Information for the SSY BLOG
25 Nov 2019
The importance of regulation for Futures
SSY Futures Ltd offers derivatives broking services for not only freight, but also iron ore, coking coal and steel. But unlike the physical freight markets, we are subject to financial regulation. All UK FFA brokers need to be authorised by and regulated by the UK’s Financial Conduct Authority (FCA). Additionally, we are regulated in the United States and are a member of the National Futures Association.
The basis of regulation is straightforward and really helps brokerages to run smoothly and efficiently, supply their customers with an appropriate service and ensures that the brokerage has the information it needs to bill clients in the confidence that there is an enforceable contract in place. Ultimately, regulation requires us to carry out the checks that any sensible person would think prudent.
When SSY Futures takes on a new customer we not only identify who the individuals involved are, but also identify the legal basis for the formation of the company that we are dealing with. This helps us to pinpoint our customers, know who they are and where they are based. That gives us far more certainty in being able to bill them effectively. This ensures we aren’t left being owed money and not sure how, or where, to locate the debtors.
Regulation also ensures that we identify before trading with a customer that they are suitable to be in this market. This has important commercial benefits. For example, if we were matching a major customer in a deal with an individual, if that individual turned out not to have the money, or experience, to be able to perform in their contract, then it would be commercially damaging for SSY.
Regulation ensures we not only to know who our customers are, the basis for their involvement in the business and where their money comes from; but it also requires us to assess whether they are suitable to be in the market in the first place.
Freight has always been a market for professionals, it is not a market for private clients. By dealing only with professional clients, SSY can remain compliant quite easily while maintaining high professional standards.
Beyond that we look at the staff we employ. We ensure that they are fit and proper people and that they understand their obligations as brokers to customers. That is, that they will be acting for their customers with skill, care and diligence. Which, of course, sounds like an absolute, bottom line requirement, but in so many markets, where the regulation doesn’t exist, this isn’t always the case.
An SSY futures broker must be scrupulously honest in their dealings with their customers. They additionally have a duty of care to understand the needs of the customer, who the customer is, and why they are trading.
We are also responsible for ensuring that client trading activities are not used to mask money laundering and we have an anti-money laundering (AML) policy. If a client were to trade in a suspicious fashion, then the SSY Futures broker looking after them is trained to identify this and report it to our Money Laundering Reporting Officer (MLRO). The MLRO would then be in contact with the authorities.
With these processes in place we are confident that we won’t find ourselves working with people who would not only bring Simpson Spence Young into disrepute and would be commercially damaging to deal with.
For further details see www.ssyonline.com/services/derivatives/