Commodity Futures Trading Commission Rule 1.55
ADVANTAGE FUTURES LLC
The Commodity Futures Trading Commission (“CFTC”) requires each futures commission merchant (“FCM”), including Advantage Futures LLC (“Advantage”), to provide the following information to a client prior to the time the client first enters into an account agreement with the FCM or deposits money or securities (funds) with the FCM. Except as otherwise noted below, the information set out is as of November 1, 2021. Advantage will update this information annually and as necessary to account for any material change to its business operations, financial condition or other factors Advantage believes may be material to a potential client decision to do business with Advantage.
I. Advantage Information and Principal
Advantage is the primary operating subsidiary of Advantage Financial LLC, our holding company. Advantage is registered with the CFTC as a FCM, Commodity Pool Operator (“CPO”) and Commodity Trading Advisor (“CTA”) and is a member of the National Futures Association (“NFA” [Member ID # 327359]). Advantage does not currently have any funds or accounts under management in its capacities as a CPO or CTA. Advantage Securities LLC (“Advantage Securities”), a broker dealer registered with FINRA (“BD”), operates as a wholly owned subsidiary of Advantage, and is currently not clearing any business.
Advantage Financial LLC has three other subsidiaries: Advantage Capital Resource LLC (“ACR”), Advantage Building LLC (“AB”) and LaSalle Street Technology LLC (“LST”). ACR exists to provide margin financing for clients under certain conditions and is not currently providing any financing. AB is an entity formed to own an office building located in Downers Grove, Illinois which serves as Advantage’s business continuity site, as well as office space for its clients and some employees. LST offers server hosting, colocation and information technology services.
Advantage’s Principal Place of Business and contact information:
Headquarters: 231 S. LaSalle Street
Chicago, IL 60604
Telephone Number: 312-800-7000
Fax Number: 312-800-7810
Business Continuity Site and Branch Office:
1501 West Warren Avenue
Downers Grove, IL 60515
Telephone Number: 312-800-7000
Fax Number: 312-800-7810
Joseph M. Guinan, Jr. Founding Chairman & CEO
Business Location: Headquarters
The CEO has oversight and responsibility of overall operations and resources of Advantage and acts as the main point of communication amongst the members.
Mr. Joseph Guinan is the Founding Chairman, Chief Executive Officer (“CEO”) and Governing Body and managing member of Advantage. Prior to establishing Advantage in June 2003, Mr. Guinan served as Executive Vice President, Mizuho Securities USA. Before that, Mr. Guinan was President and CEO of Fuji Futures Inc. (“Fuji”) where he worked from 1995 to 2002. Prior to Fuji, Mr. Guinan held various trading and management positions at Irving Trust, Kidder Peabody, and Merrill Lynch. Mr. Guinan is a registered floor broker and a member of the Chicago Board of Trade and NYMEX. Mr. Guinan received a BA in economics and an MBA in finance and accounting from Columbia University.
Thomas Guinan Chief Technology Officer
Business Location: Headquarters
Reporting to the CEO, the CTO manages the Information Technology Department and is responsible for implementing and monitoring Advantage’s Information System Security Program (“ISSP”) and Cybersecurity initiatives.
Mr. Guinan has been with Advantage since its inception in 2003. His career in the futures industry began on the CME trading floor in 1987 and expanded to information technology after he received an MBA and an MS in computer science from the University of Chicago. Mr. Guinan’s unique blend of industry experience and IT knowledge led him to develop and maintain Advantage’s technology infrastructure and support staff. Mr. Guinan also earned a BBA from the University of Texas.
William Harrington III EVP – Business Development
Business Location: Headquarters
Reporting to the CEO, EVP – Business Development is responsible for leading the development of new business for Advantage. This encompasses the development and implementation of an Advantage-wide sales plan.
Mr. William Harrington joined Advantage in 2004. Mr. Harrington is responsible for overseeing, managing, and coordinating Advantage’s business development activities. Prior to this position, Mr. Harrington served as Senior Vice President of Institutional Business Development at Advantage. Mr. Harrington began his career in the futures industry with Merrill Lynch Futures in 1987 before joining Fuji Securities (later Mizuho Securities USA) in 1995 as Vice President of Institutional Sales. He worked closely with large institutional clients emphasizing interest rate, foreign currency and equity futures and options trading. Bill earned a BBA in finance from the University of Notre Dame.
