The futures industry’s rules for segregated funds help protect customer capital in the event of a brokerage bankruptcy**.

In recent years, many investors found out the hard way they have very little recourse to recover funds in the event of a financial firm’s bankruptcy. Although the Bernie Madoff “hedge fund” was by far the highest profile case, there were numerous less publicized bankruptcies and defaults at other firms and investments (including legitimate ones), in which investors found recouping remaining funds difficult or impossible. Sometimes it’s a case of being the last in line of a long list of creditors, a problem that’s compounded when customer funds aren’t separated from a firm’s funds. Such “commingled” funds might have been used to fund the firm’s operating expenses or in its own trading. If a firm enters bankruptcy, it can be very difficult or impossible to recover customer funds that were commingled in such a fashion.

However, all futures trading accounts, including managed futures, have the advantage of specific industry rules that require the segregation of customer funds from the firm’s own funds. The practice of segregating customer funds protects investors in the event of default at the Futures Clearing Merchant (FCM, the industry term for futures brokerage firms licensed to trade on futures exchanges in the U.S.) holding their account. While FCM bankruptcies are rare, they do occur. In 2005, Refco Inc. and 23 of its unregulated subsidiaries filed for Chapter 11 bankruptcy protection. However, Refco’s regulated subsidiaries (where customers’ futures trading and managed futures accounts resided) were unaffected and customers were able to continue trading and managing their accounts.

Investment Risk and Firm Risk

Although first-time managed futures investors might assume they’re depositing money directly with the Commodity Trading Advisor (CTA) running the fund, in fact, customers open an account in their own name at an FCM. The CTA is then given the authority to trade per the fund’s investment strategy. Segregated funds possess a separate identity from FCM funds in the firm’s bank account. Once funds are deposited, the bank signs a written acknowledgement stating it will not use the funds for anyone other than the customer. Also, the FCM is required to use these funds only in certain pre-defined instruments. The end result is that, in the event of a crash or FCM bankruptcy, customer funds can be more easily recovered.

FCM Reporting Requirements

Segregated funds are subject to stringent daily, monthly, and annual monitoring by industry regulatory agencies. Every day, FCMs must submit a report to the National Futures Association (NFA) detailing the breakdown of their customer funds. This “Segregated Investment Detail Report” (SIDR) lists the actual and expected segregated funds in the FCM’s accounts. In addition, every FCM must file monthly financial reports with the Commodity Futures Trading Commission’s (CFTC) Division of Clearing and Intermediary Oversight (DCIO) within 17 business days after the end of the month. Finally, the FCM is subject to a yearly audit by the Joint Audit Committee, a consortium of U.S. futures exchanges and regulatory organizations.

CFTC oversight

The provision for segregated funds is stipulated in the Commodities Exchange Act. As a result, the CFTC, which is the futures industry equivalent of the Securities and Exchange Commission (SEC), regulates all practices for segregated funds. Any case of malpractice results in an administrative proceeding before a CFTC law judge. If an FCM is found guilty of the charges, the CFTC can suspend or revoke trading privileges, assess penalties, or issue cease and desist orders. There have actually been very few malpractice cases; most are the result of technical or processing difficulties within an FCM, or a delay in reporting. For example, the CFTC imposed a civil penalty of $300,000 in 2009 on a large FCM for violating rules related to segregation. Besides reporting process violations, the CFTC charged the company with not holding enough funds in its customer funds account. (The shortfall occurred because the FCM had purchased Treasury notes between 2007 and 2009 using a mix of its own and customer funds.) In response to the charge, the firm established a “segregation forecasting mechanism” to ensure that proper segregation was maintained between customer and company accounts. Before making any investment in futures or managed futures, investors should research the company where they plan to open an account. The NFA makes this research easy at the BASIC (Background Affiliation Status Information Center) section of its website.

Dean Hoffman

**MF Global

Source-CME Group

It’s potential to save cash and never fear about whether or not will probably be there tomorrow. Contemplating our total monetary system right now relies on printing money with nothing backing its worth except for a promise by leaders that it’s value its face worth, despite the foreign money rising and falling like a roller coaster on a every day basis. We simply can’t belief our institutions to secure our future and deal with our money responsibly. Not like banks, firms and major buyers who are inclined to invest in dangerous debt, the secret on how to save money is to purchase a tangible asset that has value. While that worth might enhance or fall based on demand, you still have your money backed by a physical asset that you could hold in your hand. One which you recognize will rise tremendously throughout troubled economic occasions as more folks try and purchase it. In reality the property we are talking about are precious metals, which have outperformed all different investments over the last ten years and again, they actually exist as opposed to promised interest rates which will or will not be there over time.

