CFTC FCM Financial Data Report – July, 2014

October 13, 2014

Ahead of next month’s FIA Expo in Chicago, I figured it would be a good time to take a fresh look at the CFTC’s monthly FCM Financial Data report. I admit that I haven’t looked at it for some time – the last time I posted anything here about it was back in February for the 2013 year-end report. (A link is here.)

So, refreshing: the CFTC data is published here: CFTC Link.

I saved the spreadsheet version of the CFTC report and then sort the FCM list by categories.

fcmdata July 2014 Sorted by Seg Required

fcmdata July 2014 Sorted by Secured Required

And new this time, I learned from this review that since my last peek, CFTC has started including Swaps Seg Funds required:

fcmdata July 2014 Sorted by Swaps Seg Required

So, a quick look at the numbers, compared to 2013 year-end:

Customer Seg Required totals:
July 2014: $148,214,002,848
December 2013: $143,741,158,888

A small increase of $5B.

The top 5 FCMs measured by Customer Seg were:
Goldman Sachs $18B
JP Morgan $17.3B
Deutsche Bank $$12.4B
Newedge $12.1B
Morgan Stanley $10.6B

Those five firms hold 47.65% of all the Customer Seg Funds.

The next 5 FCMs are:
Merrill Lynch $10B
Credit Suisse $8.8B
UBS Securities $7B
Barclays $6.2B
Citigroup $5.3B

Those top-10, all in, hold 73% of all the US Customer Seg Funds Required.
There were 63 firms that reported Customer Seg on their July 2014 FOCUS (or FCM 1-FR) reports. That’s down SIX FCMs from the December 2013 year-end reports.

Customer Secured Required totals:
Total Secured Funds (or 30.7) Required in July 2014 was $31,721,736,168.

The top 5 FCMs measured by Customer Secured were:

Goldman Sachs $7.2B
Barclays $3.4B
UBS Securities $3.3B
Newedge $3B
JP Morgan $2.9B

Those five firms hold 62.8% of all the Customer Secured Funds.

The next 5 FCMs are:
Credit Suisse $2.6B
Merrill Lynch $2.6B
Morgan Stanley $2.1B
Deutsche Bank $1B
Citigroup $931MM

Those top-10, all in, hold 92.6% of all the US Customer Seg Funds Required.
There were 53 firms that reported Customer Secured on their July 2014 FOCUS (or FCM 1-FR) reports.

Finally, the Customer Swaps Seg Required totals:
Total Swaps Seg Funds Required in July 2014 was $37,573,414,231.

Since there were only 22 FCMs/BDs/SDs that reported these funds, and since this is the first time I’ve looked at this, all the firms, their reported amounts, and the percent of the totals are listed below:

1. Credit Suisse $7,583,982,994 (20%)
2. Barclays $5,824,094,747 (15.5%)
3. Citigroup $5,475,668,782 (14.5%)
4. Morgan Stanley $4,633,503,266 (12.3%)
5. JP Morgan $4,010,710,065 (10.7%)
6. Goldman Sachs $2,353,995,394 (6.3%)
7. Merrill Lynch $2,065,002,087 (5.5%)
8. Wells Fargo $1,509,345,655 (4%)
9. Deutsche Bank $1,502,136,236 (4%)
10. UBS Securities $829,082,727 (2.2%)
11. HSBC $522,398,676 (1.4%)
12. Newedge $422,435,013 (1.1%)
13. BNP Paribas Securities $370,185,150 (1%)
14. State Street $315,334,914 (0.8%)
15. Mizuho $43,755,732 (0.1%)
16. Jefferies $41,203,000 (0.1%)
17. RBS $39,683,871 (0.1%)
18. Nomura $24,047,555 (0%)
19. Macquarrie $3,316,120 (0%)
20. ADM $2,687,874 (0%)
21. BNP Paribas Brokerage Services $731,813 (0%)
22. CHS Hedging $112,560 (0%)

FTF News Chicago DerivOps Conference – April 1, 2014

April 2, 2014

I’ve said this before, here and elsewhere, that I’ve been a great admirer of FTF News for some time. The team at FTF is great at what they do: new aggregation and curation, tremendous original content, and conferences and events in New York, Chicago and London.

Today FTF held their Chicago DerivOps conference. I was honored to chair the event, and to moderate a panel on FMCs with Yvonne Downs from Jefferies, Max Itkin from Pentwater Capital and Rajeev Ranjin from the Chicago Fed. The full conference agenda is here.

As conference chair, I was able to deliver some opening remarks. As I do sometimes, I selected the topic of FCM data, as published by CFTC, as a topic on which to focus. The opening remarks are pasted below, but full disclosure: I pretty much strayed from the text and spoke extemporaneously. I was supposed to talk for 5 to 10 minutes. I had to cut myself off when the clock counted down from 15 minutes to zero.

The lineup was, as always, terrific. I was proud to be able to contribute to the event. My guess is that most attendees got a lot out of it. I certainly did.

