Question & AnswerQ&A (SEC)
A Futures Contract refers to an agreement to buy and sell a specified quantity and grade of commodity at a future date at a price established at the floor of the Exchange, or an agreement to buy or sell foreign currency or foreign interest notes at a future date with cash settlement on expiration instead of delivery.
A Futures Broker is a corporation registered and licensed to solicit or accept orders for the purchase or sale of any futures contract traded in the Philippine market. They collect margins in money form related to such transactions.
A Futures Broker must have a minimum paid-up capital of Php10,000,000 with at least Php2,000,000 as cash operating capital. They must also post a surety bond of Php5,000,000 with the Commission to secure payments against losses.
It should comply with self-regulatory organization standards including membership qualifications, business conduct rules, trading procedures, audit and surveillance, customer protection, and must have adequate facilities, managerial capabilities, and integrity, among other requirements.
Members of a Contract Market are persons who own or hold membership seats in the futures exchange. Exchange seats are for those engaging in futures broking; those trading exclusively for personal accounts acquire 'locals' rights.
The Commission may suspend or revoke designations, licenses, or registrations for up to 12 months, impose fines, and issue cease and desist orders if violations of rules or the Revised Securities Act are found.
Customers must attend Exchange-sponsored seminars, undergo broker interview processes to assess suitability and loss tolerance, and must trade their own accounts.
Futures Brokers must maintain daily trading records per customer, voice-record trading activities, issue monthly account statements, submit audited financial reports annually and semi-annually, and keep all related documents for at least five years.
Prohibited acts include engaging in futures trading without proper authorization or licenses, misrepresenting membership or licensing status, discretionary accounts misuse, opening in-house accounts by unauthorized persons, and fraudulent transactions such as bucket shops and wash sales.
They must register with the Commission, submit applications with personal and business details, descriptions of trading programs, financial bonds of Php5,000,000, and undergo publication of their application inviting opposition before licensing.