FCM and IB Regulations

The whole unit on one sheet: the guaranteed-versus-independent IB split, and the capital, complaint, stamping, and advertising duties.

What Splits a Guaranteed IB From an Independent IB?

• An Introducing Broker solicits or accepts customer orders but never accepts or holds customer money; those funds always go to a carrying FCM.
• A guaranteed IB signs a written guarantee agreement with one FCM, which takes on full financial responsibility and liability for the IB's acts and omissions. The guaranteed IB keeps no separate net capital and may carry accounts only with that one guarantor.
• An independent IB operates without a guarantee agreement, so it keeps its own net capital, files its own reports, and may introduce accounts to one or more FCMs.

What Must Each Firm Keep in Net Capital, and Report?

• Adjusted net capital, broadly current assets minus liabilities minus certain charges, must stay at or above the firm's minimum at all times.
• The FCM files unaudited financial reports monthly; the independent IB files them semiannually; the guaranteed IB files none, because its guarantor's reporting covers the relationship.
• Both the FCM and the independent IB also file an annual certified, audited report: the FCM's is due within 60 days of its fiscal year-end, the independent IB's within 90 days.

Who Collects Margin, and How Are Complaints Handled?

• Futures margin is a good-faith performance bond, not a loan or a partial payment. Only the carrying FCM collects initial margin, issues maintenance calls, and holds the money in segregation. An IB collects and holds nothing.
• FCMs and IBs must record every complaint, oral or written, with oral complaints reduced to writing. A branch or guaranteed-IB complaint goes to the main office or guarantor FCM, with resolution supervised and reviewed. Options complaints follow the same process.
• Account adjustments must be fair to the customer and documented, never used to hide a firm error.

How Are Orders Time-Stamped?

• When an FCM or IB receives a customer order that cannot be entered into the trade-matching engine at once, it must immediately prepare a written record and stamp the date and time of receipt, to the nearest minute. This receipt stamp applies to every order.
• A commodity option order gets a second stamp: the date and time the order is transmitted for execution. For every order, the executing party (such as the floor broker) separately records the time of execution.
• Together the receipt stamp and the execution record build an audit trail showing an order was not delayed or front-run. Order records are retained for five years.

What Do the Promotional Material and Cost-Disclosure Rules Require?

• Promotional material may not be misleading, deceptive, or high-pressure, misstate or omit a material fact, or make a fraudulent performance claim. Past performance shown must be accurate, not cherry-picked.
• Hypothetical results need the prescribed cautionary disclaimer and a demonstrable basis; testimonials must be representative, disclose if paid, and state they do not indicate future performance.
• FCMs and IBs must also disclose commissions, fees, and other trading costs. The duty is honest disclosure, not a fee cap; a deceptive charge structure is the violation.

Which Numbers Matter Most?

Which Gotchas Trip Students Up?

• A guaranteed IB has no net-capital minimum and ties to exactly one FCM; an independent IB keeps $45,000 and may use one or more FCMs. Swapping these is the classic trap.
• Margin is a performance bond, not a loan or partial payment, and only the carrying FCM ever collects or holds it.
• The receipt stamp goes on every order, immediately, to the nearest minute. The second ticket stamp, for time transmitted for execution, is specific to commodity option orders; do not extend it to every futures order.
• Financial reporting tracks net-capital responsibility: no separate capital minimum means no separate reporting duty.
• Promotional material is reviewed before use, not after a complaint, and hypothetical results always need the cautionary disclaimer.

One-Breath Recap

An Introducing Broker never holds customer money, so a guaranteed IB borrows one FCM's financial strength and keeps no capital of its own, while an independent IB stands alone with its own $45,000 net capital and may use several FCMs, against the Futures Commission Merchant's $1,000,000; audited reports come due in 60 days for the FCM and 90 days for the independent IB, and only the carrying FCM ever collects and holds margin, a performance bond rather than a loan; every customer order gets an immediate receipt stamp to the nearest minute, and a commodity option order also gets a second stamp for the time transmitted for execution, while the executing party records the execution itself; promotional material must avoid misleading claims, flag hypothetical results, and disclose the true cost of trading.

Need more than the recap? Read the full FCM and IB Regulations unit.