My comments:

I want to start by thanking all the fine folks at Financial Technologies Forum – my friend Maureen Lowe, Katie Flanagan, Eugene Grygo, Liz Acury, and the rest of their team. I’ve been fortunate to be a part of this DerivOps conference for a couple of years now, it really is one of the best conferences in Chicago. And I’ve been a big fan of Maureen and the rest of the folks at FTF. If you’re not engaged with this team – on Twitter, in their LinkedIn group, on their website, well, I’d strongly encourage you all to do that. They are excellent at what they do – the content aggregation and curation, the original content they are producing, it is all really terrific stuff. Trust me when I say this, you should be engaged with them in the many ways they are available -it will help you professionally in ways that will surprise you.

I want to thank the sponsors of today’s event: TriOptima, LCH Clearnet, Tradeweb, Options Clearing Corp and Omgeo, Lombard Risk, Misys, Simcorp and MarketAxess. Without these sponsors this event would not be possible, thank you all for participating. And to the attendees, be sure to visit with them during the breaks today – they have a lot to offer in the FinTech space, you should take some time to see what innovations these sponsors are bringing online in the recent past and for the rest of 2014.

Finally, I want to thank all of you, our attendees. Obviously, the purpose of the event, the reason we’re all here, the sponsors, FTF, all the panelists and speakers, is for you. I’m sure you’ll get a lot our of today’s event.

We have an excellent lineup: In a few minutes we’ll get started with a roundtable on SEFs – Swap Execution Facilities, those brand new regulated platforms on which OTC swaps are required to be traded, born out of the Financial Reform Bill that we all know as Dodd-Frank, The moderator for this panel is John McPartland, the Senior Policy Advisor at the Federal Reserve Bank, a fellow I first met a few years ago here at the FTF DerivOps conference in Chicago. Pay attention to this panel, folks – McPartland is one of the really great minds in trading and clearing policies, and he has a top-notch lineup with folks from LCH Clearnet, Citi and Tradeweb.

After a short break we’ll have a presentation by Mary Harris from TriOptima on portfolio reconciliation, and after that we’ll have a panel on Collateral Management, moderated by Larissa Miller, founder of Stuart Investments and a professor at IIT, with panelists from Northern Trust, Nuveen and she’ll have Ted Levroni from Omgeo.

After lunch I’ll be moderating a panel on FCMs – we’ll be touching on some of the points from this morning’s panels, and looking at some of the criteria that firms can and should use to help them choose clearing firms for the OTC and exchange-traded derivatives activity. This panel includes Max Itkin, head of Ops at Pentwater Capital, Yvonne Downs, Chief Operating Office at Jefferies, and Rajeev Ranjin, a policy specialist at the Chicago Fed.

Following that we’ll have a panel on Global Reg Compliance, moderated by Michael Sackheim from the law firm Sidley Austin, with panelists from Gladius Capital Management, the FCM Straits Financial, and with Gavin McConville from Lombard Risk.

That panel will be followed by a presentation Risk and Reconciliation in the derivatives market, by Maan Bsat from Misys.

We’ll wrap thing up this afternoon with a panel moderated by Larissa Miller from Stuart Investments and IIT, the topic there will address how firms can cope with the new rules and requirements for clearing. Larissa will have Joe Corcoran from OCC, Kevin Walker from Nuveen, and Joe Kamnick, a director at the SEC, who is really sharp and who was on one of my panels at last year’s conference. He’s a great guy and a really good sport. We were a little hard on him last year, as a representative of one of the market regulators, but he came though that okay. The proof is that he is back again this year. I’m looking forward to hearing what Joe has to say.

Let me wrap up my comments with a few stats, some raw numbers to keep in the back of your mind as you speak to the sponsors, as you listen to the speakers, as we go through the day. People often refer to the explosion of exchange volumes as a sign of robust health and growth in the US Capital markets. They often make the same case when talking about outstanding notional amounts for the swaps market. My own suspicion is that volume alone, or outstanding notional amount alone, only tells part of the story. Certainly volume figures are indicative of exchange and clearinghouse health, but I’m not sure that the same can be said of the overall health of the US financial markets.

As you all know, FCMs and broker dealers are required to submit, to CFTC, FOCUS reports, or FCM 1FR forms if they’re not a broker dealer, and the CFTC uses these reports to produce their FCM Financial Data reports every month. There is an extensive archive of these reports at CFTC’s website: cftc.gov. These reports have a ton of useful information that anyone can review, and can use to draw some conclusions about the relative health of the US futures market, and by extension, the US swaps market, the US securities markets, and the US financial world in general.

Since the focus of my consulting practice is mainly in the FCM back-office technology world, I look at these reports pretty often. In preparation for this years DerivOps conference, I took a look at the year-end reports for 2013, posted by CFTC in February, and year-end from 10 years before, in 2003. As one might expect, the pure raw figures provided by CFTC show some positives and some negatives.

