric www.schneider-electric.com
Tick Data, Inc. www.tickdata.com
Trading Technologies www.tradingtechnologies.com
Vela www.tradevela.com

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Accountants, Compliance, Lawyers and Other Professional Services Providers

Compliance Office Types
70%
60%
50%
40%
30%
20%
10%
0%
e

FC ion

ne Fi t

ffi o
im

n ce en

O ls
M

ed rm

r
Ti

e is a
ce
om ct
ll T

he n nd

ed
fr ire
rt

w lia pe
Fu

nc r
Pa

ia e
D

p e

pl wn
m nd
e
nc

m o
Co y I
ia

Co IB
o
pl

pl
m

Em
Co

Source: 2017 Industry Survey

IIBs and CTAs must file certain financial reports directly with the NFA. It is important that the reports meet NFA
requirements – you could be subject to a fine for non-compliance. All IBs can benefit from a consultation with
accountants and compliance specialists who are familiar with the futures and options industry.

Advanced Regulatory Compliance, Inc. www.advreg.com

Compliance Supervisors Inc. www.compliancesupervisors.com
Michael Coglianese CPA, PC www.cogcpa.com
DeMarco, Sciaccotta, Wilkens & Dunlleavy, LLP www.dscpactroup.com
Futures Accounting & Compliance www.futuresaccounting.com
Great Lakes Credit Union www.glcu.org
Michael Liccar, CPA www.liccar.com
Midland IRA www.midlandira.com
Millennium Trust Co. www.mstrustcompany.com
Strategic Compliance Solutions www.strategiccompliancesolutions.com
Turnkey Trading Partners www.turnkeytradingpartners.com
United Lex www.unitedlex.com

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Lawyers
Whether it’s your initial registration filing, or you are preparing a disclosure document, you will need the assistance
of an attorney who is skilled in the particular requirements of the financial industry. It’s a good idea to consult with an
attorney very early on in the process of making decisions about your business.

Baker & McKenzie, Matt Kluchenek matt.kluchenek@bakermckenzie.com

Gekas & Associates, Chris Gekas CIG@gekaslaw.com
Funkhouse, Vegosen, Liebman & Dunn, Ltd., Jeff Kopiwoda jkopiwoda@fvld.com
Greenburg Traurig LLP, Jeff Henderson hendersonj@gtlaw.com
Kennyhertz Perry LLC, Braden Perry braden@kennyhertzperry.com
(816) 527-9445
Howard & Howard Attorneys, Jeff Burclay (312) 456-3433
Ruddy Gregory Law, Mark Ruddy mruddy@ruddylaw.com
Ulmer & Berne, LLP, Ken Berg www.ulmer.com

Web Design and Marketing

Your website is your online calling card. While a few FCMs offer assistance to their IBs, you will most likely need to
contact a professional designer to develop your site. Choose a firm that is very familiar with the futures and options
industry, and understands the need for strict compliance with NFA regulations for solicitation.

Contact marketing professionals who understand the financial industry and are aware of the regulations you must
comply with before you allow anyone to develop marketing or sales materials for you.

Blue Fountain Media, Inc. www.bluefountainmedia.com

Financial Brand, The www.thefinancialbrand.com
Gate 39 Media www.gate39media.com
Ginger Szala Ink www.gingerszalaink.com
GlossyDev www.glossydev.com
Lida Citron www.lida360.com
Propel Growth www.propelgrowth.com
Trungale + Egan www.trungaleegan.com
Windy City Web Designs www.windycitywebdesigns.com

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Print & Electronic Publications – Web Design and Sales

Sometimes nothing but a good book will help! Most of the publications listed below are available for purchase online
and most can be purchased in hardcopy or for your electronic reader.