Lisa C. Jones Chief Compliance Officer
Business Location: Headquarters
Reporting to the CEO, the CCO is responsible for ensuring Advantage related business is conducted in compliance with current CFTC, NFA, as well as Exchange rules and regulations.
Ms. Lisa Jones joined Advantage in 2004. Ms. Jones began her career in 1990 at Lind-Waldock & Company, a registered FCM, where she served as Compliance Officer. Ms. Jones later joined the Bank of Montreal and Harris Bank as the US Treasury Compliance Manager in 1995, where she was primarily responsible for overseeing US Treasury activities, including exchange traded and over the counter markets. She later served in a variety of compliance roles within Fuji Bank Ltd. subsidiaries, including Chief Compliance Officer of Fuji Futures Inc. Ms. Jones holds a BBA from Loyola University of Chicago.
Sung Soo Kim
Business Location: N/A
Mr. Sung Soo Kim is a passive investor of Advantage Financial LLC. Mr. Kim does not have management oversight for the business activities or day to day responsibilities of the operations of Advantage.
Michael McLaughlin Institutional Sales
Business Location: Headquarters
Reporting to the CEO, President of Institutional Sales at Advantage, Michael McLaughlin oversees the CME and CBOT and off-floor execution team and is responsible for leading business development in these areas.
Mr. Michael McLaughlin joined Advantage in 2004. Mr. McLaughlin began his career in the financial industry at Merrill Lynch in 1986, where he served as Manager of short-term interest rates until 1995. He later held the position of Managing Director at Fuji Futures where he managed the CME, CBOT and upstairs sales staff for eight years. Mr. McLaughlin holds a BS in finance from the University of Iowa.
Curt Paloumpis Chief Risk Officer
Business Location: Headquarters
Reporting to the CEO, the CRO provides independent monitoring, controlling and reporting on the nature and extent of material risks and financial exposure, and ensures the implementation of and compliance with enterprise risk management policies and procedures.
Mr. Curtis Paloumpis rejoined Advantage in October 2014 and was appointed CRO effective April 10, 2019. Earlier in his career with Advantage, Mr. Paloumpis served as an institutional and later as a professional trader salesman from January 2004 through June 2011. In between his Advantage employment, Mr. Paloumpis traded proprietarily at various trading firms. Mr. Paloumpis has extensive experience in the futures and derivatives industry. In 1983 he began his career at Drexel Burnham Lambert as a short-term interest rate trader. Mr. Paloumpis was a member of the Chicago Mercantile Exchange from 1990 to 2010. He earned a BS in Finance from Southern Illinois University.
Carlos Rodriguez Chief Financial Officer
Business Location: Headquarters
Reporting to the CEO, the CFO is responsible for overseeing accounting at Advantage; protecting the assets of the company, ensuring regulatory compliance and protection of customer funds, accurately reporting Advantage results, and forecasting Advantage capital requirements.
Mr. Carlos Rodriguez joined Advantage in May 2017. Prior to Advantage, Mr. Rodriguez worked for CME Group over 20 years, most recently serving as Executive Director in CME Group’s Financial and Regulatory Surveillance Department. During his 20-year tenure at CME Group, Mr. Rodriguez was responsible for the regulatory, financial and compliance oversight of clearing member firms. Mr. Rodriguez holds a BS in Accountancy from the University of Illinois at Chicago.
Philip Singer Operations Manager
Business Location: Headquarters
Reporting to the CRO, the Operations Manager is responsible for monitoring client position balances and related trade price information, reconciling exchange clearing fees, performing trade allocations, balancing carrying broker accounts and submitting regulatory data to exchanges and CFTC.
Mr. Singer joined Advantage as Operations Manager in 2005. Mr. Singer has extensive GMI system knowledge and has a broad range of experience in futures and options clearing operations dating back to 1979, including supervising LFG LLC’s clearing operations for North American futures exchanges. Mr. Singer is a graduate of Dominican University.
II. Advantage’s Business
Advantage is a clearing member of CME Group (including CME, CBOT, NYMEX, and COMEX), ICE Futures Europe, ICE Clear Europe, ICE Futures Abu Dhabi, Options Clearing Corp., CBOE Futures Exchange, Nodal Clear, FairX, as well as a non-clearing member of EUREX. Advantage maintains carrying broker relationships to facilitate client access to products on exchanges Advantage does not directly clear. Advantage currently maintains such relationships with RBC Capital Markets, LLC, Phillip Capital Inc., Marex North America LLC, Marex Financial and Nissan Securities Co., Ltd.
