# Futures Commission Merchant (FCM): Key Roles and Registration Requirements

![A trader looks at computer screens displaying charts for futures markets.](https://www.investopedia.com/thmb/Ncm3rzK_ueqA6Iompomzkgwy2Ds=/1500x0/filters:no_upscale():max_bytes(150000):strip_icc()/GettyImages-1911912306-47c748d46fb24c5f88e862bc8cec6fbe.jpg)

*— Andia / Getty Images*

> **Definition**
>
> A futures commission merchant (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.

## What Is a Futures Commission Merchant (FCM)?

Futures Commission Merchants (FCMs) are vital players in futures markets, connecting customers to trading opportunities. They [handle](https://www.investopedia.com/terms/c/commission.asp) buy/sell orders for [futures](https://www.investopedia.com/terms/f/futures.asp) and options, collect customer margins, and ensure contract fulfillment. Registered with the National Futures Association (NFA) and accredited by the Commodity Futures Trading Commission (CFTC), FCMs maintain regulatory compliance to safeguard trading integrity.

In Europe, FCMs are similar to clearing members in the futures market.

### Key Takeaways

*   A Futures Commission Merchant (FCM) facilitates futures trading by accepting orders to buy or sell futures contracts or options for clients.
*   FCMs must register with the National Futures Association and adhere to guidelines set by the Commodity Futures Trading Commission.
*   FCMs are responsible for managing customer margins and ensuring the delivery of assets or cash as per contract terms.
*   FCMs have seen a decline in numbers due to increased regulatory burdens, particularly following the Dodd-Frank legislation.
*   FCMs can be either clearing or non-clearing members, with specific requirements regarding their role in the trading process.

## Understanding the Fundamentals of Futures Commission Merchants (FCMs)

FCMs are required to be registered with the [National Futures Association](https://www.investopedia.com/terms/n/nfa.asp) (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.

An FCM can be a clearing member firm on exchanges (a "clearing FCM") or a non-clearing member firm (a "non-clearing FCM"). Clearing FCMs must hold substantial deposits with the [clearing house](https://www.investopedia.com/terms/c/clearinghouse.asp) of their exchange. Non-clearing FCMs must have their customers' trades cleared by a clearing FCM.

Additionally, FCMs must also meet the [Commodity Futures Trading Commission (CFTC)](https://www.investopedia.com/terms/c/cftc.asp) guidelines:

*   Segregation of customer funds from the FCM's funds
*   Maintenance of a minimum of $1,000,000 in adjusted net capital
*   Reporting, recordkeeping, and supervision of employees and affiliated brokers
*   Monthly submission of financial reports to the CFTC.

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](https://www.investopedia.com/terms/f/futuresmarket.asp) deal.

When a customer wants to buy or sell a futures contract, they contact an FCM, which acts as an intermediary and handles the transaction for them. This is similar to what a [stockbroker](https://www.investopedia.com/terms/s/stockbroker.asp) does with stocks. At the [delivery date](https://www.investopedia.com/terms/d/deliverydate.asp), the FCM ensures the contract is fulfilled and the commodity or cash is delivered to the customer.

FCMs, among other things, enable farmers and companies (called [commercials](https://www.investopedia.com/terms/c/commercial.asp)) 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](https://www.investopedia.com/terms/d/dodd-frank-financial-regulatory-reform-bill.asp) legislation in 2010, the number of FCMs, especially small independents, has declined due to the regulatory burden.

## The Bottom Line

A Futures Commission Merchant (FCM) plays a pivotal role in the futures markets, facilitating the buying and selling of futures and options contracts. To operate legally, an FCM must be registered with both the National Futures Association (NFA) and the Commodity Futures Trading Commission (CFTC). They must also comply with stringent financial and reporting requirements, including the segregation of customer funds and maintaining a significant amount of net capital. FCMs are crucial in providing market access and helping participants manage risk. As market intermediaries, they ensure that futures contracts are accurately executed and settled, akin to stockbrokers in the stock markets.

> **Article Sources**
>
> 1.  Commodity Futures Trading Commission. "[Legal Definition of Futures Commission Merchant](https://www.cftc.gov/LearnAndProtect/AdvisoriesAndArticles/CFTCGlossary/index.htm#_futurescommissionmerchant)."
>     
> 2.  National Futures Association. "[Futures Commission Merchant (FCM) Registration](https://www.nfa.futures.org/registration-membership/who-has-to-register/fcm.html)."
>     
> 3.  Commodity Futures Trading Commission. "[Clearing Member](https://www.cftc.gov/LearnAndProtect/AdvisoriesAndArticles/CFTCGlossary/index.htm#clearingmember)."
>     
> 4.  Commodity Futures Trading Commission. "[Segregation of Customer Funds](https://www.cftc.gov/IndustryOversight/Intermediaries/FCMs/fcmsegregationfunds.html)."
>     
> 5.  Commodity Futures Trading Commission. "[Minimum Adjusted Net Capital Requirements for Futures Commission Merchants and Introducing Brokers](https://www.cftc.gov/IndustryOversight/Intermediaries/FCMs/fcmibminimumnetcapital.html)."
>     
> 6.  Commodity Futures Trading Commission. "[Disclosure](https://www.cftc.gov/IndustryOversight/Intermediaries/FCMs/fcmibdisclosures.html)."
>     
> 7.  Brookings Institution. "[Dwindling Numbers in the Financial Industry](https://www.brookings.edu/research/dwindling-numbers-in-the-financial-industry/)."