In part of the NFA’s initiative to improve its monitoring of member risk, the regulatory body has announced additional reporting requirements for Forex Dealer Members (FDM). As a result, in addition to providing read only access to segregated client holdings, as well as being privy to transactions taking place in and out of segregated accounts, the NFA will begin to require new monthly and quarterly reports.
The new monthly reporting requirements will go into effect on March 25th, for the month ended February 28th, 2014. Among some of the main items that will now be required to be disclosed are identification of all formal lines of credit and amounts drawn from these lines, number of accounts that represent 10% or more of total trading volumes, new products being offered, and funding types accepted by the FDM. In the new quarterly reporting which goes into effect on April 24th for the month ended March 31st, the items that caught our eye were the requirements to indicate how often a firm initiates financial stress testing and identify which five Associated Persons generated the greatest revenues over the past three months at the FDM.
Trading Places: Finding The Best Jurisdiction for Your BrokerageGo to article >>
Monthly Reporting Requirements
• Identify entities where house commodity trading accounts were held and the number of accounts held at each entity (at any time during the prior month);
• Identify all counterparties utilized by the firm to any repurchase or reverse repurchase agreements (at any time during the prior month);
• Identify any non-trade based fees the firm charged to customers (at any time during the prior month);
• Identify all forms of funding accepted by the firm for customer trading accounts (at any time during the prior month);
• Identify all formal lines of credit held by the firm during the prior month and the amount of credit available from that line. Also report the total amount drawn from each line during the month regardless of whether the amount has been repaid;
• Number of customer accounts whose trading volume represents 10% or more of the firm’s overall trading volume (as of the month end reporting date);
• Number of proprietary and non-customer accounts whose trading volume represents 10% or more of the firm’s overall trading volume (as of the month end reporting date);
• If the firm allows employees to engage in outside business activities; and
• If the FDM offered any new products or services that the firm did not offer in previous monthly reporting period;
Quarterly Reporting Requirements
• Any material administrative, civil, enforcement or criminal complaints or actions filed against the firm where such complaints or actions have not concluded, or any enforcement complaints or actions filed against the firm during the last three months;
• Identify the five Associated Persons who generated the greatest revenue during the last 3 months; and
• Frequency with which the firm performs scenario analyses to assess its financial condition and continued compliance with capital and other regulatory requirements (i.e., stress testing).