Futures Trading Terms Glossary

Earn extra income on the fully-paid shares of stock held in your account. IBKR borrows your shares to lend to traders who want to short and are willing to pay interest to borrow the shares. Each day shares are on loan you are paid interest while retaining the ability to trade your loaned stock without restrictions.

It’s easy to imagine how there are both potential efficiencies and potential conflicts of interest introduced by a single financial institution performing multiple different functions in the trading life cycle. In our case, however, all of these parties will generally be completely separate, and Proof Services, our broker-dealer subsidiary, will just be the executing broker in the equation. The Commission, by rule or regulation, may include within the term “commodity trading advisor”, any person advising as to the value of commodities or issuing reports or analyses concerning commodities if the Commission determines that the rule or regulation will effectuate the purposes of this paragraph. , the term “associated person of a swap dealer or major swap participant” does not include any person associated with a swap dealer or major swap participant the functions of which are solely clerical or ministerial. The futures commission merchant is a clearing member of a registered derivatives clearing organization. In 1995, Defendants added commodity futures to their marketing curriculum.

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CFTC rules require SEFs to offer certain methods of execution for required transactions. An option contract that gives the holder the right but not the obligation to sell a specified quantity of a particular commodity, security, or other asset or to enter into a short futures position at a given price prior to or on or prior to a specified expiration date. A commodity trader who either buys or sells contracts and holds them for an extended period of time, as distinguished from a day trader, who will normally initiate and offset a futures position within a single trading session. A specially constructed area on the trading floor of some exchanges where trading in a futures contract or option is conducted. On certain other exchanges, the term ring designates the trading area for commodity contract.

An interdealer broker who brokers derivatives transactions via telephone, instant message, or similar means of communication. A type of credit derivative in which one counterparty receives the total return from a specified reference asset and the other counterparty receives a specified fixed or floating cash flow that is not related to the creditworthiness of the reference asset. A transaction providing for subsequent delivery within a stipulated time limit of a specific grade of a commodity. The risk that a default by one market participant will have repercussions on other participants due to the interlocking nature of financial markets. For example, Customer A’s default in X market may affect Intermediary B’s ability to fulfill its obligations in Markets X, Y, and Z.

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The rate of return that can be obtained from selling a debt instrument futures contract and simultaneously buying a bond or note deliverable against that futures contract with borrowed funds. The bond or note Introducing Broker Meaning & Definition with the highest implied repo rate is cheapest to deliver. An option spread involving the simultaneous purchase and sale of options of the same class and strike prices but different expiration dates.

An organization whose owners, employees, and/or contractors trade in the name of accounts owned by the group and exclusively use the funds of the group for all of their trading activity. A trading strategy that uses stock index futures and/or stock index options to protect stock portfolios against market declines. A shorthand method of referring to the payment of a loss and receipt of a gain by a clearing member to or from a clearing organization that occurs after a futures position has been marked-to-market.

Affiliate Definition

customers and the firm submits all trades for clearing to an FCM. NASAA submitted a comment letter on the CAB Proposal requesting that the SEC delay approving the full CAB Rule Set until NASAA, FINRA and the SEC have had the opportunity to fully collaborate on their competing proposals. Arbitration and Mediation – CABs are subject to the FINRA arbitration and mediation rule set for customer and industry disputes. Investigations and Sanctions, Code of Procedure – CABs are subject to the FINRA rules governing investigations and sanctions of firms other than those covering availability of manual to customers, but not FINRA rules related to automated submission of trading data. With the CAB Rule Set, sponsors of 3 funds will need to weigh the process, risks and costs associated with CAB registration and the CAB rule book in determining whether to form an in-house CAB. Such risks and costs also must be weighed against the costs of hiring a third-party CAB or traditional placement agent or having employees register with a third-party CAB or traditional placement agent.

Market situation in which futures prices are progressively lower in the distant delivery months. For instance, if the gold quotation for January is $360.00 per ounce and that for June is $355.00 per ounce, the backwardation for five months against January is $5.00 per ounce. The department in a financial institution that processes and deals and handles delivery, settlement, and regulatory procedures. The principle under which all futures positions owned or controlled by one trader are combined to determine reporting status and compliance with speculative position limits. Definitions are not intended to state or suggest the views of the Commission concerning the legal significance or meaning of any word or term and no definition is intended to state or suggest the Commission’s views concerning any trading strategy or economic theory.

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The relationship of the cost of feed, expressed as a ratio to the sale price of animals, such as the corn-hog ratio. These serve as indicators of the profit margin or lack of profit in feeding animals to market weight. An open outcry market situation in which transactions in the pit or ring take place in such volume and with such rapidity that price reporters fall behind with price quotations, label each quote ‘FAST’ and show a range of prices. A unit of trading in a commodity established by an exchange to which official price quotations apply. A trading facility that operates by an electronic or telecommunications network instead of a trading floor and maintains an automated audit trail of transactions. The futures contract having the largest amount of open interest.

