After a weeklong delay due to Hurricane Sandy hitting the East Coast, the National Futures Association (NFA) on Monday launched an upgraded version of its Background Affiliation Status Information Center (BASIC), giving investors online access to key futures commission merchant (FCM) information.
Many futures customers had their confidence shaken by the bankruptcies of MF Global and Peregrine Financial Group, which raised concerns about the sanctity of customer segregated funds. In response, the NFA initiated these system updates that will provide more transparency of FCM financial data.
Using the new BASIC system, customers will be able to view:
- An FCM Capital report, showing the most recent month’s data on adjusted net capital, required net capitals and excess net capital
- An FCM customer segregated funds report, which will include information including the total funds held in segregated accounts, the funds required to be held in segregated accounts, excess segregated funds and the percentage of segregated funds that are held in cash
- An FCM customer secured amount funds report, which will show the same information as the segregated funds report for an FCM’s secured funds
Beginning with the September 2012 report, the NFA will update the FCM Capital Report each month; the other two reports will be updated on a semi-monthly basis.
NFA President and CEO Dan Roth discussed the organization’s push for increased transparency in the November issue of Futures, advising investors to seek out as much information as possible about the financial condition of potential FCMs. “By all means, [perform] due diligence on the FCM [with whom you are choosing to do business],” he said. “We are putting as much information on our web site as we can to help [customers] with that due diligence process to try and make the FCMs’ financial condition as transparent as possible.”
The drive for transparency also led to the proposal of daily confirmation of segregated-fund balances, designed to allow customers to verify FCMs’ balance claims. “That doesn’t address all the risk involved in customer segregated funds … ,” Roth said. “But regarding potential misuse of customer segregated funds by an FCM, daily confirmation of seg balances should go a long way to providing customers with assurances, along with greater transparency about FCM data.”