Thu, Jul 31, 2014
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. Opalesque Roundtable: Success in hedge fund marketing not linked to performance, but investor appetite[more]

    Komfie Manalo, Opalesque Asia: Success in marketing a fund is not linked to the performance, but to investor appetite, to the way you can market the fund, and to how much time you can spend to raise assets, said Antoine Rolland, the CEO of incubator and seeding firm

  2. Hedge fund manager Winton Capital making headway with long-only strategy[more]

    From PIonline.com: North American investors are helping Winton Capital Management Ltd. make progress — albeit slowly — toward its founder's goal of becoming a $100 billion company. The firm's ticket to quadrupling its assets under management is unlikely to be one of its scientifically designed manag

  3. Opalesque Radio: Now is a good time to buy protection cheaply in the options market[more]

    Benedicte Gravrand, Opalesque Geneva: Investors are showing an increased interest in risk parity funds and strategies, Opalesque reported last year. Risk parity strategies have the

  4. The Big Picture: Charlemagne Capital smoothes risk out of frontier market investing with portfolio approach[more]

    Benedicte Gravrand, Opalesque Geneva: Opalesque recently talked to one of the portfolio managers of the Oaks funds, which are emerging and frontier market hedge funds focusing on equity long/short with a directional approach. They are run by

  5. Winton’s low-cost equities fund tops $1bn for first time[more]

    From FT.com: Winton, the London-based hedge fund, has increased the assets in its low-cost equities fund to more than $1bn for the first time in a sign that traditional stock managers may come under increasing pressure from computer-driven rivals. Winton, which manages about $25bn in total ass