Interactive Brokers LLC recently agreed with the National Futures Association ("NFA") to pay a fine of $300,000 in connection with two pending matters:
First, NFA found that of the hundreds of hedge funds that use Interactive Brokers to execute and clear their U.S. and global securities and futures trades, a small number of these funds were not properly registered with NFA or had not filed the appropriate exemption from registration. Through NFA Bylaw 1101, NFA imposes strict liability on any brokerage firm that does business with a commodity pool that has not registered with NFA or has not taken the proper steps to take advantage of an exemption.
Interactive Brokers General Counsel David Battan stated: "Because of our global best execution platform and low cost, our client base of hedge funds has been growing very rapidly over the past several years. We have committed to NFA to assist the hedge funds that use our platform to make sure that they are properly registered or exempt from registration."
The settlement also covers an administrative error regarding reporting of futures brokers' bank accounts to NFA. Earlier this year a new NFA rule went into effect requiring futures commission merchants electronically to report the balances of their segregated accounts containing customer funds to a third party vendor, which then provides such information to NFA. Because of a temporary administrative error in implementing the new rule, a single, newly-opened bank account used by Interactive Brokers was not reported to NFA for several days. The account was otherwise completely in accordance with NFA requirements. As NFA noted in the settlement: "Although the account ...was property titled and had the correct acknowledgment letter ... indicating that the account contained customer funds, Interactive inadvertently failed to authorize [the bank] to report to [NFA's vendor]." The error was fixed immediately.Interactive Brokers conducts a global customer business on U.S. and non-U.S. exchanges, and its U.S. and worldwide customers transact business on over 100 different markets in 20 different countries and in 19 different currencies. Interactive Brokers was recently named 2013 Best Online Broker and Best for International Traders by Barron's Magazine. Interactive Brokers' parent company has over $4.8 billion in equity capital and is publicly traded under the symbol IBKR. Interactive Brokers customers traded over 300 million shares, 1 million options, 400,000 futures and $11 billion of forex in the first half of 2013. About Interactive Brokers Group, Inc.: Interactive Brokers Group, Inc., together with its subsidiaries, is an automated global electronic broker that specializes in catering to financial professionals by offering state-of-the-art trading technology, superior execution capabilities, worldwide electronic access, and sophisticated risk management tools at exceptionally low costs. The brokerage trading platform utilizes the same innovative technology as the Company's market making business, which executes and processes trades in securities, futures and foreign exchange instruments on more than 100 electronic exchanges and trading venues around the world. As a market maker, we provide liquidity at these marketplaces and, as a broker, we provide professional traders and investors with electronic access to stocks, options, futures, forex, bonds and mutual funds from a single IB Universal Account SM. Employing proprietary software on a global communications network, Interactive Brokers Group continuously integrates its software with a growing number of exchanges and trading venues into one automatically functioning, computerized platform that requires minimal human intervention.
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