Sun, Jan 25, 2015
A A A
Welcome Guest
Free Trial RSS
Get FREE trial access to our award winning publications
Opalesque Futures Intelligence

Auditing of FCMs Enhanced by NFA, CMEGroup, AlphaMetrix Technology Pact

Friday, June 28, 2013

By Mark Melin

The National Futures Association (NFA) and the Chicago Mercantile Exchange (CMEGroup) both recently announced alliances with AlphaMetrix to enhance confirmation of investor assets on deposit at Futures Commission Merchants, the brokerage firms responsible for handling assets in the regulated derivatives industry. With this technical integration, the industry's self regulatory organizations will be able to identify and monitor in real time account balances in depositories holding customer segregated funds, a hot issue in MF Global and the PFG fraud.

AlphaMetrix offers a leading technical platform that provides professional asset managers the ability to gain detailed degrees of transparency into a fund's operations.

The managed futures direct account structure has been unique in alternative investing. Regulated by the NFA, CFTC and CMEGroup, investors can view significant trade transaction details - even peering into daily trade positions, all fees and margin to equity visibility.For a risk manager such transparency to the daily operations of the investment enables them to watch for style drift and overall exposure to position risk limits, a key component to active portfolio management regimes. It is this technical feature that regulators will now use to take their auditing one step further - confirming actual bank balances at FCMs.

"This confirmation of bank balances enhances the existing auditing process, where each registered managed futures CTA offering investments to the public undergo an NFA audit that targets the CTA's reported performance, fee calculations and business operations."

Performance that appears in marketing materials and that which is reported to the various managed futures databases is spot checked for accuracy. Audits of CTAs typically occur within the first three years of existence and then occur again depending on perceived need.

Stung by both MF Global and PFG instances, a situation where customer assets went missing from segregated account structure, regulators have moved aggressively to restore confidence. In the PFG situation false bank records were being provided to regulators, according to press reports and court documents (see related article below).



 
This article was published in Opalesque Futures Intelligence.
Opalesque Futures Intelligence
Opalesque Futures Intelligence
Opalesque Futures Intelligence
Today's Exclusives Today's Other Voices More Exclusives
Previous Opalesque Exclusives                                  
More Other Voices
Previous Other Voices                                               
Access Alternative Market Briefing


  • Top Forwarded
  • Top Tracked
  • Top Searched
  1. Commodities - Druckenmiller alums at PointState make $1 billion on oil, Andurand Capital sees oil sliding to $40[more]

    Druckenmiller alums at PointState make $1 billion on oil From Bloomberg.com: Hedge fund manager Zach Schreiber stood on stage at Avery Fisher Hall in New York eight months ago and made a bold prediction. “We believe crude oil is going lower -- much lower,” Schreiber, 42, told the audienc

  2. Investing - David Einhorn discloses a new position in Time Warner, Canyon trimming bets on mortgage bonds after making $7bn[more]

    David Einhorn discloses a new position in Time Warner From FTLeavenworthlamp.com: …Einhorn also disclosed a new position in Time Warner. "Since 2009, TWX has refocused its business into a collection of high quality assets including basic cable networks (Turner and CNN), a movie studio (

  3. Top performing private equity firms you should invest in[more]

    Komfie Manalo, Opalesque Asia: Professor Oliver Gottschalg of Paris-based HEC Business School, also known as Ecole des Hautes Etudes Commerciales de Paris has released his annual ranking of the top performing private equity firms. The 2014 HEC-DowJones Private Equity Performance Ranking

  4. Comment - Why invest in hedge funds if they don't outperform the market?[more]

    From Forbes.com: Hedge funds have always been a bit exotic and an enigma to some, but bottom line they are supposed to produce good returns using a range of strategies including global macro, event driven and relative value (arbitrage). And, sophisticated or high-net-worth individuals (HNWIs) could

  5. Owen Li 'truly sorry' for blowing up $100m of hedge fund’s assets[more]

    From CNBC.com: A hedge fund manager told clients he is "truly sorry" for losing virtually all their money. Owen Li, the founder of Canarsie Capital in New York, said Tuesday he had lost all but $200,000 of the firm's capital—down from the roughly $100 million it ran as of late March. "I take r