Advantage primary source of revenue is client commissions derived from executing and clearing futures and options on futures trades. Most volume cleared through Advantage is electronically self-executed by clients. Advantage clears trades for a variety of client types, including professional traders, proprietary trading groups, institutional clients, non-clearing FCMs, hedge funds and individuals. Advantage clients employ various trading styles, including spreading, relative value, option market making, directional, and high frequency day trading. Advantage clients are located in 61 different countries, territories, and jurisdictions.
Advantage offers execution services, primarily to institutional clients, via CME Group trading-floor-based and office-based sales personnel. Advantage allocates most of these trades to other FCMs for clearing. ADM Investor Services provides global execution services for Advantage clients. Trades executed by ADM Investor Services on behalf of Advantage clients are given-up to Advantage for clearing. Advantage hosts technology equipment and provides other technology services for clients.
Advantage does not conduct speculative proprietary trading. Advantage operates an agency model brokerage company and does not trade for its own account, focusing its resources in support of client business.
The Advantage Designated Self Regulatory Organization (“DSRO”) is CME Group. Addtional information can be obtained on their website http://www.cmegroup.com/clearing/financial-and-regulatory-surveillance.html.
A. Permitted Depositories and Counterparties
Advantage appreciates its responsibility to protect and separately account for funds in both Customer Segregated and Customer Secured 30.7 origins (collectively “segregated funds”). This is necessary to protect both customer and Advantage, as the FCM is ultimately responsible for any loss of segregated or secured 30.7 funds due to their mishandling. To that end, Advantage developed procedures for:
Evaluating suitability of depositories designated for holding customer segregated funds;
Opening and documenting segregated accounts at approved depositories;
Monitoring approved depositories;
Establishing appropriate level of FCM residual interest in these segregated accounts, including regular reviews of the suitability of that level;
Withdrawing funds from segregated accounts when the withdrawal is not for the benefit of customers;
Assessing suitability and appropriate allocation of segregated funds to specific investments permitted per CFTC Rule 1.25.
B. Evaluating the Suitability of Customer Fund Depositories
There are three primary depositories holding segregated funds of Advantage customers: banks, carrying brokers and clearing organizations. Advantage established policies and procedures reasonably designed to ensure institutions holding Advantage deposits of customer segregated funds are financially sound and otherwise appropriate for this purpose.
Criteria utilized in this analysis of banks, carrying brokers and clearing organizations include but are not limited to a review of the following, as applicable:
Institutional size and capitalization
Access to liquidity
Concentration of segregated funds with any depository or group of depositories
Outside rating agency opinions
Availability of deposit insurance
III. Material Risks
Advantage faces a number of potential risks throughout the ordinary course of business, including Credit Risk, Market Risk, Operational Risk, Legal, Regulatory & Compliance Risk, Human Resources Risk, Financial Risk, Information Technology Risk, and Strategic Risk, each defined as follows:
Credit Risk – The risk of loss from failure of client or counterparty to meet financial obligations or default of client or counterparty.
Market Risk – The risk of loss from fluctuations in market prices or changes in market conditions that impact investment values or result in client deficit balances. Also includes foreign currency exposure.
Operational Risk – The risk of loss due to inadequate systems and controls, human error, or management failure.
Legal, Regulatory, & Compliance Risk – The risk of fines, penalties, or reputational damage due to real or perceived noncompliance with laws, rules, regulations, agreements, or failure to meet professional obligations.
Human Resources Risk – The risk of loss due to ineffective hiring/recruitment, loss of key employees, inadequate corporate governance, or legal risks arising from employees.
Financial Risk – The risk of loss or missed business opportunities due to insufficient financial controls, including capital risk, liquidity risk, segregation risk, and accounting risk.
Information Technology Risk – The risks associated with critical systems, technology practices, cybersecurity, business data, and interruption of business activity.
Strategic Risk – The risk of internal or external events that inhibit or prevent Advantage from achieving objectives or damage Advantage’s reputation.
Advantage does not conduct speculative proprietary trading. Therefore, no conflicts exist when Advantage acts as client executing broker or clearing firm since we are not competing against client trading or on the other side of client orders.
