Archive for the ‘Seg Funds’ Category

2016 Year-End FCM Financial Data

February 3, 2017

Attached here is the CFTC’s Financial Data report for FCMs, sorted by Segregated Funds Required: 2016 Year-End CFTC FCM Fin’l Data

For comparison’s sake, linked here is the same report from 2015 year-end.

What we’ve learned:

  • there were just 65 FCMs registered at CFTC as of 2016 year-end; in November 2016 there was 66 (State Street has left); there were 75 FCMs registered with CFTC at the end of 2015.
  • there were 55 U.S. FCMs who cleared customer business at the end of 2016, the same number as there was at the end of 2015.
  • the amount of Customer Seg assets required jumped, year-over-year: in December 2015, there was $148,435,850,345 in Customer Seg; in December 2016 that figure jumped to $160,295,996,895, or roughly $12 billion more assets in Customer Seg. That’s an increase of 8%, which is encouraging.
  • The concentrations at the top remain largely unchanged:
    • in 2015, 51.58 of the Customer Seg funds were held at the top five FCMs (Goldman, JP Morgan, SocGen, Morgan Stanley and Merrill Lynch); in 2016 that figure was 52.69%
    • in 2015 the top 10 FCMs held just over 73% of the Customer Seg funds; in 2016 that figure was just under 74%.

Summary: the rising amount of Customer Seg funds being traded in the U.S. is a positive sign; I think that the concentration among just ten FCMs is a cause for worry. I also think that the dwindling number of FCMs is a cause for genuine alarm.

I’d be interested in learning your thoughts, though, too. So drop them in the comments.



FCM Financial Data Reports – Feb 2016

May 9, 2016

By now everyone knows the routine:

  • CFTC publishes FCM Financial Data based on FCM 1-FR Reports and broker/dealer FOCUS Reports
  • I grab the spreadsheet version from there, sort the data by meaningful columns like Customer Segregated Funds Required (column J in this case)
  • Then I upload the updated spreadsheet here.

The February 2016 FCM Financial Data Report was just published by CFTC.

Interesting tidbits:

There were 55 FCMs that reported Customer Seg Funds required in February, 2016. That’s the same number that cleared customer business as of December 31, 2015.

Just 25 of them hold more than $1B in Customer Seg, though. Just five FCMs hold more than $10B. Those are Goldman, JP Morgan, SocGen, Morgan Stanley and Merrill Lynch.

Goldman has more than $6B more Customer Seg money than 2nd-place JP Morgan does.

More than half, or 51.62%, of Customer Seg money is held at the top-5 FCMs. Almost three-quarters, or 73.66%, is held at the top-10 FCMs.

The Customer Seg total in Feb 2016 was $157,006,070,162. That’s up roughly $9B from December 2015.

So while the Seg Funds figures continue to rise – meaning, more customers, futures-users, are clearing business at FCMs, the number of FCMs is not increasing, yet. Hopefully more firms will enter or re-enter the US futures industry.

Until then, despite increasing demand, customers’ choices will continue to be limited to the existing market participants.



2015 Year-End FCM Financial Data

February 11, 2016

Attached here is the CFTC’s Financial Data report for FCMs, sorted by Segregated Funds Required: fcm-data-2015YE-sorted-by-Seg-xls

As we’ve discussed here before, FCM consolidation (Wedbush, Crossland, Knight, etc.), executive malfeasance and criminal activity (MF Global and Peregrine), and lousy economic times (Jefferies) have led to fewer and fewer clearing members that are willing to clear FCM customer business.

We are now down to just 55 clearing firms in the U.S. that are carrying and reporting Customer Segregated Funds. The amount of Customer Seg assets held by FCMs at the end of 2015 was  $148,435,860,345.00. There were 72 FCMs registered at CFTC at the end of 2015.

By contrast, just five years ago, 71 U.S. FCMs were clearing customer business, and the amount of assets held in Seg was $151,055,523,757.00:  fcm-data-2010YE-sorted-by-Seg-xls At that time, 122 FCMs were registered with CFTC.

Talk about concentration risk: roughly the same amount of Customer Seg assets held at roughly 25% fewer clearing firms.

And ten years ago, when just $94,204,546,290.00 was held in Customer Seg accounts, there were 94 FCMs clearing customer business, and there were 178 FCMs registered with CFTC: fcm-data-2005YE-sorted-by-Seg-xls

People talk about exchange volumes, and exchange revenue, how high the volumes are, how robust trading revenue is,  and cite this as evidence that the U.S. derivatives industry is healthy and growing.

In my view, they’re looking at the wrong metric.


FCM Data – November 2015

January 8, 2016

Well, here is the latest FCM Data and provided by the U.S. Commodity Futures Trading Commission, or CFTC.

By now you know the drill: CFTC publishes the FCM Financial Data on their website. I download the spreadsheet, sort it by Customer Seg Funds, and upload it here.

So, as discussed before: fewer and fewer FCMs are clearing customer business. Jefferies has wound down the customer portion of their FCM business as they continue to wind down the FCM, taking the venerable Bache and Prudential Bache names with it.

Currently there are 55 FCMs clearing customer business, but that will drop to 54 once the Xchange Financial Access FCM winds down, as it was ordered to do by NFA in that organization’s infinite wisdom.

In December 2013 there were 69 FCMs that reported Customer Seg. A list of them is here.

This sick trend continues apace, except when it periodically accelerates.


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%)

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.

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.

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

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

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?