CFTC Form 1-FR-IB Instructions - National Futures Association

epurchase side of matched agreements. For purposes of this report
such sales of securities are not to be treated as sales, but rather as
a financing arrangement.
An IB that enters into repurchase transactions must be familiar
with the charges it may be required to take against unadjusted net
capital. Such charges are specified in SEC rule 240.15c3-
1(c)(2)(iv)(F)(3).
Haircuts applicable to repurchase agreements are specified in
Appendix A to these instructions. Any applicable haircut should be
reflected on page 4, line 7.B.
Example - Repurchase Agreement
On 11-28-XX the IB enters into a repurchase agreement with its
bank and receives $950,000 from the bank. The agreement is
collateralized by a $1 million U.S. Treasury bond owned by the
IB. The agreement requires the IB to reverse the transaction
with its bank on 12-2-XX, at which time it will disburse
$951,000. On 11-30 the market value of the Treasury bond is
$954,000. The IB has no other repurchase or reverse-repurchase
agreement.
On its 11-30-XX financial report the IB will reflect $950,500 as
a current liability. There is no charge against net capital
because the repurchase agreement deficit does not exceed 5% of
the contract price. (The percentage to be applied varies with
the type of security -- see Appendix A.)
Amount to be disbursed at reversal $951,000
Original sales price 950,000
Interest to be earned by bank $ 1,000
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Accrued interest payable at 11-30 $ 500
Original sales price 950,000
Liability to be shown on statement
of financial condition
(Contract price) $950,500
Market value of Treasury bond 954,000
Repurchase agreement deficit $ 3,500
5% of the contract price
(5% x $950,000) $ 47,500
Charge against net capital -0-
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Line 19. - Liabilities subordinated to claims of general creditors
Line 19.A. - Subject to a satisfactory subordination agreement
Regulation 1.17(h) sets forth minimum and nonexclusive
requirements which must be met for a subordinated loan to