A. Investments Made by the Firm
Advantage holds a significant portion of its assets in cash, and may also hold US Treasury and US Agency securities guaranteed by US Government to ensure compliance with regulatory capital requirements and maintain sufficient liquidity to meet ongoing business obligations.
Advantage maintains a proprietary account to hedge Advantage foreign currency exposure and minimize risk in foreign currency price fluctuation.
Advantage investments of customer funds comply with CFTC Regulation 1.25. As permitted under CFTC regulations, client funds are invested in cash, US Treasury and Agency securities, and Reverse Repurchase Agreements with US Treasury and Agency securities. Advantage daily financial and quarterly investment information can be found on Advantage website www.advantagefutures.com under section About > Financials.
B. Advantage Creditworthiness, Leverage, Capital, Liquidity, Principal Liabilities, Balance Sheet Leverage and Other Lines of Business
Advantage pays its financial obligations in a timely manner and has never failed to meet a payment obligation to an exchange, clearing organization, or carrying broker. When and as needed, Advantage has been able to establish new banking, exchange, and carrying broker relationships. As an LLC and non-publicly held company, Advantage does not have a formal credit rating with major credit rating agencies.
Advantage balance sheet leverage as computed under NFA Financial Requirements Section 16 was 7.33 as of May 31, 2021.
Advantage strives to maintain capital necessary to support our business needs and comply with regulatory requirements. As of May 31, 2021, Advantage had Net Capital of $24,587,848, Adjusted Net Capital of $22,589,417 and Excess Net Capital of $10,376,181.
Advantage strives to transparently reflect our liquidity by graphically displaying on our website how we invest Customer Segregated and Customer Secured 30.7 funds. Additional liquidity for Advantage is provided via a $56,000,000 delivery line of credit by one of our banking relationships. If, when and as additional liquidity may be needed, Advantage will seek equity or debt funding from private sources of capital.
Principal liabilities for Advantage are balances in customer and non-customer accounts. As of May 31, 2021, these comprised 95.91% of Advantage liabilities. Of the remaining liabilities, 1.87% represent liabilities subordinated to claims of general creditors subject to a satisfactory subordination agreement approved by Advantage DSRO. Various other payables and accrued expenses (including compensation and accounts payable) represent the remaining 2.22% of liabilities carried by Advantage as of May 31, 2021.
C. Risks to the Firm Created by its Affiliates
Advantage does not invest customer or house funds with affiliated entities, except to the extent Advantage invests house funds in Advantage Securities.
Advantage Securities is a wholly-owned subsidiary of Advantage. Advantage Securities is a registered broker dealer (“BD”) with the Financial Industry Regulatory Authority and the Securities and Exchange Commission. Advantage Securities does not currently conduct any securities business and maintains excess net capital of $255,917 as of May 31, 2021. Although Advantage Securities is a regulated entity with separate policies and procedures in place, parent company Advantage may have financial exposure if the BD became illiquid or required additional capital to support its business activities.
No other affiliates of Advantage pose a material risk to the FCM business.
D. Significant Liabilities and Material Commitments
Advantage has a long-term liability in the form of its sub-sub-lease on its headquarters located at 231 South LaSalle Street, Suite 1400 Chicago, IL. The sub-sub-lease is a non-cancellable operating lease with rental commitments totaling $2,209,248 beyond June 01, 2021.
E. Summary of Current Risk Practices, Controls and Procedures
Pursuant to CFTC Regulation 1.11(c), Advantage has a risk management program to establish, maintain, and enforce a system of risk management policies and procedures designed to monitor and manage risks associated with Advantage activities. Advantage maintains written policies and procedures describing the risk management program, approved in writing by Advantage governing body.
Advantage maintains a risk management program framework which describes the principles, policies, and functional responsibilities for risk management across Advantage. The framework identifies the goals, business context, regulatory background, business model, governance structure, supervision, methodologies, controls, monitoring, reporting, and resources utilized to manage risk.
Advantage maintains specific risk management policies, which identify various risks Advantage faces and describes how Advantage manages these risks. Advantage categorized risk exposures into Credit Risk, Market Risk, Operational Risk, Legal, Regulatory & Compliance Risk, Human Resources Risk, Financial Risk, Information Technology Risk, and Strategic Risk. Advantage appreciates its business activities present various combinations and concentrations of risks. Advantage written risk management program also establishes risk tolerance limits, accounts for risks posed by affiliates and all lines of business, and includes policies and procedures for detecting and appropriately escalating breaches of risk tolerance limits.