For example: in those 10 years, between 2003 and 2013, the amount of US Customer Segregated Funds more than doubled – from a little over $71 million in 2003, to $143.7 million in 2013. That is a clear sign of outstanding growth. And it is worth noting that during this period, the US and the global economy went through staggering upheaval: from the collapse of the US housing market, the global recession, the international credit crisis, the collapse of Lehman and Bear Stearns, the bankruptcy of what was then one of the top-10 FCMs in the US – MF Global, and all the attendant upheaval from that – missing customer money, accusations of mismanagement and malfeasance. MF Global’s collapse was followed in short order by the revelations out of Cedar Falls Iowa that Russ Wasendorf had stolen more than $200 million of his own customer’s money to fund his lavish lifestyle and to fund his divorce settlement with his ex-wife. Russ Wasedorf’s actions led to the demise of a mid-tier FCM called Peregrine Financial, or PFG Best, as it was rebranded.

Fun Fact, as an aside: in the months just after MF Global failed, US customers took more than $10 million out of the US Futures Markets. That sounds like a mind-bogglingly large figure, but at the time, it was only one-fifteenth of the total ledger balance of what was then around $153 million in US Customer funds.

So that’s some good news. Here is some news that might be considered less-good:

Between 2003 and 2013, the concentration of US Customer Seg at the top end of the spectrum has grown. In 2003, the top-5 FCMs had 41.7% of the total reported Customer Seg, and the top-10 had 65% of the Seg Funds reported. By 2013, the top-5 reported 49.6% and the top-10 had 75% of the US Customer Seg balance. That’s right, as of December 2013, more than thee quarters of all the US Customer Seg funds were held at just 10 FCMs.

I’ll leave it to others to decide whether that is a sign of health in the US futures industry. But here are some figures that I, and many others, consider definitely bad news.

In 2003, 177 FCMs submitted FOCUS reports or FCM 1FRs to CFTC. In 2013 only 100 did.
In 2003, 102 FCMs reported that they held Customer Seg funds to CFTC. As of December 2013, just 69 FCMs reported that they are clearing Customer Seg.

So in ten years, while the amount of Customer Seg more than doubled, we’ve seen a decrease of roughly 30% in the number of FCMs, and in the number of FCMs who clear customer business. In oder to promote a healthy, robust, vibrant US capital market, that is a trend that I think we should all commit ourselves to reversing.

With that said, with those figures fresh in your mind, let’s get started with today’s program. First up is the roundtable on SEFs, so I’ll turn the dais over to a man I greatly admire, John McPartland from the Chicago Fed.

If you were at the event, drop a comment in below and let me know what you thought of it, or e-mail me at my G-Mail address and say hello. (You can find the G-Mail address on my Twitter profile, my LinkedIn profile, the Needham Consulting Facebook Page, or my Google+ profile page.

2013 Year-End FCM Financial Data Report

February 16, 2014

Here are the 2013 results from the CFTC report on financial data for U.S. FCMs. The ORIGINAL source is here: CFTC Financial Data for FCMs

The same data sorted by U.S. Customer Seg required (FCM Data 2013 Year-End) is posted here. (Downloads as an Excel spreadsheet.)

For perspective, the same data (sorted by U.S. Customer Seg required) for year-end 2012 is posted here: (FCM Data 2012 Year-End) 2012 Year-End Results. (Also downloads as an Excel spreadsheet.)

The Details

The TOTAL US Customer Seg amount reported in 2013 was $143,741,158,888, compared to a 2012 amount of $145,900,203,492, down almost $2.15 billion. or roughly 1.5%.

Following is a list of all US FCMs that reported Customer Seg requirements in their December 2013 reports to CFTC.

