Financial Requirements for FCMs and RFEDs

If you are an FCM that is currently conducting retail forex business, please follow all requirements for RFEDs.

Required Accounting Records

FCMs and RFEDs are required to maintain an accounting system that records all of the firm's financial activity.  The Financial Reports created from the accounting system must be prepared following U.S generally accepted accounting principles ("GAAP"), must be done on an accrual basis, and must be kept current.   Additionally, NFA Financial Requirements and CFTC Regulation 1.17 include definitions which a member should fully understand in order to properly prepare its financial reports. Some of these requirements are much more restrictive than under GAAP with respect to the classification of current and non-current assets.  See the 1-FR Instruction Guide for a detailed explanation of these requirements 

Adjusted Net Capital

FCMs and RFEDs are required to maintain at all times Adjusted Net Capital greater than the minimum net capital requirement for that FCM or RFED.  Adjusted Net Capital is computed as follows: 

Current Assets - Liabilities - Charges against Capital = Adjusted Net Capital.

When computing Adjusted net capital, a firm may exclude a liability that is subordinated to the claims of all general creditors pursuant to a satisfactory subordination agreement.  A subordinated loan agreement must be filed with NFA at least ten days prior to the proposed effective date of the agreement and cannot be considered "satisfactory" until NFA finds the agreement acceptable. In order to facilitate the approval process for subordinated loan agreements ("SLA"), NFA recommends that the FCM or RFED use the templates below as a guide when drafting an SLA.

Net Capital Requirements

NFA Financial Requirements Section 1 and Section 11  define the minimum net capital requirements for FCMs and RFEDs, respectively.  If a member's adjusted net capital falls below its minimum net capital requirements, it must immediately notify the appropriate agencies of this deficiency.  See Reporting Requirements for FCMs and Reporting Requirements for RFEDs.

FCMs and RFEDs also have an "early warning" capital level. If they fall below the early warning level, they can be subject to additional reporting requirements and they may be prohibited from guaranteeing IBs. (See NFA Financial Requirements Section 2)

Members subject to capital requirements should also be aware of restrictions imposed when adjusted net capital falls to a restrictive level.  A member may not withdraw capital when it is below the Equity Withdrawal Restriction nor may it pay down a subordinated loan agreement if it is below the Suspended Repayment Restriction.   Further, Members must maintain equity capital of at least 30% at all times.  

Filing of Financial Reports

FCMs and RFEDs must file financial reports with NFA and the CFTC on a periodic basis and most filings must be done electronically.  See Reporting Requirements for FCMs and Reporting Requirements for RFEDs for what must be filed, when and how, and see the "Forms" list below for links to the appropriate financial reporting forms. Additionally, financial reports filed late will be subject to Late Filing Fees.

Segregation Requirements and Secured Amounts

The Commodity Exchange Act requires that all customer funds received by an FCM be segregated from and accounted for separately from the FCM's own funds.  CFTC Regulation 30.7 contains a related requirement for foreign futures and foreign options customer funds.   

An FCM must be adequately prepared with an appropriate back office system to account for customer equities and for handling customer funds in an appropriate manner.  The 1-FR-FCM Instruction Guide provides guidance on accounting for, investing and reporting customer funds.  An FCM must inform NFA of its intent to accept customer funds prior to doing so.  See FCM Reporting Requirements for filing of reports for segregated fund and secured amounts and Segregated Investment Detail Report (SIDR) Statements Due Dates for the list of filing due dates. See also Holiday Daily Filing Requirements for the schedule of filing requirements for U.S. holidays.

Rules Resources/Publications NFA Financial Requirements Sections 1. FCMs Financial Requirements NFA Financial Requirements Section 2. Eligibility to Guarantee IBs NFA Financial Requirements Section 10. Late Financial Reports NFA Financial Requirements Section 11. FDM Financial Requirements NFA Financial Requirements Section 12. Security Deposits for Forex Transactions with FDMs NFA Financial Requirements Section 14. Assets Covering Liabilities to Retail Forex Customers NFA Financial Requirements Section 15. FDM Internal Financial Controls NFA Financial Requirements Section 16. FCM Financial Practices and Excess Segregated Funds/Secured Amount Disbursements 1-FR-FCM Instruction Guide Securities Haircuts Schedule FCM Reporting Requirements RFED Reporting Requirements NFA Regulatory Requirements for FCMs, IB, CPOs and CTA Member Advisory - May 27, 2005 Forms Frequently Asked Questions 1-FR-FCM FOCUS II FOCUS IIA Sample cash SLA Sample Revolving SLA Sample Secured Demand Note SLA Sample Revolving SLA (Equity) Financial Requirements – FAQs Security Manager- Password Reset