a futures commission merchant fcm plays an essential role in enabling customers to participate in the futures markets an fcm is an individual or organization involved in the solicitation or acceptance of buy or sell orders for futures or options on futures in exchange for payment of money commission or other assets from customers an fcm has the responsibility of collecting margins from customers the fcm is also responsible for ensuring asset delivery after the futures contract has expired 1
in europe fcms are analogous to clearing members of the futures market basics of futures commission merchant fcm fcms are required to be registered with the national futures association nfa this is required unless the entity handles transactions only for the firm itself or the firm s affiliates top officers or directors or if the entity is a non u s resident or firm with only non u s customers and submits all trades for clearing to an fcm 2an fcm may either be a clearing member firm of one or more exchanges a clearing fcm or a non clearing member firm a non clearing fcm clearing fcms are required to hold substantial deposits with the clearing house of any exchange of which it is a member a non clearing fcm must have its customers trades cleared by a clearing fcm 3additionally fcms must also meet the commodity futures trading commission cftc guidelines a futures commission merchant is able to handle futures contract orders as well as extend credit to customers wishing to enter into such positions these include many of the brokerages with which investors in the futures markets deal if a customer wishes to purchase or sell a futures contract they contact an fcm who acts as an intermediary by purchasing or selling the contract on the customer s behalf this is similar to what a stockbroker does with stocks at maturity or the delivery date the fcm also makes sure the contract is fulfilled and either the commodity or cash is delivered to the customer fcms among other things enable farmers and companies called commercials to hedge their risks and provide customers access to exchanges and clearinghouses they can be subsidiaries of larger financial firms or smaller independent firms however in recent years and especially since the enactment of the dodd frank legislation in 2010 the numbers of fcms especially small independents have declined due to the regulatory burden 7