Bernoff, Josh and Charlene Li: Groundswell, Expanded & Revised Edition: Winning in a World Transformed by
Social Technologies
Paperback and Kindle Editions, 2011

Duckett, Jack: Web Design with HTML, CSS, JavaScript and jQuerey Set
Paperback and Hardcover Editions, 2014
(Free download at www.wakwaw.com with registration)

Duhigg, Charles: The Power of Habit

Hardcover, Paperback, Audio CD and Kindle Editions, 2012

Hoffman, Reid and Ben Casnocha: The Start-Up of You: Adapt to the Future, Invest in Yourself
Hardcover, Paperback, Audio CD and Kindle Editions, 2012

Johnson, Spencer & Kenneth Blanchard: Who Moved my Cheese: An Amazing Way to Deal with Change in Your
Work and Your Life
Hardcover, Paperback, Audio CD and Kindle Editions, 1998 (Revised 2002)

Kis-Lev, Jonathan: Fear of Success: An Emotional Manual

Paperback and Kindle Editions, 2016

Mandino, Og: The Greatest Salesman in the World

Hardcover, Paperback, Audio CD and Kindle Editions, 1968
(Free audiobook on YouTube)

Riccobini, Adam and Daniel Callahan: You, Inc., The Art of Selling Yourself
Paperback, Audio CD and Kindle Editions, 2012

Richards, Adam: Internet Marketing: The Definitive Beginner’s Guide

Kindle Edition, 2015

Robbins, Jennifer: Learning Web Design

Paperback and Kindle Editions, 2012

Scott, David: The New Rules of Sales and Service

Hardcover and Kindle Editions, 2015

Vee, Jimmy and Travis Miller: Gravitational Marketing: The Science of Attracting Customers
Hardcover and Kindle Editions, 2015

Zimmerman, Jan and Deborah Ng: Social Marketing for Dummies

Paperback and Kindle Editions, 2014

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Checklist for Chapter 7 – Resources

1. What information do I need to supplement my

knowledge of the industry?

2. What information do I need to supplement my

knowledge of the markets?

3. How much time can I actually afford to

researching and using outside sources to build
my business?

4. Will I develop my own AML policy, ethics training

program or ISSP, or should I contact an outside
source?

5. Have I contacted any website before I link to it?

6. Have I properly sourced any material or

information I used from a website or publication?

7. Does my trade association offer support

or assistance to help me locate attorneys,
accountants and other professional services?

8. Have I created a “Solicitations” folder to

maintain any material from any outside source I
use when I communicate with the public?

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CHAPTER 8
TRADE ASSOCIATIONS

Trade Associations: Organizations founded and Professional Development: Improve your professional
funded by businesses that operate in a specific skills such as marketing or how to use new products.
industry. The major focus of a trade association is You might also learn how to use your website more
most often collaboration between companies to effectively or where to hire an intern who ultimately
promote their common interests. Many are non- contributes significantly to your firm’s growth.
profit entities governed by bylaws and directed by
Personal Connections: IBs rate personal connections
officers who are also members.
and networking as a top reason to join a trade
association IBs and other industry professionals who
Trade associations are one of the tools successful
meet at conferences and workshops share ideas for
entrepreneurs use to build their businesses. Before
problem solving – after all, we’re all in this together. Your
you join, ask yourself what benefits you will receive
circle of business contacts and their ideas will expand,
directly for the dues paid or time expended. Does the
and you may even create alliances or partnerships which
association deliver education and actionable ideas that
will enhance your bottom line. Successful entrepreneurs
work? Do you want a lobbying voice?
aren’t afraid to network with competitors.
“Think of a professional association Research: Many associations conduct market research
membership as an investment in and analysis on specific industry issues. White papers
knowledge and your career” and research reports can offer insight and help you stay
– Source: Forbes Magazine, 11/1/2013 ahead of changes and trends.

