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NinjaTrader Clearing Risks


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  #1 (permalink)
 Arch 
W.Coast, USA.
 
Experience: Intermediate
Platform: Anything
Trading: Emini
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So based on this, NinjaTrader can lose all your money, and they invest your money for their own gain. What FCM doesn't do this?

https://ninjatrader.com/risk-disclosure-clearing/

5. The funds you deposit with a futures commission merchant are not held by the futures commission merchant in a separate account for your individual benefit. Futures commission merchants commingle the funds received from customers in one or more accounts and you may be exposed to losses incurred by other customers if the futures commission merchant does not have sufficient capital to cover such other customers' trading losses.

6.The funds you deposit with a futures commission merchant may be invested by the futures commission merchant in certain types of financial instruments that have been approved by the Commission for the purpose of such investments. Permitted investments are listed in Commission Regulation 1.25 and include: U.S. government securities; municipal securities; money market mutual funds; and certain corporate notes and bonds. The futures commission merchant may retain the interest and other earnings realized from its investment of customer funds. You should be familiar with the types of financial instruments that a futures commission merchant may invest customer funds in.

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  #2 (permalink)
 
SMCJB's Avatar
 SMCJB 
Houston TX
Legendary Market Wizard
 
Experience: Advanced
Platform: TT and Stellar
Broker: Advantage Futures
Trading: Primarily Energy but also a little Equities, Fixed Income, Metals and Crypto.
Frequency: Many times daily
Duration: Never
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My understanding is there is a single co-mingled customer segregated funds account that is separate than the firms accounts. This is supposed to protect customers from a broker failure. This is standard in the US Futures industry and not specific to Ninja. What happens if another customer blows that co-mingled account up though? Never really thought about that. The broker does have to have equity capital backing up the account which would cover any losses first, but I its only 8% of the total margin requirement.

https://www.cftc.gov/IndustryOversight/Intermediaries/FCMs/fcmsegregationfunds.html
https://www.cftc.gov/IndustryOversight/Intermediaries/FCMs/fcmibminimumnetcapital.html

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  #3 (permalink)
 Arch 
W.Coast, USA.
 
Experience: Intermediate
Platform: Anything
Trading: Emini
Posts: 393 since Jul 2017
Thanks Given: 116
Thanks Received: 408



SMCJB View Post
My understanding is there is a single co-mingled customer segregated funds account that is separate than the firms accounts. This is supposed to protect customers from a broker failure. This is standard in the US Futures industry and not specific to Ninja. What happens if another customer blows that co-mingled account up though? Never really thought about that. The broker does have to have equity capital backing up the account which would cover any losses first, but I its only 8% of the total margin requirement.

https://www.cftc.gov/IndustryOversight/Intermediaries/FCMs/fcmsegregationfunds.html
https://www.cftc.gov/IndustryOversight/Intermediaries/FCMs/fcmibminimumnetcapital.html

1. Can you clarify where the 8% figure came from?
2. Should a trader get separate insurance for their capital?
3. I've looked at the latest FCM Data and the top firms that handle futures are not self directed or have multimillion dollar equity requirements. What FCMs would be the safest? TradeStation as an FCM isn't an option unless you want to be in the TS ecosystem. Same with Schwab. There's Phillip Capital but I'll need to contact them to get their platform fees.

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  #4 (permalink)
 
SMCJB's Avatar
 SMCJB 
Houston TX
Legendary Market Wizard
 
Experience: Advanced
Platform: TT and Stellar
Broker: Advantage Futures
Trading: Primarily Energy but also a little Equities, Fixed Income, Metals and Crypto.
Frequency: Many times daily
Duration: Never
Posts: 5,057 since Dec 2013
Thanks Given: 4,402
Thanks Received: 10,225


Arch View Post
1. Can you clarify where the 8% figure came from?