1. Goldman Sachs – 1st in 2013, 1st in 2012, 2013 Seg required was $19,505,062,033 down about $600 MM.

2. JP Morgan Securities- 2nd in 2013, 2nd in 2012, 2013 Seg required was $16,068,072,825 down more than $2 B.

3. Newedge – 3rd in 2013, 3rd in 2012, 2013 Seg required was $13,164,428,650 down about $1.7 B.

4. Deutsche Bank – 4th in 2013, 4th in 2012, 2013 Seg required was $12,402,354,155 UP about $1.5 B.

5. Morgan Stanley – 5th in 2013, 7th in 2012, 2013 Seg required was $10,233,308,793 UP about $1.3 B.

6. Merrill Lynch – 6th in 2013, 8th in 2012, 2013 Seg required was $10,097,450,250 UP about $3 B.

7. UBS Securities – 7th in 2013, 5th in 2012, 2013 Seg required was $8,191,731,999 UP about $400 MM.

8. Credit Suisse – 8th in 2013, 9th in 2012, 2013 Seg required was $7,918,920,731 UP about $1.4 B.

9. Barclays Capital – 9th in 2013, 10th in 2012, 2013 Seg required was $6,377,915,171 UP about $170 MM.

10. Citigroup – 10th in 2013, 6th in 2012, 2013 Seg required was $4,844,742,715 down about $2.8 B.

11. RJ O’Brien – 11th in 2013, 11th in 2012, 2013 Seg required was $3,703,754,600 down about $100 MM.

12. ADM Investor Services – 12th in 2013, 12th in 2012, 2013 Seg required was $2,931,401,486 UP about $150 MM.

13. Mizuho Securities – 13th in 2013, 17th in 2012, 2013 Seg required was $2,054,124,905 UP about $300 MM.

14. BNP Paribas Prime Brokerage – 14th in 2013, 15th in 2012, 2013 Seg required was $2,019,918,460 UP bout $100 MM.

15. ABN AMRO Clearing Chicago – 15th in 2013, 13th in 2012, 2013 Seg required was $1,981,333,752 down about $500 MM.

16. Interactive Brokers – 16th in 2013, 16th in 2012, 2013 Seg required was $1,939,801,946 UP a little under $200 MM.

17. Jefferies Bache – 17th in 2013, 14th in 2012, 2013 Seg required was $1,879,889,000 down about $500 MM.

18. FC Stone – 18th in 2013, 19th in 2012, 2013 Seg required was $1,582,727,766 UP about $30 MM.

19. RBS Securities – 19th in 2013, 20th in 2012, 2013 Seg required was $1,449,331,490 down about $80 MM.

20. Rosenthal Collins Group – 20th in 2013, 18th in 2012, 2013 Seg required was $1,412,661,189 down about $17 MM.

21. MacQuarie Futures – 21st in 2013, 22nd in 2012, 2013 Seg required was $1,228,662,410 UP more than $230 MM.

22. HSBC Securities – 22nd in 2013, 21st in 2012, 2013 Seg required was $1,048,317,517 UP about $30 MM.

23. RBC Capital Markets – 23rd in 2013, 29th in 2012, 2013 Seg required was $913,109,618 UP about $350 MM.

24. BNP Paribas Securities – 24th in 2013, 31st in 2012, 2013 Seg required was $867,187,524 UP more than $300 MM.

25. Goldman Sachs Execution & Clearing – 25th in 2013, 24th in 2012, 2013 Seg required was $847,350,112 UP about $60 MM.

26. McVean Trading & Investments – 26th in 2013, 23rd in 2012, 2013 Seg required was $780,942,381 down about $140 MM.

27. Merrill Lynch Professional Clearing – 27th in 2013, 26th in 2012, 2013 Seg required was $768,875,721 UP about $160 MM.

28. Santander Investment – 28th in 2013, 30th in 2012, 2013 Seg required was $755,009,247 UP about $190 MM.

29. JP Morgan Clearing – 29th in 2013, 32nd in 2012, 2013 Seg required was $700,772,180 UP about $170 MM.

30. Timber Hill – 30th in 2013, 27th in 2012, 2013 Seg required was $697,230,646 UP about $85 MM.

31. Morgan Stanley Smith Barney – 31st in 2013, 25th in 2012, 2013 Seg required was $541,746,031 down about $110 MM.

32. Vision Fin’l Markets – 32nd in 2013, 28th in 2012, 2013 Seg required was $508,664,310 down a little more than $100 MM.

