A futures commission merchant (FCM) is a company that solicits or accepts orders to purchase or sell futures contracts, options on futures, retail off-exchange forex contracts, or swaps, and then pays money or other assets to consumers to fulfill those orders. If your company is soliciting or accepting orders to purchase or sell retail off-exchange forex contracts, as well as accepting money or assets from retail consumers, it must be designated as a Forex Dealer Member and meet the conditions listed on the Forex Dealer Member landing page.
- Handles transactions only for the firm, its affiliates, top officers, and directors; or
- Is a non-U.S. resident or a firm with only non-U.S. customers that sends all trades to a CFTC-registered FCM for clearing.
What is the distinction between a local commission merchant and a futures commission merchant?
What is the distinction between a local commission merchant and a futures commission merchant? A futures commission merchant makes trades on behalf of a client for a fee. A local trades for himself or herself.
Is it possible for a futures commission merchant to also function as a clearing broker?
A FCM can function as a go-between for a customer and the exchange members who execute or settle trades. A FCM can also be a member of an exchange and act as a clearing member.
What exactly is an introduction company?
The brokerage firm accepts your orders with an introducing firm, but it has an agreement with a carrying business to keep custody of your securities account.
What is the function of a futures clearing broker?
A clearing broker is an exchange member who serves as a link between an investor and a clearing business. A clearing broker assists in ensuring that the trade is properly settled and that the transaction is completed successfully.
Why would a contract that occurs in the future be advantageous to the buyer or seller?
- Futures contracts are financial derivatives that bind the buyer to buy (or the seller to sell) an underlying asset at a fixed price and date in the future.
- A futures contract allows an investor to use leverage to bet on the direction of an asset, commodity, or financial instrument.
- Futures are frequently used to hedge the price movement of the underlying asset, thereby reducing the risk of losses due to negative price movements.
What caused MF Global to fail?
The Undoing Project, a new book by Michael Lewis, traces the history of psychologists Daniel Kahneman and Amos Tversky, who exposed many of these errors. My book, Behavioral Risk Management, illustrates how psychological problems can have a significant impact on risk management processes.
Before MF Global misappropriated clients’ money, went bankrupt, and began a lengthy battle to recover what consumers had lost, there was a significant history. We can start up the story in 2008, after the company suffered losses as a result of an unfortunate incidence involving approved trading. Corzine was hired by the board in 2010. Michael Roseman, the company’s chief risk officer, had been hired two years prior, in 2008.
Commodities brokerage was MF Global’s business, and its customers included farmers, hedge funds, and others who traded commodity contracts. Corzine’s high-risk bets on European sovereign bonds, which eventually drove MF Global into bankruptcy, were the source of MF Global’s losses. Corzine staked a lot of money on the bond issuers not defaulting.