A futures commission merchant (FCM) is a firm that transacts futures business and executes orders for customer accounts. In addition to executing customer orders, a futures commission merchant may also hold customer funds as margin or to guarantee customer futures contracts. An FCM must have minimum net capital of at least $1,000,000 and file statements of financial condition each month within 17 days of the end of the month. An FCM that maintains the accounts of its customers and holds their cash and securities is known as a clearing firm or a clearing member and are members of the clearing corp.
Applying "Futures Commission Merchant" to Securities Exams:
Not all FCMs maintain the physical possession of the customers’ cash and securities. A merchant may find it easier to have another futures commission merchant provide the clearing and custodial functions for its customers’ accounts. The FCM may choose to clear their trades on a fully disclosed basis or through an omnibus account maintained at the clearing firm. If a firm clears all of their transactions on a fully disclosed basis, all customer confirmations and statements will be sent by the clearing member. If the FCM clears its trades on an omnibus basis, all transactions are cleared through one account and the clearing member does not know for whom the trade was executed. The introducing member is required to send customer confirmations and statements if they clear through an omnibus account. Getting ready to take the series 3 exam ? Pass your exam or your money back with our Greenlight pass guarantee