NFA Notice to Members: Implementation of Phase 2 - NFA Financial Requirements Section 4 - Segregated Account Balance Reporting by FCMs and DCOs

The NFA released a Notice to Members concerning the implementation of Phase 2 of Financial Requirements Section 4, which requires FCMs that hold customer segregated funds to instruct the depositories holding these funds to report the balances in these accounts on a daily basis. Under Financial Requirements Section 4, a depository must comply with this request in order to be considered an acceptable depository for customer segregated funds. CME Group has adopted similar requirements for its FCM clearing members.

Phase 2 requires (i) clearing FCMs (including foreign brokers) that carry customer omnibus accounts on behalf of other FCMs, and (ii) non-clearing FCMs for which the clearing FCM carries the customer omnibus account, to take a number of actions specified in the Notice to ensure that clearing FCMs report end-of-day balances in customer omnibus accounts to the non-clearing FCM's designated self-regulatory organization ("DSRO") in effect from September 6, 2013.

Non-clearing FCMs should note that the first step in the process is to complete a standard authorization letter (which they should obtain from their DSRO) that authorizes the clearing FCM to send the required data to the non-clearing FCM's DSRO. The authorizations must be completed and sent to the clearing FCMs by July 19, 2013, and a copy of the authorization letter must be submitted by the non-clearing FCM to its DSRO.

See: Notice I-13-15.