A futures commission merchant accepts derivatives orders and customer assets used to margin or secure resulting trades.
A futures commission merchant (FCM) is a regulated derivatives intermediary that solicits or accepts specified futures, options, swaps, or retail off-exchange forex orders and accepts money, securities, or other property to margin, guarantee, or secure resulting transactions.
For many futures customers, the FCM is the firm that opens and carries the account, holds customer collateral under the applicable regulatory regime, issues statements and margin calls, and connects the customer to exchange and clearing infrastructure.
A simplified customer trade can involve several separate roles:
| Participant | Primary role | Does it normally hold the customer’s futures margin? |
|---|---|---|
| Commodity trading advisor | Gives advice or directs trading under authority | No, unless separately registered and acting in another permitted capacity |
| Introducing broker | Solicits or accepts orders and introduces the account | No |
| Futures commission merchant | Carries the account, accepts covered orders and customer assets | Yes, under the applicable customer-funds regime |
| Designated contract market | Lists the futures or option and applies exchange rules | No direct retail account relationship |
| Derivatives clearing organization | Clears eligible trades and manages central counterparty risk | Receives collateral through clearing arrangements, not as the customer’s retail broker |
| Clearing member | Interfaces directly with the clearinghouse | May also be an FCM, but the roles are analytically distinct |
Some firms perform more than one regulated role. Always identify the capacity in which the firm acts for the transaction being reviewed.
The FCM collects account information, provides required disclosures, establishes product permissions, and documents account terms. It may assess the customer’s experience, objectives, financial resources, and ability to meet margin calls under applicable requirements and firm policy.
The FCM or its systems can accept customer orders and route them to an exchange or other permitted execution path. The exchange matches the trade; the FCM is not the exchange.
The FCM accepts cash, securities, or other eligible property used to support customer trading. These assets must be handled under rules applicable to the account and transaction type.
The FCM calculates customer-level requirements, monitors account equity, issues margin calls, and can impose house margin above exchange or clearing minimums. It may also restrict concentrated, illiquid, expiring, or deliverable positions.
Customer records can include trade confirmations, monthly statements, open positions, cash balances, fees, collateral, realized and unrealized results, and margin activity. These records are primary evidence for reconciliation.
The phrase “segregated funds” should not be applied loosely to every derivatives account.
| General account context | Regulatory concept to verify |
|---|---|
| U.S. exchange-traded futures and options on futures | Futures customer funds held in segregation |
| U.S. customers trading foreign futures or foreign options through an FCM | Part 30.7 secured amount |
| Cleared swaps customer collateral | Cleared-swaps customer collateral regime |
The legal details, permitted investments, account titles, depository acknowledgments, and insolvency treatment differ. A statement or agreement should identify the relevant account class.
For U.S. exchange-traded futures customer funds, segregation requires customer assets to be kept apart from the FCM’s own funds and accounted for as customer property under the applicable framework.
Segregation does not:
The CFTC explains that if customer funds are insufficient to pay customer claims in an FCM insolvency, remaining claims can share pro rata in relevant distributions. This is why segregation is a protection framework, not a return guarantee.
Suppose a clearing or exchange-level requirement for a position is hypothetically $10,000, but the FCM sets a customer house requirement of $13,000.
The customer must satisfy the FCM’s $13,000 requirement. The difference may reflect:
If account equity falls below the applicable threshold, the FCM can demand additional funds. The customer agreement may permit liquidation without waiting for the customer to restore the account. Margin is collateral, not the maximum possible loss.
An introducing broker (IB) may solicit or accept orders, but it does not accept customer money, securities, or property to margin or secure the resulting trades. The account and customer funds are carried at an FCM.
| Question | FCM | Introducing broker |
|---|---|---|
| Can solicit or accept covered orders? | Yes | Yes |
| Carries the futures account? | Yes | No; introduces it to an FCM |
| Accepts customer margin assets? | Yes | No |
| Issues the carrying-account statement? | Generally yes | May provide service records, but does not replace the FCM statement |
| May have a direct customer relationship? | Yes | Yes |
The customer should know both firms, their responsibilities, and which agreement controls each service.
A Commodity Trading Advisor advises or directs trading. The FCM carries the account and customer assets. A clearinghouse becomes the central counterparty for eligible cleared trades under its rules. None of these labels should be substituted for another.
In a managed account, the CTA may have authority to place trades while the customer sends funds directly to the FCM. The CTA’s performance report and the FCM’s official account statement serve different evidentiary purposes.
Registration and clean history are useful controls, not proof that a firm is risk-free or suitable for every customer.
This page is for financial education only. It does not recommend an FCM, interpret a customer agreement, determine account protection, or provide legal, tax, or trading advice. Rules, registrations, financial condition, margin, and account terms can change. Verify current official records and obtain professional advice for the intended decision.