33. KCG Americas – 33rd in 2013, 34th in 2012, 2013 Seg required was $479,067,087 UP about $63 MM.

34. Advantage Futures – 34th in 2013, 33rd in 2012, 2013 Seg required was $472,691,258 down about $18 MM.

35. Tradestation – 35th in 2013, 35rd in 2012, 2013 Seg required was $405,195,906 UP about $17 MM.

36. State Street – 36th in 2013, 44th in 2012, 2013 Seg required was $313,855,544 UP more than $210 MM.

37. Rand Financial – 37th in 2013, 36th in 2012, 2013 Seg required was $305,541,900 down about $70 MM.

38. EFL Futures – 38th in 2013, NOT ON LIST in 2012, 2013 Seg required was $251,656,003 UP $251 MM.

39. ED&F Man Capital Mkts – 39th in 2013, 61st in 2012, 2013 Seg required was $224,076,887 UP around $200 MM.

40. Gain Capital – 40th in 2013, 43rd in 2012, 2013 Seg required was $141,613,581 UP around $28 MM.

41. Dorman Trading – 41st in 2013, 40th in 2012, 2013 Seg required was $139,473,664 UP around $5 MM.

42. CHS Hedging – 42nd in 2013, 39th in 2012, 2013 Seg required was $138,600,871 down around $62 MM.

43. Phillip Futures – 43rd in 2013, 38th in 2012, 2013 Seg required was $128,018,797 down around $90 MM.

44. UBS Financial Services – 44th in 2013, 42nd in 2012, 2013 Seg required was $127,693,950 UP around $11 MM.

45. BNY Mellon Clearing – 45th in 2013, 41st in 2012, 2013 Seg required was $127,163,740 UP a little over $2 MM.

46. TD Ameritrade – 46th in 2013, 45th in 2012, 2013 Seg required was $125,798,949 UP around $26 MM.

47. Straits Fin’l – 47th in 2013, 47th in 2012, 2013 Seg required was $105,553,578 UP around $21 MM.

48. Marex North America – 48th in 2013, 50th in 2012, 2013 Seg required was $103,751,249 UP around $26 MM.

49. Optionsxpress – 49th in 2013, 48th in 2012, 2013 Seg required was $88,080,380 UP around $2.5 MM.

50. Cunningham Commodities – 50th in 2013, 49th in 2012, 2013 Seg required was $78,442,862 down around $5 MM.

51. Linn Group – 51st in 2013, 51st in 2012, 2013 Seg required was $76,819,233 UP around $1.3 MM.

52. Crossland – 52nd in 2013, 46th in 2012, 2013 Seg required was $76,240,649 down around $8 MM.

53. Institutional Liquidity* – 53rd in 2013, NOT ON LIST in 2012, 2013 Seg required was $54,415,840 UP $54.4 MM.

54. York Business Associates – 54th in 2013, 53rd in 2012, 2013 Seg required was $50,049,543 down around $9.6 MM.

55. Nomura Securities – 55th in 2013, 59th in 2012, 2013 Seg required was $48,479,739 UP around $17 MM.

56. AMP Global Clearing – 56th in 2013, 56th in 2012, 2013 Seg required was $42,518,643 UP around $4.5 MM.

57. E Trade Clearing – 57th in 2013, NOT ON LIST in 2012, 2013 Seg required was $39,409,278 UP $39 MM.

58. Mid Co Commodities – 58th in 2013, 55th in 2012, 2013 Seg required was $36,944,999 down around $2 MM.

59. Ironbeam – 59th in 2013, 54th in 2012, 2013 Seg required was $36,264,716 down around $11.5 MM.

60. Xchange Financial Access – 60th in 2013, NOT ON LIST in 2012, 2013 Seg required was $27,685,254 UP $27.6 MM.

61. Frontier Futures – 61st in 2013, 60th in 2012, 2013 Seg required was $25,658,100 down a little less that $5 MM.

62. Wells Fargo Securities* – 62nd in 2013, NOT ON LIST in 2012, 2013 Seg required was $21,409,743 UP $21.4 MM.

63. Oppenheimer & Co. – 63rd in 2013, 58th in 2012, 2013 Seg required was $13,893,625 down around $19 MM.

64. GH Financials – 64th in 2013, 68th in 2012, 2013 Seg required was $6,012,801 UP about $5.5 MM.

65. Daiwa Capital Mkts America – 65th in 2013, 64th in 2012, 2013 Seg required was $4,340,614 UP about $1.3 MM.

66. Friedberg Mercantile Group – 66th in 2013, 62nd in 2012, 2013 Seg required was $3,996,235 down about $5 MM.

67. LEK Securities – 67th in 2013, 63rd in 2012, 2013 Seg required was $2,309,600 down about $2.5 MM.

68. Cantor Fitzgerald – 68th in 2013, 67th in 2012, 2013 Seg required was $1,312,018 UP about $100K.

69. Alpari (US) – 69th in 2013, 66th in 2012, 2013 Seg required was $322,439 down about $1.7 MM.

* – Institutional Liquidity and Wells Fargo Securities were both on the list as an FCM in 2012 but both FCMs had zero for Customer Seg Required.

CFTC FCM Data – September 2013

November 13, 2013

Interesting results from the latest available CFTC report on financial data for U.S. FCMs. Source is here: CFTC Financial Data for FCMs

The same data sorted by U.S. Customer Seg required is posted here. (Downloads as an Excel spreadsheet.)

The data shows that now, the first five FCMs have just barely 50% of the U.S. Customer Seg. In August that figure was just under 50%, so there is small growth at the top of the list in terms of percentages. But the total U.S. Seg balances are down more than $4 billion, month over month. There was $146,879,480,741 in Customer Seg in August, there was just $142,493,827,451 reported at the end of September.

Also interesting to note that the 3rd and 4th biggest FCMs as measured by U.S. Customer Seg have swapped places: in August, Newedge was third, Deutsche Bank was fourth, now DB is third and Newedge is fourth.

The top 5 in Customer Seg – Goldman, JP Morgan, DB, Newedge and Morgan Stanley are the same as they were in August. The next five in September were Merrill Lynch, UBS, Credit Suisse, Barclays and Citi. In August, UBS was slightly larger than Merrill.

69 FCMs processed U.S. Customer Seg in September. Four of them processed more than $10 billion. 21 FCMs processed more than $1 billion in Customer Segregated Funds.

For those interested in such things, here is the same data sorted by Part 30.7, or Secured, balances. (Also downloads as an Excel spreadsheet.)

