Archive for the ‘CFTC’ Category

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

CFTC FCM Data Report for September Released

November 13, 2012

Time for another look at the Customer Segregated Funds figures. CFTC compiled the data submitted by FCMs (1-FR reports) and from broker/dealer FOCUS reports. The data from September 30th, compiled by CFTC in the interim and published last week.

CFTC Report Page.

I take the CFTC report and sort it report by column J – customer segregated funds required. The sorted report is behind this link.

The top 5 comprise 53% of all Customer Seg Funds. All are FCM-Broker/Dealers.

Goldman
JP Morgan Securities
Newedge
Deutsche Bank Securities
UBS Securities

The top 5 above along with the next five comprise 77.3% of all Customer Seg Funds. Again, all are FCM-B/Ds. The second five are:

Citi
Merrill Lynch
Morgan Stanley
Credit Suisse Securities
Barclays Capital

The first FCM (non-B/D) is R.J. O’Brien, at 11th.

More later….

U.S. Futures Customers Pulled $10 Billion Out of the Futures Market

September 13, 2012

As many know, the CFTC publishes a list of U.S. futures commission merchants (FCMs) and the amount of customer money they have in their Segregated U.S. Funds bank balances. Today they published the list for month-end July, 2012, to their website.

The CFTC report comes from the FCM’s CFTC 1-FR reports, which are part of the SEC FOCUS report if the FCM is also a broker/dealer in U.S securities. If the FCM is not also a broker/dealer registered with the SEC, then they submit just the 1-FR to CFTC.

Here is the latest report from CFTC: Latest CFTC Report

Here is the same list, sorted by FCMs’ Customer Segregated Funds balances. fcmdata0712-sorted-by-Seg

There is a lot of interesting information and data in the report: RJ O’Brien is the largest FCM in the U.S. as measured by Customer Seg, that is not also an SEC-registered broker/dealer in U.S. securities, for example. Another example: 8 of the top 10 names on the list all use the same vendor back-office system. There are 69 FCMs that reported Customer Seg to SEC and/or CFTC. (There were 71 as-of last October, when MF Global turned on their money vaporizer; there were 70 until Peregrine went down.)

But that’s not the most interesting thing to me. To me, the most revealing thing about the current report is this: In June of 2011, 13 months ago, FCMs in the U.S. reported a cumulative $153,881,560,188.00 in Customer Segregated Funds. (I used the CFTC report from that date to generate this post, where the data was sorted: June 2011 Sorted Data.

Today’s report from CFTC shows a cumulative Customer Seg figure of $143,561,983,577.00.

That means that customers of U.S. FCMs have pulled $10,319,576,611 out of their FCMs in the past 13 months of CFTC reporting.

Even if one assumes that MF Global lost/stole/vaporized $1.6 billion and that Russ Wasendorf at Peregrine stole another $200 million, there is still a full $8 billion-plus that customers of FCMs took out, entirely on their own.

FCM customers have options: ETFs, mutual funds, stocks (with SIPC protection), etc. It looks like many are utilizing the options, and departing the futures industry.

FCM Data – May 31 Report from CFTC

July 13, 2012

By now most folks know that Peregrine Financial Group, variously called PFG or PFGBest, has gone belly up amid allegations of the theft of $220 million dollars of customer money. The company’s sole owner was found by employees parked behind the corporate HQ in Cedar Falls, IA with a hose running from his exhaust pipe to the passenger seats of his car. He has survived. There are reports of a suicide note that talks of “financial irregularities.”

Today the CFTC released the monthly FCM Data report of Customer Segregated Funds (and 30.7 Secured Funds). Peregrine is on the list, at #38, having reported $371,453,743 as the firm’s Seg Requirement, and reporting $376,523,865 as Customer Seg on hand. This means the firm reported a $5,070,122 excess in their Seg balances. It is interesting to note the PFG is on this list, when MF Global was removed from the list on the first report after their bankruptcy last October 31.

Of course, now we know that these reports, for Peregrine, were falsified. Reports are that they told regulators that the firm had some $220 million in a Segregated bank account, but regulators (NFA, the National Futures Association) have been told by the back that there was less than $10 million on hand.

According to the NFA’s Member Responsibility Action (MRA) this has been going on for at least two and a half years.

The CFTC releases the report sorted by FCM, alphabetically. I usually sort the data by Seg amounts. Here is a link to the CFTC FCM Data Report, sorted by Customer Segregated Funds Required (column J).

fcmdata0512-xls Sorted By Seg

A Tip of the Cap to CME Group

April 4, 2012

News broke today that CME Group would begin requiring clearing member firms to report every day their Customer Segregated Funds balances.

Details here, via John Lothian’s Newsletter.

This is great news, and is something that was advocated on this blog back in January.  The CME took it even further with the announcement that FCMs would be required to report twice-monthly on investments of Customer Seg Funds, which is a great idea too.

It isn’t everything I hoped it would be. There is no daily reportable file. Instead, reporting will be 1FR (FCM) and FOCUS (broker/dealer) based, and forms submitted or filled out on Windjammer. And there is no tracking of each customer account’s contribution to an FCMs Customer Seg balance.

But still, this is a great start.

Well done, CME. Well done indeed.