In that second link
https://www.cftc.gov/IndustryOversight/Intermediaries/FCMs/fcmibminimumnetcapital.html

Each futures commission merchant (FCM) is required to maintain adjusted net capital of $1,000,000 or some greater amount as determined under CFTC Regulation 1.17(a)(1)(i).
and then

 1.17 Minimum financial requirements for futures commission merchants and introducing brokers.
(a)(1)(i) Except as provided in paragraph (a)(2)(i) of this section, each person registered as a futures commission merchant must maintain adjusted net capital equal to or in excess of the greatest of:
(A) $1,000,000, Provided, however, that if the futures commission merchant also is a swap dealer, the minimum amount shall be $20,000,000;
(B) The futures commission merchant's risk-based capital requirement, computed as the sum of:
( 1 ) Eight percent of the total risk margin requirement (as defined in  1.17(b)(8) of this section) for positions carried by the futures commission merchant in customer accounts and noncustomer accounts; and
.... lots more....



Arch View Post
2. Should a trader get separate insurance for their capital?

Is there such a thing?


Arch View Post
3. I've looked at the latest FCM Data and the top firms that handle futures are not self directed or have multimillion dollar equity requirements. What FCMs would be the safest? TradeStation as an FCM isn't an option unless you want to be in the TS ecosystem. Same with Schwab. There's Phillip Capital but I'll need to contact them to get their platform fees.

These are actually good questions. If there is a good answer though I'm not sure what it is. The larger the FCM the larger the risk margin requirement and hence the larger the risk-based capital requirement. This may seem like that's an advantage but it's also true that larger FCMs have larger accounts and some of these accounts are larger than you can possibly imagine.

There are lots of FCMs out there, many of which are a good fit for one customer, but not for another. Some have free front ends, some don't. Some embrace option selling others don't. Some have very aggressive liquidation procedures, some less so. Hence I don't think the answer to this question is easy.

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  #5 (permalink)
 Arch 
W.Coast, USA.
 
Experience: Intermediate
Platform: Anything
Trading: Emini
Posts: 393 since Jul 2017
Thanks Given: 116
Thanks Received: 408


SMCJB View Post
In that second link
https://www.cftc.gov/IndustryOversight/Intermediaries/FCMs/fcmibminimumnetcapital.html

Each futures commission merchant (FCM) is required to maintain adjusted net capital of $1,000,000 or some greater amount as determined under CFTC Regulation 1.17(a)(1)(i).
and then

 1.17 Minimum financial requirements for futures commission merchants and introducing brokers.
(a)(1)(i) Except as provided in paragraph (a)(2)(i) of this section, each person registered as a futures commission merchant must maintain adjusted net capital equal to or in excess of the greatest of:
(A) $1,000,000, Provided, however, that if the futures commission merchant also is a swap dealer, the minimum amount shall be $20,000,000;
(B) The futures commission merchant's risk-based capital requirement, computed as the sum of:
( 1 ) Eight percent of the total risk margin requirement (as defined in  1.17(b)(8) of this section) for positions carried by the futures commission merchant in customer accounts and noncustomer accounts; and
.... lots more....



Is there such a thing?

no idea


SMCJB View Post
These are actually good questions. If there is a good answer though I'm not sure what it is. The larger the FCM the larger the risk margin requirement and hence the larger the risk-based capital requirement. This may seem like that's an advantage but it's also true that larger FCMs have larger accounts and some of these accounts are larger than you can possibly imagine.

There are lots of FCMs out there, many of which are a good fit for one customer, but not for another. Some have free front ends, some don't. Some embrace option selling others don't. Some have very aggressive liquidation procedures, some less so. Hence I don't think the answer to this question is easy.

well, I guess the criteria for me are:
- account insurance (since SIPC doesn't apply for futures)
- cost effective platform fees

https://www.schwab.com/legal/account-protection
https://www.interactivebrokers.com/en/general/security-investor-protection.php
https://www.tradestation.com/accounts/safety-of-funds/

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Last Updated on June 12, 2024


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