Goldman was the largest FCM measured by Customer Seg. It is also the largest measured by 30.7 Secured. Looking at the 30.7 side, Goldman has twice as much 30.7 required at the second-place FCM, UBS. They also have twice as Customer Seg as UBS.

Interesting, Secured balances are even more concentrated at the top than Customer Seg is. Far more concentrated, in fact. 65% of the Secured balances are processed at just the top-5 FCMs. 93% of the Secured money is processed at the top-10 FCMs. 55 FCMs process Secured balances. Only eight of them have Secured balances of more than $1 billion.

Do you see anything interesting in all these figures? Drop a comment in below, if you do. 

U.S. FCM Data – August 2013

October 29, 2013

Now that CFTC has re-opened, and with new customer protection rules and new position limit rules imminent, it is time to post the most recent CFTC FCM Financial Data report from their website. I downloaded the Excel file (from here) and sorted it by Customer Seg Required (Column J).

This is the August, 2013 data: August 2013 FCM Data Sorted By Seg Req’d 

The link will open as an MS Excel file. If you have any questions, comments or concerns, drop them into the comments.

U.S. FCM Data – July 2013

October 10, 2013

With the CFTC shut down along with much of the rest of the U.S. government, I figured this is as good a time as any to post the most recent CFTC FCM Financial Data report from their website. I downloaded the Excel file (from here) and sorted it by Customer Seg Required (Column J).

fcmdata0713 sorted by Seg Required

The by-now unsurprising results: more than 50% of all U.S. Customer Seg is in just five firms (Goldman, JP Morgan, Newedge, Deutsche Bank and UBS). The following five firms (Morgan Stanley, Merrill Lynch, Credit Suisse, Barclays and Citi) add another 25%. So 75% of Customer Seg is housed at just the top-10 FCMs. There are 69 FCMs that booked Customer Seg in this reporting period (July 2013). So 59 firms divide up 25% of the Customer Seg while 10 firms divide up 75%.

I’ll leave it to wiser folks than me to decide what this says about the health of the U.S. futures industry.

Drop in a comment: what do these figures tell you about the U.S. futures industry?

U.S. FCM Violations: Customer Segregated and Secured, Minimum Capital Violations

September 27, 2013

UPDATE:Updating, 10/13/2014 with additional CFTC finding in 2014.

UPDATE: I am going to start adding Secured (30.7) violations and FCM minimum capital violations too. I also changed the blog post title. This post still does not include LIBOR violations, nor various precious metal scams, nor simple supervision violations.

Since, alas, it has become so hard to keep track of all the FCM violations of Customer Seg Funds regulations, I decided to create this so I have one place to refer to in the future. Note please that these are only Customer Seg violations, not violations of 30.7 regs nor of Retail Foreign Exchange Dealer (RFED) net capital requirements. Not various and sundry other ponzi schemes, fraudulent precious metal scams, or other violations. These are all just violations of the U.S. Customer Segregation rules and regulations. This post also doesn’t include the many and varied enforcement actions against all the bankers caught up in the LIBOR rip-off/scandal.

Source: Enforcement actions as archived on the CFTC website.

2014
October 8, 2014: Friedberg Mercantile Group (FMG): Firm was under-secured (30.7) in early February, 2013. Friedberg.

September 24, 2014: FXDirectDealer, LLC undercapitalized, under he CFTC’s FCM/Retail FX Dealer adjusted net capital rule requiring a minimum of $20MM. FXDirectDealer, LLC

May 19, 2014: Global Futures & Forex, Ltd., undercapitalized, under he CFTC’s FCM/Retail FX Dealer adjusted net capital rule requiring a minimum of $20MM. Global Futures & Forex, Ltd.

March 27, 2014: Morgan Stanley Smith Barney, under in Secured (30.7) funds and commingling customer and firm funds. MSSB.

2013
September 30, 2013: ADM Investor Services (ADMIS): Ugh. Add ADM to the list. Caught commingling customer and prop accounts in their Customer Seg account. ADMIS This appears to have ended in July 2011 and probably was self-reported.

September 27, 2013: Vision Financial: fined for Seg violations in 2008/09. Vision Financial

September 27, 2013: R.J. O’Brien: an inter-account transfer from Secured (30.7) to Seg, for a non-clearing FCM for whom RJO cleared, put the non-clearing FCM into a Secured deficit. RJO Ops apparently made the transfer to cover a Seg margin deficiency for the omnibus account but never told the non-clearing FCM, nor called the non-clearing FCM for additional funds. R.J. O’Brien

June 19, 2013: ABN Amro Chicago: fined for violations in 2011. ABN Amro

April 9, 2013: Interactive Brokers: the firm “failed to compute on a currency-by-currency basis the amount of customer funds on deposit and required to be on deposit in segregated accounts.” Interactive Brokers

February 19, 2013: Enskilda Futures Limited (EFL), a London-based Futures Commission Merchant (FCM) fined $125,000 for failure to maintain adequate capital after undermargining a proprietary omnibus account. Enskilda

January 3, 2013: Muzuho Securities fined for Secured 30.7 violations. Mizuho Securities

2012
December 3, 2012: MBF: Federal Court Orders MBF Clearing Corp. to Pay $650,000 for Violating Customer Fund Segregation Requirements. MBF judgement

November 21, 2012: Cantor Fitzgerald:operational inadequacies and under seg. Cantor Fitz

October 10, 2012: Farr Financial. (I had somehow missed this one last year. I’d also never heard of Farr Financial before now.) Improper investment of customer segregated funds. Farr Financial

July 10, 2012: Peregrine Financial: the infamous Russ Wasendorf theft of $215 million. Peregrine Financial and Russ Wasendorf.

