capital requirments

I posted this on another forum, but ill post here to get your thoughts on this:

Here's something interesting reguarding MB trading. In june, MB's net capital adjusted was 419k, with 250k of net capital requirment and 170k of net excess capital .

In their July; their Net capital adusted was 437k, capital was 250k and net excess was 187k.


Now for August: Their net adjusted was 606k, capital 1 million and..... Net excess was -393k, which means they are losing money?


What do you think?

I/m no accountant but if you look at net adjusted it is climbing, meaning they are making money, not losing it.

I have no idea what those numbers mean, but their capital increased quite a bit. 750K increase. So if their excess was -400K, then taking into account the capital increase, the excess was really 350K. Disclaimer: I personally think nothing in this post is correct, so don't listen to me.

The net capital requirement for any forex dealer changed from 250k to 1 million. That is why they are at a negative. I guess they get some initial leeway even though this change was announced back in April, 2006.

Exactly. That's why they changed over from MB Trading Technologies to MB Trading Futures... Everything is normal.

Wouldn't "normal" be a situation where they met the new standards?

I think the word you are looking for is "ideal"

I was thinking "acceptable".

Does your broker meet the requirements Cap'?

yes

From what I've read, they exceeded the new standards... it's just not reflected on the sheet because of the rolling over from MBTT to MBTF.

I'm only going by what I read on another forum... not sure what the rules are as far as linking to other forums... but if it's OK, I'll do it.

here's the q&a.
I have a question for MBFT:

What's with the negatve Excessive Net Capital? In the report presented in the latest CFTC Rerpot.? Your company has a capital below the minimum requirments of the Commission. Shall I run with my money?

Damn, it wasn't negative when I opened my account. Now I'll have to check this on a monthly basis. As if making money by trading wasn't hard enough by itself. http://nondealingdesk.com/images/smilies/frown.gif


I will look into this further on Monday. Obviously, it appears to be an error, or we would have been shut down. We don't have net capital issues at all. At the end of July, the minimum net cap requirements were changed (and raised considerably) for FCMs.

In that process, we actually rolled our customers from MB Trading to MB Trading Futures. I'll have to check at the top on Monday, but perhaps there is an issue with accounting related to the rollover that occurred because it happened right on the last day of the month. All of our customers were notified ahead of the rollover and it went smoothly.

Again, if there was actually an issue, it wouldn't just be a matter of showing a negative excess net capital number. We'd already have to have fixed it or been shut down, so there obviously isn't a real issue. I will get the complete answer on Monday.

Don't forget that MB Trading is a stock/options/futures trading company that has had to conform to SEC net capital requirements for almost a decade and never had a problem.

Justin LeBlang
www.efxgroup.com

I dug into the matter further and discovered that I was, indeed, correct. At the end of July, we rolled our clients from MB Trading to MB Trading Futures, which is the FCM that we are now using with our ECN technology. At the same time, the regulatory requirements for net capital changed at that point. In the process of rolling our customers and shifting our assets between our companies, we were hit with an “affiliation haircut” that was imposed on us. Once all movement was complete, the haircut was rectified, and the haircut no longer applies. In future reports, you will see that not only do we meet the requirements, but we have ample excess equity.

Thanks for the question so I can keep people up to speed.

Justin LeBlang
www.efxgroup.com
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