IV. Customer Funds Segregation
Below is a basic overview of customer fund segregation, FCM collateral management and investments. Note Advantage is not a registered Swap Dealer and does not support Swap business nor hold Cleared Swaps Customer Accounts. Reference to such is not applicable to Advantage.
Customer Accounts. FCMs may maintain up to three different types of accounts for customers, depending on the products customer trades:
(i) Customer Segregated Accounts for customers that trade futures and options on futures listed on US futures exchanges;
(ii) 30.7 Accounts for customers that trade futures and options on futures listed on foreign boards of trade; and
(iii) Cleared Swaps Customer Accounts for customers trading swaps that are cleared on a Derivatives Clearing Organization (“DCO”) registered with the CFTC.
The requirement to maintain these separate accounts reflects the different risks posed by the products. Cash, securities and other collateral (collectively, Customer Funds) required to be held in one type of account, e.g., the Customer Segregated Account, may not be commingled with funds required to be held in another type of account, e.g., the 30.7 Account, except as the CFTC may permit by order.
Customer Segregated Account. Funds that customers deposit with an FCM, or that are otherwise required to be held for the benefit of customers, to margin futures and options on futures contracts traded on futures exchanges located in the US, i.e., designated contract markets, are held in a Customer Segregated Account in accordance with section 4d(a)(2) of the Commodity Exchange Act and CFTC Rule 1.20. Customer Segregated Funds held in the Customer Segregated Account may not be used to meet the obligations of the FCM or any other person, including another customer.
Customer Segregated Funds may be commingled in a single account, i.e., a customer omnibus account, and held with: (i) a bank or trust company located in the US; (ii) a bank or trust company located outside the US that has in excess of $1 billion of regulatory capital; (iii) an FCM; or (iv) a DCO. Such commingled accounts must be properly titled to make clear the funds belong to and are being held for the benefit of FCM customers. Unless a customer provides instructions to the contrary, an FCM may hold Customer Segregated Funds only:
(i) in the US; (ii) in a money center country;1 or (iii) in the country of origin of the currency.
An FCM must hold sufficient US dollars in the US to meet all US dollar obligations and sufficient funds in each other currency to meet obligations in such currency. Notwithstanding the foregoing, assets denominated in a currency may be held to meet obligations denominated in another currency (other than the US dollar) as follows: (i) US dollars may be held in the US or in money center countries to meet obligations denominated in any other currency; and (ii) funds in money center currencies2 may be held in the US or in money center countries to meet obligations denominated in currencies other than the US dollar.
1 Money center countries means Canada, France, Italy, Germany, Japan, and the United Kingdom.
2 Money center currencies mean the currency of any money center country and the Euro.
30.7 Account. Funds that 30.7 Customers deposit with an FCM, or that are otherwise required to be held for the benefit of customers, to margin futures and options on futures contracts traded on foreign boards of trade, i.e., 30.7 Customer Funds, and sometimes referred to as the foreign futures and foreign options secured amount, are held in a 30.7 Account in accordance with Commission Rule 30.7.
Funds required to be held in the 30.7 Account for or on behalf of 30.7 Customers may be commingled in an omnibus account and held with: (i) a bank or trust company located in the US; (ii) a bank or trust company located outside the US that has in excess of $1 billion in regulatory capital; (iii) an FCM; (iv) a DCO; (v) the clearing organization of any foreign board of trade; (vi) a foreign broker; or
(vii) such clearing organization or foreign broker designated depositories. Such commingled account must be properly titled to make clear the funds belong to and are being held for the benefit of the FCM 30.7 Customers. As explained below, CFTC Rule 30.7 restricts the amount of such funds that may be held outside the US.
Customers trading on foreign markets assume additional risks. Laws or regulations will vary depending on the foreign jurisdiction in which the transaction occurs, and funds held in a 30.7 Account outside the US may not receive the same level of protection as Customer Segregated Funds. If a foreign broker carrying 30.7 Customer positions fails, the broker will be liquidated in accordance with the laws of the jurisdiction in which it is organized. Such laws may differ significantly from the US Bankruptcy Code. Return of 30.7 Customer Funds to the US will be delayed and likely will be subject to the costs of administration of the failed foreign broker in accordance with the law of the applicable jurisdiction, as well as possible other intervening foreign brokers, if multiple foreign brokers were used to process the US customer transactions on foreign markets.
