How do you set up an Introducing Broker for Commodity Futures?
To become a Futures Introducing Broker you:
- Set up a clearing arrangement with a Futures Commission Merchant (“FCM”)
- Pass the Series 3 exam
- Join the NFA as an Introducing Broker
The NFA requires an IB to have a net worth of $45,000.00. If the proposed IB doesn’t have the capital necessary, it may establish a “Guaranteed Introducing Broker” where the clearing FCM “provides” the equity. As a guaranteed IB, the IB can only clear through its guaranteeing FCM. An independent IB (one that meets the net worth requirement) can establish clearing relationships with multiple FCMs.
You can study for the Series 3 exam while your application forms are being created and processed — but your registration isn’t complete until you finish all steps and show proof of passing the Series 3 exam.
What is a Commodity Trading Adviser and how do you become one?
A CTA is an individual or organization which, for compensation or profit, advises others as to the value of or the advisability of buying or selling futures contracts or options on commodity futures contracts.
Providing advice indirectly includes exercising trading authority over a customer’s account (“discretionary control”) as well as giving advice through written publications or other media.
Every registered CTA must give prospects a Disclosure Document. The Disclosure Document is intended to provide information customers need to make informed decisions – it’s basically two parts. One is a the background, business location, principals, advisory agreement, etc., and the second part is the performance history of the CTA.
To become a CTA you:
- Pass the Series 3 exam
- Join the National Futures Association (”NFA”) as a CTA (a $200 application fee and an annual registration fee of $750 per year)
- Submit your Disclosure Document to the NFA for registration
You are exempt from registration if you have provided advice to 15 or fewer persons during the past 12 months and do not generally hold yourself out to the public as a CTA.
A CTA is required to file the following:
- A completed online Form 7-R
- A completed online Form 8-R, fingerprint card and fee of $85 for each individual principal
- Each branch manager must pass the Series 30 exam or sponsorship by a broker-dealer and proof of having met the branch office manager requirements of FINRA
Leave a Reply
You must be logged in to post a comment.