There are a number of ways that one can invest in precious metals as the reply of how one can save for the coming years. Some those that have cash readily available can simply purchase gold coins, gold and silver bullion and preserve them secure in their very own homes or a safety deposit box at their native monetary institution. When buying gold coins you have to all the time concentrate on the situation of the piece itself as this does play a consider its true value. Have the coins appraised and insured if you really feel the need to shield your investment. Another method to purchase precious metals for those wishing to save cash and enhance their net value is to make use of a broker. These are companies that provide financial savings plans that convert your monetary deposit into bullion or coins. They may assure to carry your metals until you reach a certain amount at which time you possibly can withdraw the funding and retailer it yourself. This is a nice method to purchase precious metals if you would not have enough cash readily available to purchase an ounce of gold or silver. You can do computerized deposits and simply watch your funding develop until you choose to collect your tangible assets. These companies normally charge a small charge whenever you withdraw your precious metals, however it is far less than the markup you see at your native coin dealer.

Those which are conversant in the stock market and have questioned how one can save can simply switch their strategy and invest in a gold exchange. The issuing financial institution may have gold readily available to again your funding; you might be still solely given a doc stating your investment. This may result in a potential loss if the financial institution collapses nonetheless they’re normally safe investments and as these banks solely deal in this one asset and costs are extremely low.

Another funding for those not wishing to retailer physical property however understand the significance of precious metals, can invest in gold based mutual funds. These involve companies that mine gold so you will need to solely invest in people who checklist companies with proven profitable histories. Once more, there may be some danger concerned in any funding the place you are not receiving a tangible asset so do your homework wisely when investing in gold based mutual funds.

For people who want to invest in something a bit cheaper, you are able to do the same as listed above for silver or another metal. Silver is a good funding on account of its industrial uses. If in abundance, then it should go down in price nonetheless due to the want for it the costs often skyrocket when its peak hits in the market. It’s relatively low-cost and may yield quite the return when holding the asset until its next massive cycle.

We all know that investing in precious metals is how to save money, nonetheless when is it the time to purchase and when do you sell if you choose to do so? Shopping for is solely when the value is low. Now the brokerages listed above will adjust your ownership based on the going rate of the gold they hold in your deposit account. This means if the value drops they will enhance the quantity you personal to account to your deposit and lower price of gold, so those are safe to work with. In case you are buying by yourself or investing available in the market you want to do so when the value is low. Proceed buying as the value climbs until you are feeling you might be at your threshold for getting a terrific return on your investment. If you have paper ownership in some type of buying and selling or fund, you wish to sell whenever you see the worth drop simply over ten percent. This will go away you with a pleasant return on your funding and you can wait for it to fall low enough to start out the cycle again.

With tangible property it is strongly recommended to easily hold onto them unless you need to sell for some reason. Preserving the physical metals is how to save money as you simply proceed buying, and as talked about above, it all the time outperforms in the long haul. Take into consideration how a lot you would currently have saved if you purchased silver consistently over the last 20 years and noticed that silver and gold skyrocketed as it did recently. You would have saved quite a bit of money and earned considerably more due to the enhance in value. You have got now been informed of how to save money in the current economic climate and also you by no means know, you may have realized the secret to changing into wealthy.

Most people have some anxiety or even fear about driving at some point in their lives.  For some, it may be fear of driving at night.  For others, the fear of driving in snow or bad weather makes them break out in a sweat.  Then there are those who are always anxious when driving, which is less common but still doesn’t mean that a person has an actual driving phobia.  A driving phobia is much more serious than just having a bit of anxiety when getting behind the wheel.

Symptoms that should alarm you and make you consider whether you have a driving phobia include becoming sweaty even if it’s cold out, rapid heartbeat, extreme anxiety, and shakiness.  Some people become so highly agitated at even the thought of driving a car that they will experience heart palpitations, trouble breathing and even chest pain.  Those are signs of a full blown panic attack.  If you have panic attacks in the car or just thinking about driving, then you most likely have a driving phobia.

If you think you might be suffering from a driving phobia, you should get help now before the phobia becomes terribly debilitating.  Without treatment, symptoms usually get worse over time.  This often leads to lifestyle changes to avoid driving altogether.  When you avoid driving, the fear grows and quite a few people get to the point that they can’t even get in a vehicle, even when they’re not doing the driving.

There are treatment options available.  Start by talking to your doctor or a mental health professional.  Treatments that could help include things as simple as relaxation techniques or cognitive and behavioral therapies.  Don’t let fear control your life.  Help is there for you.

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