If the foreign broker does not fail but the US FCM of the 30.7 Customer fails, the foreign broker may want to assure that appropriate authorization has been obtained before returning the 30.7 Customer Funds to the US FCM trustee, which may delay their return. If both the foreign broker and the US FCM were to fail, potential differences between the trustee for the US FCM and the administrator for the foreign broker, each with independent fiduciary obligations under applicable law, may result insignificant delays and additional administrative expenses. Use of foreign brokers by the US FCM to process trades of 30.7 Customers on foreign markets may cause additional delays and administrative expenses.
To reduce potential risk to 30.7 Customer Funds held outside the US, CFTC Rule 30.7 generally provides that an FCM may not deposit or hold 30.7 Customer Funds in permitted accounts outside the US except as necessary to meet margin requirements, including prefunding margin requirements, established by rule, regulation, or order of the relevant foreign boards of trade or foreign clearing organizations, or to meet margin calls issued by foreign brokers carrying the 30.7 Customers’ positions. The rule further provides, to avoid the daily transfer of funds from accounts in the US, an FCM may maintain in accounts located outside of the US an additional amount of up to 20% of the total amount of funds necessary to meet margin and prefunding margin requirements to avoid daily transfers of funds.
Investment of Customer Funds. Section 4d(a)(2) of the Commodity Exchange Act authorizes FCMs to invest Customer Segregated Funds in obligations of the US, in general obligations of any State or of any political subdivision thereof, and in obligations fully guaranteed as to principal and interest by the US. Section 4d(f) authorizes FCMs to invest Cleared Swaps Customer Collateral in similar instruments.
CFTC Rule 1.25 authorizes FCMs to invest Customer Segregated Funds, Cleared Swaps Customer Collateral and 30.7 Customer Funds in instruments of a similar nature. CFTC rules further provide that FCM may retain gains earned and is responsible for investment losses incurred in connection with the investment of Customer Funds. However, the FCM and customer may agree that FCM will pay customer interest on funds deposited.
Permitted investments include:
(i) Obligations of US and obligations fully guaranteed as to principal and interest by US (US government securities);
(ii) General obligations of any State or of any political subdivision thereof (municipal securities);
(iii) Obligations of any US government corporation or enterprise sponsored by the US government (US agency obligations);
(iv) Certificates of deposit issued by a bank (certificates of deposit) as defined in section 3(a)(6) of the Securities Exchange Act of 1934, or a domestic branch of a foreign bank that carries deposits insured by the Federal Deposit Insurance Corporation (“FDIC”);
(v) Commercial paper fully guaranteed as to principal and interest by the US under the Temporary Liquidity Guarantee Program as administered by the FDIC (commercial paper);
(vi) Corporate notes or bonds fully guaranteed as to principal and interest by the US under the Temporary Liquidity Guarantee Program as administered by the FDIC (corporate notes or bonds); and
(vii) Interests in money market mutual funds.
The average duration of the securities in which an FCM invests Customer Funds cannot exceed two years.
An FCM may also engage in repurchase and reverse repurchase transactions with non-affiliated registered BDs, provided such transactions are made on a delivery versus payment basis and involve only permitted investments. Funds or securities received in repurchase and reverse repurchase transactions with Customer Funds must be held in the appropriate Customer Account, i.e., Customer Segregated Account, 30.7 Account or Cleared Swaps Customer Account. In accordance with the provisions of CFTC Rule 1.25, such funds or collateral must be received in the appropriate Customer Account on a delivery versus payment basis in immediately available funds (NFA publishes a report twice-monthly, which displays for each FCM, inter alia, the percentage of Customer Funds that are held in cash and each of the permitted investments under CFTC Rule 1.25. The report also indicates whether the FCM held any Customer Funds during that month at a depository that is an affiliate of the FCM).
Funds deposited with Advantage for trading futures and options on futures contracts on either US or foreign markets are not protected by the Securities Investor Protection Corporation.
CFTC rules require Advantage to hold funds deposited to margin futures and options on futures contracts traded on US designated contract markets in Customer Segregated Accounts.
Advantage must hold funds deposited to margin options on futures contracts traded on foreign boards of trade in a 30.7 Account. In computing its Customer Funds requirements under relevant CFTC rules, Advantage may only consider those Customer Funds actually held in the applicable Customer Accounts and may not apply free funds in an account under identical ownership but of a different classification or account type (e.g. Customer Segregated) to an account’s margin deficiency. In order to be used for margin purposes, the funds must actually transfer to the identically-owned undermargined account.
