Filing Requirements

Futures commission merchants (FCM) have the following filing requirements:

Required Accounting Records

Each FCM is 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), be done on an accrual basis, and be kept current. Note: some of these requirements are more restrictive than GAAP with respect to the classification of current and non-current assets. NFA Financial Requirements and CFTC Regulation 1.17 include definitions that a Member should fully understand in order to properly prepare its financial reports.

View the 1-FR Instruction Guide for a detailed explanation of these requirements.

View FCM 1-FR Instruction Guide

Adjusted Net Capital

Each FCM is required to maintain adjusted net capital greater than the minimum net capital requirement for that FCM at all times. 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 (SLA) must be filed with NFA at least 10 days prior to the proposed effective date of the agreement and cannot be considered satisfactory until NFA finds the agreement acceptable.

Net Capital Requirements

If an FCM Member's adjusted net capital falls below its minimum net capital requirements, as defined in NFA Financial Requirements Section 1, it must immediately notify the appropriate agencies of this deficiency. 

FCMs also have an early warning capital level. In accordance with NFA Financial Requirements Section 2, if an FCM falls below the early warning level, it can be subject to additional reporting requirements and may be prohibited from guaranteeing IBs.

If adjusted net capital falls to a restrictive level, an FCM may not withdraw capital when it is below the equity withdrawal restriction nor may it pay down an SLA if it is below the suspended repayment restriction. FCMs must maintain equity capital of at least 30 percent at all times.

Filing of Financial Reports

FCMs must file financial reports with NFA and the CFTC on a periodic basis. See Reporting Requirements for FCMs for specifics on what must be filed, when and how. Financial reports filed late will be subject to late filing fees.

Segregation Requirements, 30.7 Secured Amounts and Cleared Swaps Customer Collateral

The Commodity Exchange Act (CEA) and CFTC Regulation 1.20 require that all customer funds received by an FCM must 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 and CFTC Regulation 22.2 contains a related requirement for cleared swaps customer collateral.  

FCMs must obtain acknowledgment letters from depositories, including derivatives clearing organizations (DCOs) where applicable and other FCMs, that declare certain funds placed with it are customer funds held in accordance with the CEA and CFTC Regulations. FCMs and their depositories must file a copy of each acknowledgment letter with both the CFTC and the firm's DSRO.

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 investing and reporting customer funds. An FCM must inform NFA of its intent to accept customer funds prior to doing so.

Risk Management Program

CFTC Regulation 1.11 requires each FCM that holds customer funds to establish, maintain and enforce a system of risk management policies and procedures designed to monitor and manage the risks associated with the FCM's activities. As a part of the Risk Management Program, each FCM is required to provide its senior management and its governing body with a quarterly Risk Exposure Report (RER), as well as interim RERs at any time the FCM detects a material change in the FCM's risk exposure. FCMs must electronically file through WinJammer™ a copy of the quarterly RER and any interim RERs within five business days of providing the report to its senior management.    

Risk Assessment Report

As required by CFTC Regulation 1.15, each FCM must electronically file through WinJammer™ an annual Risk Assessment Report containing a copy of the firm's organizational chart, copies of the financial and operational policies, procedures and systems, and fiscal year-end consolidated financial statements for certain affiliates. Each FCM must also report any material change in the firm's organizational chart and/or financial and operational policies and procedures within 60 days after the end of the fiscal quarter where the change occurred.

CCO Annual Report

Each FCM must designate a Chief Compliance Officer (CCO) and ensure that person is listed as a principal of the FCM. The CCO is required to prepare an annual report as outlined in CFTC Regulation 3.3(e) and provide the report to the firm's senior management or the board of directors. CFTC Regulation 3.3 requires that the report be furnished to the CFTC electronically, not more than 90 days after the FCM's fiscal year-end. The annual report must also include a certification by the firm's CCO or CEO regarding the accuracy and completeness of the report. FCMs should use WinJammer™ to submit the report.