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A Futures Commission Merchant (FCM) is an entity that is registered with the National Futures Association (NFA) and accredited by the Commodity Futures Trading Commission (CFTC). It acts as an intermediary between customers who are trading futures contracts and the exchanges on which futures are traded. An FCM’s primary role is to facilitate and process futures trading transactions in a safe and efficient manner, while abiding by all applicable laws, regulations, and rules.
An FCM is responsible for soliciting and executing customer orders to buy and sell futures contracts, as well as providing customer support. They must ensure that customer orders are executed in an accurate and timely manner and at a fair and equitable price. FCMs are also required to collect minimum deposits and margin payments from customers, as required by the exchange rules, and to reconcile customer accounts on a regular basis.
In order to operate an FCM, a firm must be properly registered with both the NFA and the CFTC. By registering with the NFA, a firm is subject to a rigorous and thorough background check and must abide by the Code of Arbitration and any other rules and regulations for trading futures. In addition, the firm must maintain proper financial records and provide periodic account statements to its customers. By registering with the CFTC, an FCM must meet financial responsibility and capital requirements, as set out in the rules.
An FCM also has an obligation to its customers to ensure delivery of assets or payment of monies as per terms stipulated in the futures contracts. To this end, an FCM must ensure timely payments to counterparties, maintain requisite customer funds in segregated accounts, secure the property and money of customers, and appropriately document customer trading activity.
In summary, an FCM is an important intermediary for customers looking to trade futures and for exchanges to rely on for maintaining the integrity of the marketplace. An FCM must adhere to all applicable laws, regulations, and rules, to ensure the smooth and safe operations of the futures market.
An FCM is responsible for soliciting and executing customer orders to buy and sell futures contracts, as well as providing customer support. They must ensure that customer orders are executed in an accurate and timely manner and at a fair and equitable price. FCMs are also required to collect minimum deposits and margin payments from customers, as required by the exchange rules, and to reconcile customer accounts on a regular basis.
In order to operate an FCM, a firm must be properly registered with both the NFA and the CFTC. By registering with the NFA, a firm is subject to a rigorous and thorough background check and must abide by the Code of Arbitration and any other rules and regulations for trading futures. In addition, the firm must maintain proper financial records and provide periodic account statements to its customers. By registering with the CFTC, an FCM must meet financial responsibility and capital requirements, as set out in the rules.
An FCM also has an obligation to its customers to ensure delivery of assets or payment of monies as per terms stipulated in the futures contracts. To this end, an FCM must ensure timely payments to counterparties, maintain requisite customer funds in segregated accounts, secure the property and money of customers, and appropriately document customer trading activity.
In summary, an FCM is an important intermediary for customers looking to trade futures and for exchanges to rely on for maintaining the integrity of the marketplace. An FCM must adhere to all applicable laws, regulations, and rules, to ensure the smooth and safe operations of the futures market.