Hello @mmomm1 and welcome to the Optimus Futures community.
As per your questions:
Futures brokers (FCMs) and introducing brokers (IBs) have an interdependent relationship when it comes to managing risk for customer accounts. The FCM is ultimately responsible for setting margin requirements and monitoring risk across all accounts. However, IBs play an important role in implementing risk management policies on behalf of the FCM.
Typically, an FCM will provide risk management parameters and tools for the IB to utilize. The IB is responsible for enacting the FCM’s margin methodology, applying risk controls, and monitoring customer risk within the FCM’s guidelines. IBs have their own real-time monitoring tools and position data to help identify excessive risk buildup in customer accounts. If necessary, the IB can intervene directly by executing trades for customers to reduce outsized risk positions.
Through their risk monitoring capabilities and ability to execute, IBs provide an additional layer of risk oversight and control on top of the FCM’s overall framework. The specific arrangement between an IB and FCM can vary, with some IBs taking a more hands-on role in enforcing risk limits versus others who take a lighter touch. So risk management implementation tends to be a collaborative effort, with the FCM providing guidance and tools but relying on the IB for day-to-day monitoring and account intervention for their subset of customers.
The responsibility for notifying customers of margin calls can vary based on the arrangement between the futures commission merchant (FCM) and introducing broker (IB). In some cases, the IB may be the primary point of contact for the customer and handle margin call notifications. In other cases, the FCM may take on that role directly with customers.
Ultimately, as a futures trader, it is your responsibility to closely monitor your own intraday and overnight margin requirements. While your FCM or IB may alert you to a margin shortfall, you should proactively manage your positions and cash on hand to avoid margin calls in the first place. It’s prudent to maintain a margin cushion and have contingency plans in case additional margin is required. Staying on top of your margin obligations is an essential risk management practice for all futures market participants. As a futures trader, the obligation to maintain adequate margin with your broker lies entirely with you. If your account has a margin shortfall at any point, it is your responsibility to promptly deposit additional funds to cover the deficit. The onus is on the trader to proactively monitor margin balances and meet margin requirements, not the broker. While your futures commission merchant or introducing broker may provide notices of undermargined accounts, you should not rely on them to cover a margin call on your behalf. Maintaining sufficient collateral is a key risk management duty for all futures traders.
You’re right, I should broaden that to cover both margin and cash deficits. Here is an updated version:
As a futures trader, the obligation to maintain adequate capitalization of your account lies entirely with you. If your account has a margin shortfall or cash deficit at any point, it is your responsibility to promptly deposit additional funds to cover the shortfall. The onus is on the trader to proactively monitor margin balances as well as cash available for trading and meet requirements, not the broker. While your futures commission merchant or introducing broker may provide notices of undermargined or cash-deficit accounts, you should not rely on them to cover a margin call or cash deficit on your behalf. Maintaining sufficient collateral and account capitalization is a key risk management duty for all futures traders.
Thank you,
Matt Z
Optimus Futures
There is a substantial risk of loss in futures trading. Past performance is not indicative of future results.