IBs belong to such diverse trade associations as the Advocacy: Advocacy is one of the most overlooked
National Cattlemen’s Association, Futures Industry benefits of belonging to a trade association. When
Association and the American Petroleum Institute, you become a member, you belong to an organization
as well as NIBA. Here are the ways they boost their dedicated to protecting and advancing the needs of our
businesses with a membership in a trade association: industry. Being part of the group means making your
opinion count. The collective effort helps raise the image
Education: Trade associations are clearing houses
and influence of the entire IB community, turning one
of information and education that help professional
small voice into a persuasive, collective shout.
growth. It is very likely someone in the industry
has already discovered the solution to the problem
OVER 50% OF IBs ATTEND ANNUAL INDUSTRY
you’re working on, or has the same questions you do.
MEETINGS WHICH INCLUDE CYBERSECURITY
Workshops, newsletters, forums and webcasts, along
TRAINING, REGULATORY UPDATES AND
with personal contacts, offer opportunities to share
MARKETING STRATEGY.
fresh ideas and learn best practices.

Compliance: Let’s face it – regulation and how to Source: 2017 Industry Source

comply with it is the number one industry concern each

and every business day. Trade associations keep up
with rapidly changing industry regulations so you can
continue to stay in compliance.

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NIBA
Address: 55 West Monroe, Ste. 3600
Chicago, IL 60603
(312) 977-0598

Website: www.theniba.com

Primary Contacts: Melinda Schramm: melinda@futuresrep.com

Mike Burke: mikeb@highgroundtrading.com

NIBA, based in Chicago, IL, is a non-profit membership organization focused on the needs of derivatives
professionals. Founded in 1991, NIBA includes Introducing Brokers, Commodity Trading Advisors and Associated
Persons among its members, along with Futures Commission Merchants who clear retail business. NIBA also has the
sponsorship of domestic exchanges and service providers in the industry.

NIBA’s mission is to provide education to registered derivatives professionals to help them grow their businesses
while staying in compliance. That purpose is accomplished through four membership meetings annually, as well as
a twice-monthly electronic newsletter and various webinars throughout the year. The association’s business is done
by its board of directors – a combination of elected IBs and CTAs working with appointed FCM, exchange and service
provider representatives. Officers and committee members are volunteers who are actively engaged in the industry.

NIBA regularly holds scheduled meetings with the NFA, and meets twice yearly with the CFTC. The association’s
annual member conference, held each fall in Chicago, emphasizes continuing education, networking, marketing and
updates from NFA Board Members on the state of regulation change. Other member events are held in New York City
and in partnership with DePaul University, Chicago and various industry participants.

NIBA member benefits include a click-through firm listing on the website directory; complimentary attendance at
in-person events; members only-premium content accessed through its electronic newsletter; a resource directory
for professional goods and services; and, advocacy with the CFTC, NFA and others on issues pertinent to the daily
business activity of its members.

All registered IBs and CTAs may claim their free membership by going to NIBA’s website, theniba.com. The free
membership offer continues through August 31, 2018. After September 1, 2018, membership fees are $150 for IBs
and CTAs. $75 for APs annually. FCMs and other industry professional may also join in supporting categories.

The 2018 Board of Directors of the NIBA includes:

*Founder/Chairman of the Board: Melinda Schramm – melinda@futuresrep.com

*President: Mike Burke – mikeb@highgroundtrading.com
*Vice-Pres/Sec/Newsletter: Ryan Griffeth – ryan.griffeth@postrockbrokerage.com
*Treasurer: Mike Coglianese – mike@cogcpa.com
*Past Pres/Serv Pro Members: Steve Petillo – spetillo@straitsfinancial.com

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*Member/AG Committee: Rodney Dow – rodney@thedowcorp.com

*Member/NYC Conf: Howard Rennell – hrennell@e-windham.com
*Member/DePaul Projects: Tom Sandy – ts@ricedairy.com
*Member/IB & CTA Members: Brad Janitz – bjanitz@midlandira.com
*Member/DePaul Conf: Mark Shore – mshore@shorecapmgmt.com
*Member/FCM Issues: Brian Gaffud – bgaffud@rcgdirect.com
*Member/FCM Issues: Mark Washack – mark.washack@wedbush.com
*Member/FCM Issues: Paul Fry – pfry@straitsfinancial.com
*Member/Exchange Issues: Barbara Schmidt-Bailey – barbara.schmidt-bailey@cmegroup.com
*Legal Advisor: Matt Kluchenek -matt.kluchenek@bakermckenzie.com

