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?

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:

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

On Voluntary Subscriptions

January 9, 2013

I am a believer that folks should use whatever free resources available to them, both professionally and personally. Facebook, Twitter, LinkedIn, and Instagram are examples of services that are free for ordinary users/consumers, and I use all of them, for personal or professional purposes. (Sometimes I use one or more of them for both.) My usage for each of these services is based on their cost to me – nothing! If one or more of these services started to charge for the servies, then I’d make a value judgement on what the overall worth was, to me, and either pay or jettison the service, as my values dictated.

An example of this was the recent Chicago Tribune decision to switch from entirely-free content to limited free content, with a paywall behind which “premium content” was stored. This change came in November, 2012. For years before the switch I read the Trib online, paying nothing for all the content. When the premium content – mainly, opinion columnists, but also content from Trib partners publications like Forbes and The Economist, along with digital archives dating to the 1850s – was moved behind the paywall, I had to make a decision on whether to subscribe. (Ultimately I chose to subscribe. The Trib was and is, after all, my original hometown newspaper, and during the month I was considering whether to subscribe, I found I really missed a lot of the newly-minted “premium” content.)

The examples above – free applications/content, mandatory subscriptions – are two examples of how application providers and content providers deliver their apps and content to consumers. There is a third type, however, referred to sometimes as “voluntary subscriptions.”

One example of “voluntary subscriptions,” and one that I cite every once in a while when I’m talking about this topic, is science fiction author John Scalzi. Science fiction fans know Scalzi as the Hugo Award-nominated author of Old Man’s War, or maybe as the Campbell Award winner as best new Sci-Fi author in 2005. Scalzi also served as president of the Science Fiction and Fantasy Writers of America.

Not everyone knows, though, that Scalzi’s first two novels, including the Hugo-nominated Old Man’s War, were published under a voluntary-pay model on his website.

The real purpose of this post is to highlight another voluntary subscription content provider: the John Lothian Newsletter, and to encourage consumers of this daily newsletter to subscribe to the service.

We’re all familiar with the stats that Lothian publishes a couple times per year: with 15.5 million views in 2012, more than 33 million views since it launched; with 3 million page views since launching.

It is possible that many are not aware, though, that these wikis are funded entirely from the newsletter subscriptions (plus whatever sponsorship revenues the newsletter generates).

But there is more to the Lothian Newsletter than just the newsletter itself, and the associated wikis. There is also the Futures Crowd site launched after the collapse of MF Global, which solicited input from all over the capital markets industry on addressing concerns rising out of that firm’s failure (and to which I contributed); there is the Restoring Customer Confidence video series; there is the MarketsWiki.TV video series that covers a wide variety of captial markets industry-related topics, from the listing of new types of futures contracts to social media strategies for market participants.

The daily Lothian newsletter provides valuable, essential information to market participants at every level of the food chain, from traders to technologists, from front-office staff to back-office operations professionals, and especially for consultants like me. Put another way, if you don’t read the newsletter every day, then I’m smarter than you are, because I do read it every day.

This post is not some Public Television pledge drive, though, and it is not a paid advertisement either. I am a fan of the work that Lothian and his team do. I believe that this team is providing a genuinely valuable and vital service to the industry in which I work, and I believe that they deserve recognition, and that they deserve payment, for the terrific work they do.

So if you’re a participant, like I am, in the global capital market or futures industry, and you already subscribe to the newsletter, it is time to renew that subscription. Do that now. If you participate in the capital markets/futures industry and you don’t subscribe to the newsletter, you are doing yourself and your career a great disservice and you should fix that now by subscribing.

Yes, it is voluntary. But it is important, too, to all of us, to support the work that the team behind the Lothian Newsletter, and MarketWiki, MarketsReformWiki, the Restoring Customer Confidence video series and MarketsWiki.TV, are doing.


John P. Needham
January 4, 2012
11:05 AM
Aurora, IL

2012 in review

December 31, 2012

The stats helper monkeys prepared a 2012 annual report for this blog.

Here’s an excerpt:

600 people reached the top of Mt. Everest in 2012. This blog got about 3,500 views in 2012. If every person who reached the top of Mt. Everest viewed this blog, it would have taken 6 years to get that many views.

Click here to see the complete report.

Normandy Beach, NJ – Post Sandy #2

November 15, 2012

A friend I’ve never met (but will, someday, I swear) – Sal Arnuk – put together this little video. Vocals and guitar are from Sal. He also took the pictures from Normandy Beach. Notice that there is a boat in the parking lot of the big church with the green tile roof. Bailey Needham, our oldest son (12 years old in January) was baptized in that church in the summer of 2001.


Get every new post delivered to your Inbox.

Join 1,482 other followers