April 4, 2012: JP Morgan: fined $20 million for using the customer seg funds of a FCM called LBI as “net free equity” covering intra-day credit that JP Morgan extended to LBI over a 22-month period. During the Lehman bankruptcy, when LBI requested JP Morgan to release the customer seg funds, JP Morgan refused because it was using the customer money to cover LBI proprietary credit lines. J. P. Morgan 2012

March 13, 2012: MBF: This is the original CFTC complaint against MBF, settled on December 3rd above. MBF original charges.

New CFTC FCM Data Released (May 2013)

July 16, 2013

http://cftc.gov/MarketReports/FinancialDataforFCMs/index.htm

CFTC just published the May month-end report for FCM Financial Data. The raw link is above. I have sorted the data differently, ad posted the resorted data below.

This is from FCM 1FR reports, or CFTC/SEC FOCUS reports if the FCM is also a broker-dealer. Attached here is the CFTC report sorted by customer assets in Seg, and another version sorted by Customer Seg Required. I believe this is the best metric for measuring the depth and breadth of the U.S. futures industry, much moreso than simple exchange volumes and or FCM trading volumes. To me, trading volume is a good measurement of exchange/clearinghouse health (and revenue, naturally). But for industry health, I think customer assets is a better measurement.

Here is the May 2013 CFTC FCM Data sorted by Seg assets, and…

here is the same data sorted by U.S. Customer Seg Required.

Note that those are both download-able Excel Spreadsheets.

Weird fact: JP Morgan and Goldman are the two biggest FCMs as measured by U.S. Customer Seg amounts. Interestingly, Goldman has higher Seg Required (column J) than JPM, by about $1B. But JPM has more assets in Seg than GS, by about $600MM.

The four largest FCMs – GS ($17.5B), JPM $16.5B), Newedge ($14.3B), Deutsche Bank ($14.1B) – completely dwarf the rest. The 5th biggest FCM – UBS ($8.4B) – has way less than half the Cust Seg Required that Goldman carries.

The largest FCM, measured by U.S. Customer Seg Required, that is also *not* a broker dealer: RJ O’Brien, with $3.7MM in Cust Seg Required.

The largest FCM that has zero required in 30.7 funds (from foreign boards of trade): McVean Trading in Memphis. This means that 100% of their customer positions and assets are on U.S. boards of trade.

The total amount of Customer Seg required across all FCMs is $143.4B. Total Customer Seg assets is $154.5B, so an excess of $11.1B exists in FCM Seg bank accounts.

49.5% of all Customer Seg is carried at the top five FCMs: JPM, Goldman, Newedge, Deustsche Bank, and UBS. Nearly 75% of U.S. Customer Seg Required is carried at the top ten FCMs: the top five above plus Merrill, Citi, Morgan Stanley, Credit Suisse and Barclays.

The total number of FCMs even carrying U.S. Customer Seg balances – meaning the number of FCMs clearing customer business – was 70 in May, 2013. In November 2003 that number was 102, so we’re down more than 30% in FCMs clearing customer business in less than 10 years. In 2003, 102 FCMs reported $67.1B in Customer Seg. May 2013 reports showed $143.4B spread among 30% fewer FCMs.

I would argue that the number of FCMs carrying customer business is really on the only sign of ill-health in the U.S. futures industry. All other signs, especially growth of Customer Seg (and also exchange volumes) point to good health in the futures industry.

I’d be very interested to know what you all have to think about the signs of health in the futures industry, still recovering from MF Global and the Wasendorf fraud. What do these figures mean to you?

A Quick Look at MBF

April 10, 2013

MBF never had Customer Seg funds in the period I looked at below. The firm’s net capital requirements was never greater than the FCM minimum of $1,000,000 as required by CFTC. I don’t know why the firm de-listed as an FCM.

