Welcome to FCM and IB Regulations, the unit where one fact you already know does most of the work: a Futures Commission Merchant (FCM) holds customer money, and an Introducing Broker (IB) does not. That single line drives the net-capital minimums, the margin-collection duty, and the guaranteed-versus-independent split that the exam loves to test.
Exam Weight: Part 2 (Regulations) is about 29% of the exam (all of Chapter 8) and is graded as an independent section requiring its own score of at least 70% to pass, so it cannot be under-studied; the National Futures Association (NFA) does not publish per-unit weights.
What You'll Learn
In this unit, you'll cover:
- Guaranteed and Independent Introducing Brokers: The two flavors of IB, the guarantee agreement that backs one of them, and the crisp contrast the exam builds questions around
- Net Capital Requirements: The three minimum-capital figures ($1,000,000, $45,000, and none) and which firm carries each
- Financial Reports: Who files what and how often, plus the annual audited-report deadlines
- Collection of Margin Deposits: Why only the carrying FCM collects and holds margin, applied straight from the money test
- Customer Complaints: How firms record, forward, and supervise complaints, including options complaints and account adjustments
- Time-Stamping Requirements: The two time stamps every order gets and the audit trail they create
- Promotional Material: The no-misleading-claims standard, hypothetical-performance and testimonial rules, and supervisory review
- Disclosure of Transaction Costs: The duty to tell customers what trading actually costs
Why This Matters
Every firm-specific rule in this unit traces back to whether a firm touches customer funds. Because the FCM holds the money, it carries the heaviest financial-responsibility load; because the IB only hands accounts to a carrying FCM, it comes in a guaranteed version with no capital of its own and an independent version that stands on its own capital. Anchor the money test and the thresholds fall into place.
Let's start with the two types of Introducing Broker.