Regulations - Net Capital Requirements

Net Capital Requirements
"Risk margin" is the level of maintenance margin an FCM must collect, and this varies by exchange. Under rules established by the CFTC in 2004, an FCM must maintain adjusted net capital in the minimum amount equal to

  1. $250,000, or
  2. 8% of the total risk margin for all positions carried in customer accounts, plus 4% of the total risk margin for all positions carried by the FCM on its own account, whichever is greater.

If the FCM is registered as a broker-dealer, the amount required under Securities and Exchange Commission regulations would constitute the net capital requirement if it exceeds either of the CFTC standards.

All exchanges accept U.S. Dollars as margin. If an FCM accepts foreign currencies to margin a domestic futures contract, a "subordination agreement" must be obtained from the account owner. This subordination agreement is required for all customers trading U.S., regardless of what country they call home. For accounts holding multiple exchange positions, firms should ensure that the specific instruments being used for margin are allowed under exchange rules.

Each FCM must file financial reports with NFA for each month-end, including its fiscal year end, within 17 business days of the date for which the report is prepared.

Independent IBs must maintain net capital of the greatest of:

  1. $45,000, or
  2. $6,000/office for IBs with less than $1,000,000 in net capital; or
  3. $3,000/AP sponsored for IBs with less than $1,000,000 in net capital.

If the IB is registered as a broker-dealer, the amount required under Securities and Exchange Commission regulations would constitute the net capital requirement if it exceeds any of the CFTC standards.

Each independent IB must file financial reports with the NFA semi-annually, including its fiscal year end, within 17 business days of the date for which the report is prepared. Independent IBs must file financial reports electronically.

An FCM receiving a margined customer's order must immediately prepare a written record of the order, including the account identification and order number, documenting by time-stamp the date and time, to the nearest minute, the order was received.

Customer Complaints
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