For additional information on the protection of customer funds, please see the Futures Industry Association’s “Protection of Customer Funds Frequently Asked Questions” located at http://www.futuresindustry.org/downloads/PCF-FAQs.PDF.
V. Filing a Complaint
A client may file a complaint directly by contacting the Advantage compliance department at email@example.com or by calling 312-800-7000.
Additional options include:
A client may file a complaint about Advantage or one of its employees with the CFTC. Contact the Division of Enforcement at https://forms.cftc.gov/fp/complaintform.aspx or call the Division of Enforcement toll-free at 866-FON-CFTC (866-366-2382).
A client may file a complaint about Advantage or one of its employees with the NFA at http://www.nfa.futures.org/basicnet/Complaint.aspx or by calling NFA at 800-621-3570.
A client may file a complaint about Advantage or one of its employees with Advantage DSRO, CME Group, electronically at: http://www.cmegroup.com/market-regulation/file-complaint.html or by calling the CME at 312.341.3286.
VI. Material Complaints or Actions
At any given time, in the normal course of business, Advantage may be involved in or the subject to litigation, investigations, arbitration matters or regulatory reviews, which may or may not seek significant damages. Advantage is currently not involved in a litigation matter.
All regulatory actions taken against Advantage by any Exchange, CFTC or NFA are documented and summarized on the NFA website at: http://www.nfa.futures.org/basicnet/CaseInfo.aspx?entityid=0327359&type=reg
As a regulated entity, complaints or actions filed against Advantage are generally accessed by the above link. This section of the disclosure document is updated with any material actions or complaints filed against the FCM not otherwise available on the source provided above.
VII. Relevant Financial Data
Advantage annual audited financial statements are made available on Advantage website at https://www.advantagefutures.com/about/financials/. Also included, are monthly net capital summaries, monthly segregation statements, daily and monthly segregation and secured statements and investment of client funds historical data for a minimum of the past 12 months.
Other Financial data as of May 31, 2021:
Total Ownership Equity: $17,078,754
Net Capital: $24,587,848
Tangible Net Worth: $15,893,613
Advantage proprietary margin requirement:
Advantage does not conduct speculative proprietary trading. Advantage does maintain an immaterial margin requirement from time to time which represents open positions which hedge Advantage currency exposure. This margin requirement represented .033% of Advantage aggregate margin requirement for futures customers and non-customers.
* Seven clients represent at least 50% of the FCMs total funds held for futures customers.
* Two clients represent at least 50% of the FCMs total funds held for 30.7 futures customers.
* Advantage does not enter into any principal over-the-counter transactions.
* Advantage does not maintain any unsecured lines of credit or similar short-term funding.
* Advantage does not provide financing for customer transactions involving illiquid financial products.
* Advantage has not written off any new material segregated or secured 30.7 customer receivables as uncollectable during the past 12-month period.
Additional financial information on all FCMs is also available on the CFTC’s website at: http://www.cftc.gov/MarketReports/financialfcmdata/index.htm
Clients should be aware that the NFA publishes on its website certain financial information with respect to each FCM. The FCM Capital Report provides each FCM’s most recent month-end adjusted net capital, required net capital, and excess net capital (information for a twelve-month period is available). In addition, NFA publishes a Customer Segregated Funds report twice-monthly, which displays for each FCM: (i) total funds held in Customer Segregated Accounts; (ii) total funds required to be held in Customer Segregated Accounts; and (iii) excess segregated funds, i.e., the FCM’s Residual Interest. This report also displays the percentage of Customer Segregated Funds that are held in cash and each of the permitted investments under CFTC Rule 1.25. Finally, the report indicates whether the FCM held any Customer Segregated Funds during that month at a depository that is an affiliate of the FCM.
The report reflects the most recent semi-monthly information, and the public also has the ability to see information for the most recent twelve-month period. A 30.7 Customer Funds report and a Customer Cleared Swaps Collateral report provides the same information with respect to the 30.7 Account and the Cleared Swaps Customer Account.
The above financial information reports can be found by conducting a search for a specific FCM in NFA’s BASIC system (http://www.nfa.futures.org/basicnet/) and then clicking on “View Financial Information” on the FCM’s BASIC Details page.
This disclosure document was first used November 1, 2021.