American Petroleum Institute (API)

Office: 1220 L Street, N.W.
Washington, DC 20005
(202) 682-8000

Website: www.api.org

Primary Contact: Jack Gerard: jgerald@api.org

The American Petroleum Institute (API) represents all aspects of this country’s oil and natural gas business, and
promotes public policy in support of strong, viable industry. Six hundred plus corporate members of API include
producers, refiners, suppliers, pipeline operators and marine transporters, as well as service and supply companies.

API conducts and sponsors research in all aspects of U.S. industry operations, including supply and demand of
various products, imports and exports. Much of this information is available through their Weekly Statistical Bulletin.

Throughout the year, API organizes seminars, workshops and conferences on current public policy issues. For over
90 years, the association has advocated for the industry, negotiated with regulatory agencies, formed coalitions and
litigated to achieve achieve its goals. More information is found at www.api.org.

Commodity Markets Council (CMC)

Office: 1300 L Street, N.W., Ste. 1020
Washington, DC 20005
(202) 842-0400

Website: www.commoditymkts.com

Primary Contacts: James Newsome: james.newsome@commoditymkts.com

Kevin Batteh: kevin.battah@commoditymkts.com

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Commodity Markets Council (CMC) is a trade association which brings commodity exchanges together with their
industry counterparts. Many commercial users of the futures markets are members, including representatives from
the agricultural, energy, metals and financial industries.

CMC advocates for an open, competitive marketplace by addressing issues focusing on agriculture, energy, finance,
infrastructure and transportation. Key areas of focus for 2018 are ensuring that end-users are able to utilize markets
for risk management that are safe, stable and liquid; the capital requirements of swap dealers and major swap
participants; passage and implementation of MiFID; and obtaining legislative and regulatory relief from burdensome
regulations on commodity end-users.

Members of CMC are the regular users of the CME Group, ICE Futures and other exchanges. CMC began in 2006 as
a successor to the National Grain Trade Council, with the initial purpose of working with the CFTC and lawmakers to
improve transparency and accountability.

Membership is open to exchanges, FCMs, IBs, CTAs and others who transact futures-related business. Events include
an annual State of the Industry meeting and market specific conferences, such as those on energy and agriculture.
Contact CMC directly to learn about their dues structure.

Chartered Market Technician (CMT)

Office: 25 Broadway, Ste. 10-036
New York, NY 10004
(646) 652-3300

Website: www.cmtassociation.org

Primary Contacts: Alvin Kressler: alvin@cmtassociation.org

Marie Penza: marie@cmtassociation.org
Stanley Dash: stan@cmtassociation.org

Chartered Market Technician Association (formerly MTA) is a not-for-profit professional credentialing body with
over 4,500 market analyst members in 85 countries. Its main objectives involve the education of the public, the
investment community and its membership regarding the theory, practice and application of technical analysis.

Certification as a CMT is offered through the association. A candidate must complete a three-level exam and abide by
the association’s Code of Ethics. The CMT designation can be helpful when you are applying for a research position.

Affiliate member status is open to anyone who is interested in learning technical analysis. Students may also apply to
join the association.

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Futures Industry Association (FIA)

Office: 2001 Pennsylvania Ave., N.W., Ste. 600
Washington, DC 20006
(202) 466-5460

Website: www.fia.org

Primary Contacts: Walter Lukken: wlukken@fia.org

Will Acworth: wacworth@fia.org
Toni Vitale-Chan: tvitalechan@fia.org

Futures Industry Association (FIA) is a trade association representing the cleared derivatives industry. Its membership
includes over 85 percent of registered FCMs. Those FCMs are responsible for more than 80 percent of the customer
business transacted on U.S. futures exchanges, and include the top 20 firms in terms of customer equity.