In contrast, Defendants assert that the plain language of the Introducing Broker registration requirement excludes them from registration because they are advertising production companies that neither solicit orders, nor accept orders from customers. Defendants posit that the phrase “soliciting or in accepting orders” cannot conceivably cover general solicitation to the public through television advertisements, which neither invite nor accept the placement of an order. Non-sponsored (“blind”) advertisements were not approved by an Introducing Broker and did not include the name of an Introducing Broker in the advertisement. The leads generated from blind advertisements were sold on a random basis to any interested Introducing Broker. The contents of blind advertisements were ultimately approved by Nanasca who is not registered as a commodity broker.

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The procedure through which the clearing organization becomes the buyer to each seller of a futures contract or other derivative, and the seller to each buyer for clearing members. Stocks of a commodity that have been inspected and found to be of a quality deliverable against futures contracts, stored at the delivery points designated as regular or acceptable for delivery by an exchange. A method of settling futures, options and other derivatives whereby the seller pays the buyer the cash value of the underlying commodity or a cash amount based on the level of an index or price according to a procedure specified in the contract. An option position in which the owner establishes a long call and a short put at one strike price and a short call and a long put at another strike price, all of which are in the same contract month in the same commodity. The difference between the spot or cash price of a commodity and the price of the nearest futures contract for the same or a related commodity . Basis is usually computed in relation to the futures contract next to expire and may reflect different time periods, product forms, grades, or locations.

When you have your licence , you need to find a broker company to work with. There are probably hundreds of companies to choose from when starting your IB business. If you don’t want to go through the hassle of becoming an Introducing Broker, then you might consider becoming an affiliate with a broker firm instead, it could be just as rewarding. The IB does not directly execute and customer orders rather it forwards them to an FCM. In the wake of increased regulation of the market over recent years and the Dodd-Frank legislation, IB’s are closely regulated these days. These active traders tend to seek the lowest rates possible.

A delta-neutral option spread designed to speculate on changes in the volatility of the market rather than the direction of the market. A price limit schedule, determined by an exchange, that permits Introducing Broker Meaning & Definition variations above or below the normally allowable price movement for any one trading day. A physical trading facility where traders make bids and offers via open outcry or the specialist system.

For example, my former client hired me to be their interim CFO because they required reverse-merger and subsequent capital raising experience—a combination of transactions I worked on in at least three other occasions. Individuals who pass the licensing exams can legally receive compensation for transactions involving the sale of securities and, therefore, be lawfully compensated if a transaction successfully closes (i.e., via a success fee). The scope of responsibilities of a broker-dealer is very similar to what a fundraising consultant delivers for a startup but is usually at a larger scale While the terms “broker” and “dealer” are often clustered together as “broker-dealers,” or BDs, each has its own legal definition spelled out in the Securities Exchange Act of 1934. Historically, financial service providers emerged to act as both brokers and dealers, hence why the two have been combined to the figure of “broker-dealer.” A person who currently is registered as a swap dealer may apply to withdraw that registration, while continuing to engage in swap dealing activity in reliance on this section, so long as that person has been registered as a swap dealer for at least 12 months and satisfies the conditions of paragraph of this definition. This term means any person that collects and maintains information or records with respect to transactions or positions in, or the terms and conditions of, swaps entered into by third parties for the purpose of providing a centralized recordkeeping facility for swaps.

We offer a range of products enabling you to offer your clients a choice of proven money management solutions for investment or trading purposes. An Introducing Broker that has entered into a guarantee agreement with a Futures Commission Merchant, whereby the FCM agrees to be jointly and severally liable for all of the Introducing Broker’s obligations under the Commodity Exchange Act. By entering into the agreement, the Introducing Broker is relieved from the necessity of raising its own capital to satisfy minimum financial requirements. In contrast, an independent Introducing Broker must raise its own capital to meet minimum financial requirements. In the instant case, the CFTC claims that by soliciting and referring prospective investors to Introducing Brokers, Defendants have themselves acted as unregistered Introducing Brokers in violation of the Act. The CFTC interprets the phrase “soliciting or in accepting orders” contained in the definition of an Introducing Broker as covering a whole range of conduct, including Defendants’ solicitation to the public through television advertisements.

No presumption shall arise that a person is required to perform the calculations needed to determine if it is a major swap participant, solely by reason that the person does not meet the conditions specified in paragraph , or of this definition. $2 billion in aggregate uncollateralized outward exposure plus aggregate potential outward exposure with regard to all of the person’s swap positions. A person shall not be deemed to be a “major swap participant,” regardless of The 10 Best Forex Strategies Looking For The Best Forex Trading whether the criteria in paragraph of this definition otherwise would cause the person to be a major swap participant, provided the person meets the conditions set forth in paragraphs , or of this definition. That person will be deemed a major swap participant pursuant to the timing requirements specified in paragraph of this definition at the end of the next fiscal quarter if the person exceeds any of the applicable daily average thresholds in that next fiscal quarter.

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Posted by: Jessica Dickler