You may wonder how the clearing corporation does this. The answer lies in the margin deposit that you and every other futures trader must make before trading any contract. This margin is available to the clearing corporation and, together with other reserve cash and various protection funds, are used to cover any customer default. A clearing corporation is composed of clearing members, most of which are large FCM's. It is a mark of distinction for an FCM to be a clearing member. commodity futures broker, futures trader, commodities futures trading, financial and commodity futures markets, paper trading, full service broker assisted accounts.
Regulation of the futures market
All futures industry-related operations, including exchanges, brokers and FCMs are regulated and licensed by the Commodity Futures Trading Commission (CFTC), a federal agency with jurisdiction over the United States commodities markets. The CFTC regulates in conjunction with the National Futures Association (NFA), the industry's only national association. The primary purpose of the NFA is to ensure, through self-regulation, high standards of professional conduct and financial responsibility on the part of the individuals and organizations that are its members: Futures Commission Merchants, Introducing Brokers, Commodity Trading Advisors, Commodity Pool Operators, and Associated Persons. In connection with its regulatory responsibilities, the NFA conducts periodic audits of its members' financial and other records, monitors sales practices and provides a mechanism for the arbitration of futures related disputes between NFA members and the investing public.
Information on the NFA and CFTC can be directed by post to:
National Futures Association
200 West Madison Street
Chicago, IL 60606
Commodity Futures Trading Commission
2033 K Street Northwest
Washington, D.C. 20581
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Described above is a network of individuals and organizations which exist to serve you, the futures trader. These participants require payment for their services. Payment takes the form of commission and other fees which are expressed as a fixed dollar amount per round-turn contract traded. A round-turn transaction means a completed and closed transaction - a buy followed later buy a sell, or a sell followed later by a buy.
The clerk and floor broker receive a transaction fee for executing the customer's order. Fees are also paid to the futures commission merchant, the clearing corporation, the National Futures Association (NFA) and the futures exchange on which the contract trades. Taken together, these fees can range anywhere from $25 per contract for discount brokers who offer very little if any customer services, to over $95 per contract for full-service brokers. Additional services provided by full-service brokers consist of market commentaries, identification of trading opportunities, and trading tips or advice. In addition to its clearing and processing fees, the FCM typically receives interest income on customer cash margin deposits; the customer receives no interest income. However, those customers who typically hold considerable excess margin in their trading account can use some of this money to purchase a treasury bill which receives interest income