FIA’s primary purposes are to provide a forum to discuss industry issues, work with exchanges, represent public
customers, study ways to reduce costs, eliminate abuse of credit and cooperate on educational efforts.

FIA Divisions include:

• Chicago Chapter • Japan Chapter

• Law and Compliance Division • Market Technology Division

• Operations Division

FIA Events Include:

• an annual Expo held in Chicago which focuses on technology and software. This is the largest expo of its kind in
the U.S. and usually draws over 4,000 attendees.

• an annual Law and Compliance workshop held in Baltimore, MD.

• a 3-day annual membership meeting held in Boca Raton, FL.

• meetings in global venues including Japan, New York, London, Geneva and Chicago.

Membership benefits include Washington representation, division membership, conference, webinars and publications,
including the FIA Smart Brief, a daily electronic industry news summary, various white papers and case studies.

FIA membership fees vary based on the applicants organizational structure and/or registration status. Once the
entity becomes a member, its employees may join the various divisions.

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Global Association of Risk Professional (GARP)

Office: 111 Town Square Place, 14th FL
Jersey City, NJ 07310
(201) 719-7210

Website: www.garp.org

Primary Contacts: Richard Apostolik: richard.apostolik@garp.org

Certifications: support@garp.org

The Global Association of Risk Professionals (GARP) was founded in 1996. Its mission is to advance the risk
profession through education, training and promotion of best practices globally. GARP works to expand views and
increase recognition of the global risk management community through in-person events, publications, webinars and
certification programs.

GARP offers two risk management certification programs – Financial Risk Manager (FRM), and Energy Risk
Professional (ERP). Both certifications require an examination (approximately $300) which covers the major
disciplines of financial risk and energy-related practices.

Annual membership and regulatory conferences are held in New York City. Chapter meetings are held locally with the
purpose of bringing together senior risk managers, leading academicians, regulators and policy makers to discuss the
latest developments in the practice of risk management. “Locally” includes Chicago, Singapore, Dubai, London
and Houston.

GARP counts a worldwide membership of over 150,000 individuals in 190 countries who work in banks, asset
management firms, insurance companies, securities regulation, hedge funds, universities, large industrial and
multinational corporations.

GARP website registration is free and includes access to articles from its magazine and research webcasts.
Membership and fees are divided into three categories for U.S. based persons: (i) individual Members @ $195
annually (this membership includes access to premium content on the website, discounts and attendance at various
events); (ii) Students @$95 annually; and, (iii) Affiliates (defined as “all who access the public areas of the association
website) are free.

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International Swaps and Derivatives Association (ISDA)

Office (D.C.): 600 13th St., N.W., Ste 320
Washington, DC 20005
(202) 683-9330

Office (NYC): 10 East 53th, 9th FL

New York, NY 10022
(212) 901-6000

Website: www.isda.org

Primary Contacts: Scott O’Malia: somalia@isda.org

Mary Cunningham: mcunningham@isda.org
Liz Zazzera: lzazzera@isda.org

Founded in 1985, the purpose of the International Swaps and Derivatives Association (ISDA) is to make global
derivatives markets safer and more efficient. ISDA has over 875 members in 68 countries which include
representatives from a broad range of derivatives market participants – corporations, investment managers,
government entities, insurance companies, energy and commodities firms, and international and regional banks.
The membership also includes law firms, accounting firms and other service providers, as well as exchanges,
intermediaries, clearing houses and repositories.

ISDA holds several conferences throughout the year, and presents webcasts intended to promote stable financial
markets and a strong financial regulatory framework.

The three categories of membership are: (i) Primary Member: an investment or commercial bank or other business
organization that deals in derivatives as part of its business; (ii) Associate Member: service providers such as brokers,
law firms, exchanges and software providers; and, (iii) Subscriber Member: financial institutions and government entities
who use privately negotiated derivatives to manage risk. Information on dues can be found at their website, www.isda.org.

