Comodity Futures Flashcards
A future commission merchant
Is a clearing member of an exchange that will execute customer orders
Floor brokers on an exchange
May be independent agent who transact orders for any firm willing to give them an order
Responsibilities of an exchange
Establish the specifications of a contract.
Such as Grades, deliverable months, how and where delivery will be made, and size of the contract.
Margin requirements
Margin is due to the clearing house before the opening of trading on the next business day. If markets are volatile, the clearing house has the right to call variation margin during trading session. In this case, variation margin must be answered in one hour.
CFTC
Commodity Futures Trading commission was established by congress in 1975 as part of a major revision of the Commodities Exchange Act. The principal function is to prevent the manipulation of futures and option prices, establish and enforce cuatomer protection rules, and minimum financial and ethical standards, prohibit the spread of false and misleading information, approve new futures and options contracts, regulate exchange and floor members, and provide for the settlement of claims.
NFA
Is a self regulatory organization of the commodities industry. Its principal functions are: audit its members to insure ethical and finantial standards, customer protection rules, provide arbitration of disputes, and codict registration screening of its members, training standards and proficiency testing.
CTA -Commodity Trading Advisor
Individual or entity that advises others on the trading of futures or options for compensation or profit. A CTA may not accept customer funds.
CPO - Commodity Pool Operator
Individual or entity which pools the funds of several customers together to trade as one account. Funds received from customers must be in the name of the Pool in which he will participate.
The NFA conducts full scope audit of its members every ____
Every 2 years.
Can an RCR exercise discretion over an account?
The CBT does not allow an RCR to exercise discretion over an account unless he has had at least 2 years experience and has been continously registered during that period.
How long must records be kept for IB’s, for FCM’s, CTA’s, and CPO’s ?
CFTC require that records be kept for 5 years.
What is a trading limit?
The trading limit is the maximum number of contracts that a trader may enter into, in any single trading session. These limits apply to long positions, short positions, and spread positions established in one or more exchanges.
What is a position limit?
The position limit is the maximum number of contracts that a trader may hold at any one time in a regulated commodity. These limits apply to long positions, short positions, and spread positions established in one or more exchanges.
A commodity pool operator must disclose how much of its operating history?
If it has been in existence for less than 3 years, it must disclose all its operating history. If he has been in existence for more, it must disclose 5 years and the operating history of any other pool it operates or the life of the pool whichever is less.
If a clent dies, the RCR must…
Cancel all openorders and liquidate all open positions, but may not send the funds out until it receives the proper documentation from the executor of the estate.