Source for the details below is here: http://cftc.gov/MarketReports/FinancialDataforFCMs/index.htm

June, 2013
Customer Assets in Seg: $0
Customer Seg Required: $0
Adjusted Net Capital: $1,311,027
Net Capital Required: $1,000,000

July, 2013
Customer Assets in Seg: $0
Customer Seg Required: $0
Adjusted Net Capital: $2,362,149
Net Capital Required: $1,000,000

August, 2013
Customer Assets in Seg: $0
Customer Seg Required: $0
Adjusted Net Capital: $2,099,107
Net Capital Required: $1,000,000

September, 2013
Customer Assets in Seg: $0
Customer Seg Required: $0
Adjusted Net Capital: $1,960,067
Net Capital Required: $1,000,000

October, 2013
Customer Assets in Seg: $0
Customer Seg Required: $0
Adjusted Net Capital: $1,872,412
Net Capital Required: $1,000,000

November, 2013
Customer Assets in Seg: $0
Customer Seg Required: $0
Adjusted Net Capital: $1,623,543
Net Capital Required: $1,000,000

MBF was deleted from the CFTC FCM Data Report in December 2012.

An 11-Year History of CFTC FCM Data

January 17, 2013

UPDATE: I am adding a zip file that contains the CFTC FCM Data reports, sorted by Customer Seg Funds. CFTC FCM Data Nov 11 years

A few weeks ago, just by chance, I took a look at a few of the old CFTC FCM Data reports that are archived on CFTC’s website. At the time I noted that there were many fewer FCMs reporting Customer Segregated Funds in 2012 than there were in previous years, at least at the reports I looked at on a spot-check basis. I decided at that time that over the holiday season I’d take a closer look at the numbers, in a more organized way that just randomly spot-checking them. Frankly, based on a very preliminary spot-check, I expected to see a long, steady decline in the number of FCMs clearing customer business.

Earlier this week (January 14th) a comment on the John Lothian Newsletter prompted me to think more about this.

“**JK – Key stat in this story: The number of FCMs registered with the CFTC has fallen 33 percent since 2008.”

Then the CFTC published the November, 2012 FCM Data report and I figured the time was ripe for a new blog post.

So, I took the November month-end data for each report over the last 11 years and assembled the the information below. Some interesting things I found:

- while there may be a reduction of 33% in the number of FCMs registered at CFTC, the number of them clearing customer business has remained the same for the past 3 years (November-over-November).

- the number of FCMs clearing customer business was actually higher in November 2012 than it was in November 2009.

- longer term, the number of FCMs clearing customer business is down more than 30%, even while the amount of Customer Segregated Funds has nearly tripled.

- the highest level of Customer Seg Funds was reported in November 2008, after which the amount dropped roughly 17%, but the amount of Cust Seg reported since then has been steadily rising, despite the market-shuddering MF Global and Peregrine events.

- fewer FCMs overall, and especially fewer FCMs clearing customer business, mean less choice for customers, and probably mean less innovation for clearinghouses and few opportunities for vendors (and consultants).

I’d argue that these results, which I admits surprised me, provide evidence of a stronger U.S. futures market than some claim. Certainly, volumes are down today from recent historic highs. But the amount of money being stored in Segregated accounts is not as anemic as I had expected to see. And the number of FCMs clearing customer business has remained steady over the past three years, though definitely at lower than historic levels. For well-heeled futures traders, this seems like a positive trend. For smaller retail futures traders and small hedgers, fewer FCMs on the customer side is an ill wind. But overall, I’d think that, despite MF Global the Wasendorf scandal, these numbers are indicative of a relatively healthy U.S. futures market.

When you look at these numbers, what seems compelling to you?

I am using just November data for the past 11 years. (That’s what exists on the website as of this writing.) I might delve into November-over-November numbers further in the future, but as a starting point I’m just using November month-end data as reported to CFTC.

2012 November:
Number of FCMs reporting Customer Seg Funds: 70
Total Amount of Customer Seg Funds: $157,547,596,681

2011 November:
Number of FCMs reporting Customer Seg Funds: 70
Total Amount of Customer Seg Funds: $149,071,676,345

2010 November:
Number of FCMs reporting Customer Seg Funds: 70
Total Amount of Customer Seg Funds: $148,865,958,243

2009 November:
Number of FCMs reporting Customer Seg Funds: 65
Total Amount of Customer Seg Funds: $139,182,038,261

2008 November:
Number of FCMs reporting Customer Seg Funds: 74
Total Amount of Customer Seg Funds: $166,558,495,345

2007 November:
Number of FCMs reporting Customer Seg Funds: 86
Total Amount of Customer Seg Funds: $128,465,965,699

2006 November:
Number of FCMs reporting Customer Seg Funds: 93
Total Amount of Customer Seg Funds: $110,095,575,975

2005 November:
Number of FCMs reporting Customer Seg Funds: 94
Total Amount of Customer Seg Funds: $95,497,405,299

2004 November:
Number of FCMs reporting Customer Seg Funds: 97
Total Amount of Customer Seg Funds: $83,117,537,566

2003 November:
Number of FCMs reporting Customer Seg Funds: 102
Total Amount of Customer Seg Funds: $67,149,211,221

2002 November:
Number of FCMs reporting Customer Seg Funds: 102
Total Amount of Customer Seg Funds: $55,016,148,023


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