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Dear Mr. Quant:
Sorry, married with 3 kids and on my way to take them out to dinner.
The financial requirement to be an FCM is to put up $250,000. That is the minimum, but I believe you also have to have 6% of your customer equity. That is to avoid the early warning signals to the regulators. There are many of these $250,000 FCMs, if you look at the CFTC data, and they are generally newer firms.
The second question is more complex. It varies from exchange to exchange and would take some digging to find. For example, to clear the CBOT you need to own multiple full and other memberships. Same with the CME. And then there is the question of belonging to the clearing corp and those can costs can vary from exchange to exchange.
After the 1987 stock market crash these requirements were all raised significantly, which caused many smaller firms to merge with larger ones. The technology costs of being a clearing member must also be taken into account.
Regards,
John J. Lothian
Disclosure: Futures trading involves financial risk, lots of it! John J. Lothian is the President of the Electronic Trading Division of The Price Futures Group, Inc., an Introducing Broker.
In a message dated 2/14/2002 4:05:59 PM Central Standard Time, thequant@xxxxxxxxx writes:
Hello I4Lothian,
Dear John,
I always wanted to write a dear John letter (are you single?) so here.
I wish to thank you very much for that exhaustive (at least for the
normal quality of post I see on various list) explanation. I have one
more favor to ask of you kind sir, do you or anyone know of what the
monetary requirements are to become the various stages of a FCM? Or
better yet not to waste your time is there an online site that details
that information. Once again thank you, TQ %^)
Iac> There are at least three kinds of FCMs: Non-clearing Fully Disclosed FCM,
Iac> Non-clearing Non-Disclosed FCMs and Clearing FCMs. Some would say there is a
Iac> fourth kind, a fraudulent FCM.
--
Best regards,
TheQuant mailto:thequant@xxxxxxxxx
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