Managed Funds Association (MFA)

Office (D.C.): 600 14th Street, N.W., Ste. 900
Washington, DC 20005
(202) 730-2600

Office (NYC): 546 5th Avenue, 12th FL

New York, NY 10036
(212) 542-8460

Website: www.managedfunds.org

Primary Contacts: Richard Baker: rbaker@managedfunds.org

Anthony Coley: acoley@managedfunds.org
Roscoe Butler: rbutler@managedfunds.org

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The Managed Funds Association (MFA) is an advocacy, education and communications organization representing
hedge fund and managed futures firms in the alternative investment industry members participate in public policy
discourse, share best practices and learn from their peers.

MFA’s global membership includes FCMs, banks, hedge fund advisors, IBs, CTAs and CPOs, and work with pension
plans, university endowments, charitable organizations and other qualified investors to diversity investments,
manage risk and generate attractive returns.

Some of MFA’s 2017-18 initiatives include discussion on U.S. tax policy, capital market regulation and promoting fair
and stable swaps markets.

Member benefits include an electronic newsletter, Washington representation, in-person conferences in various cities
including Chicago, New York and Miami, research and discounts on meetings and various publications.

National Cattlemen’s Beef Association (NCBA)

Office: Seven regional office throughout the U.S.

Website: www.beefusa.org

Primary National Contacts: Craig Uden: cuden@beefusa.org

Kent Frazier: kfrazier@beefusa.org

National Cattlemen’s Beef Association (NCBA), formerly known as the National Livestock Growers Association, held
its first convention in Denver, Colorado in 1898. After three mergers, two world wars, numerous organizational splits,
as well as economic and natural disasters, the NCBA is widely recognized as the voice of the American cattle industry.

Membership is organized by geographical region. Dues are levied according to production levels. For example, a
producer with up to 100 head of cattle pays $150 annually to belong to the NCBA. Membership for those without live
cattle is available for as little as $150; full-time students pay $50 each. Member advantages include a weather blog
and other benefits from other NCBA members such as the Caterpiller and John Deere companies.

National Grain and Feed Association (NGFA)

Office: 1400 Crystal Drive, #200
Arlington, VA 22202
(202) 289-0873

Website: www.nfga.org

Primary Contacts: Randy Gordon: rgordon@ngfa.org

Faith Silvers: fsilvers@nfga.com

The National Grain and Feed Association (NGFA) focuses on enhancing the growth and economic performance of U.S.
agriculture by representing and providing services for grain, feed and related commercial business.

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Founded in 1896, NGFA’s more than 1,000 firm members handle approximately 70 percent of all U.S. grain and
oilseeds used in both domestic and export markets. Members include country elevators and feed mills, export
elevators, cash grain and feed merchandisers, futures brokers and end-users of grain and grain products.

NGFA’s 30 state and regional association affiliates account for more than 10,000 grain and feed companies
nationwide. Contacts for those regional associations are found on their website, www.nfga.org. Annual fees are
prorated; minimum dues for a firm are $600.

Women in Technical Analysis (WTA)

Office: 25 Broadway, Ste. 10-036
New York, NY 10004
(646) 652-3300

Website: www.cmtassociation.org

Primary Contact: Marnie Owen: marnie@cmtassociation.org

Women in Technical Analysis (WTA) is a division of the Chartered Market Technician (CMT) association. Its purpose is
to provide a forum for women focused on market analysis to network and exchanges ideas, and further the profession
with diverse opportunities in continuing education, advocacy, ethnics awareness and networking.

WTA presents both webcasts and in-person events. Fees are $325 annually for membership; $250 for the CMT
certification program.

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Checklist for Chapter 8 – Trade Associations

1. What value will I directly receive from belonging

to a trade association?

2. What type of professional support am I looking

for – colleague networking, market strategies,
understanding changing regulation?

3. Do I want to attend in-person events? Do I want

webinars, newsletters and research that are
produced by the association?

4. Would I benefit from advocacy in my behalf with

the regulators?

5. Who are the other members?

6. Periodically ask yourself why you joined the

association, and if it is still meeting your
expectations and needs.

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