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I agree, in that case this option is not attractive.
I am not a US citizen, so I did not think of this problem.
Another thing which came to my mind is, we want more or better, more effective, regulation/audits of brokerage firms so that our funds in our futures accounts are secured. But if regulators finally start to scrutinize brokerage firms in an effective manner, we will suddenly see further firms go down the drain and customer funds disappear (the funds were already gone, but then everyone would see it).
But if a solution similar to SIPC is adopted for futures accounts as well, then this might not be a problem.
By the way, I almost forgot that my agreement with TradeStation is also with TradeStation Europe (together with the US entity). The agreement states that TS Europe is regulated by the Financial Services Authority in the UK.
I am currently in contact with TS customer service to find out what that means in terms of funds protection.
However, this is of no help for you US guys... thought, some of the international members here might be interested.
Trading: Texas Grease, NY Harbor Blend, Hammond B-3
Posts: 303 since Jun 2012
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Only other solution I can think of for this problem is the old fashioned way - let the marketplace decide.
Everyone knows the market is more intelligent than any single trader or firm.
They offer CDS coverage for crazy things like banks and sovereigns.
Why not offer these products for FCMs as well?
The marketplace would then determine who the riskiest FCMs truly are - somehow I think this is more accurate than letting self-regulated regulators decide.
Insurance could then be structured by the market makers in the event of a payout event.
On the CTFC's website they state their mission and responsibilities: "The CFTC's mission is to protect market users and the public from fraud, manipulation, abusive practices and systemic risk related to derivatives that are subject to the Commodity Exchange Act, and to foster open, competitive, and financially sound markets."
According to a video made by Dan Roth, President of the NFA, they (NFA) are overseen by the CFTC. If they're both responsible for the same thing, it seems to me there shouldn't be a need for both. And why do FCM's pay fees to NFA? NFA is a "self-regulatory organization" and they are supposed to "safeguard the integrity of the futures market." So they do that by collecting fees from the very FCM's they're supposed to oversee? What is the benefit to the FCM to become a member of the NFA when we have the CFTC? Maybe they should be merged so the CFTC won't need additional funding to do their job if merging the two would give them more "manpower" they need to DO their job?
A friend of mine who is in the insurance business called and spoke directly to the compliance officer of the NFA. He was not able to answer any of the questions asked of him. My friend suggested that the FCM's should be required to purchase a bond to cover their exposure. There are many other companies who are required to purchase bonds/insurance to cover the liability of some of their employees including directors and officers of their companies. When I worked as a secretary for an insurance company over 30 years ago, I was covered under a bond. Why not brokerages? Even my townhome association carries Director and Officers Liability insurance.
When the compliance officer can't answer a few simple questions about how they "oversee" or safeguard the integrity of the futures market, I'd question his qualifications.
So, we have an overseer (CFTC) of the overseer (NFA) who oversees FCM's and (safeguards) the integrity of the futures market? I don't get it. I must be dumb. That's why I lost my money.
Just my speculation after this new video. Sr. , family, and the board of execs including the CFO and that "homemade" personal auditor all knew about it. Rumors were going around. The emails to all the employees during the last week was to help ally fears and to keep customers from leaving until the exposure..
Stupid suggestion with giving the regulators more money to get more and better people. What I've read so far about this, and if this is true, you would need only common sense to figure out that something could be wrong here. As someone else said, why didn't they just call the bank?
Agree, that someone else must have been involved as well. Cannot imagine that Sr. was the only one...