New Regulatory Wrinkle for ROBO-BROKERS

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futurestrader111
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New Regulatory Wrinkle for ROBO-BROKERS

Post by futurestrader111 » Mon Mar 28, 2005 1:47 pm

The NFA and CFTC recently met to discuss issues going forward. One of the main areas the CFTC said they are going to focus on is Robo Brokers who are actually operating as unregistered CTAs. It seems some of them are doing more than simply executing systems. In some cases they have been taking discretion as to which system trades to accept or avoid. Or worse yet, putting on discretionary trades that the system didnt generate at all!

One alleged case involves a client told he was trading I-Master. He lost several hundred thousand dollars, and then found out the broker was putting on trades NOT all generated by IMaster.

Brokers should take head and know that unless they are registered as CTA's with documented track records they have no authority other than to simply execute the system they have been directed to follow. (unless of course the customer gives specific instructions on a given trade etc.) However, the CFTC is apparently looking for brokers claiming to be system brokers who are instead operating as discretionary unregistered CTA's.

Unfortunately, this also means that if you have a systems broker its probably important that you occasionally "audit" the trades they are placing to make sure they have really come from your system.

The other area they are not happy with are “non-systemâ€

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