FIA publishes risk disclosure template for negative contract prices

10 August 2020

The FIA Law and Compliance Division has published a disclosure template to assist Futures Commission Merchants (FCMs) that wish to deliver additional disclosures to new or existing customers in furtherance of a recent advisory from the US Commodity Futures Trading Commission regarding the risks related to negative contract prices. 

In the advisory, the CFTC's Division of Swap Dealer and Intermediary Oversight (DSIO) advised FCMs that it may be prudent to re-familiarize customers with certain risk disclosures required by CFTC regulations. The advisory highlighted in particular the warning that customers may incur losses beyond amounts deposited with the FCM and that this may occur in the event of negative contract prices. DSIO further suggested it may also be prudent for FCMs to ensure that customers understand the mechanics of contract settlement at negative prices. 

FIA maintains an online document library that houses standard industry disclosures, such as the one on negative contract pricing, as well as clearing, execution and give-up agreements, legal opinions and operational and regulatory guidance.  For additional information on the US Documentation Library, please contact Michael Sorrell.

The disclosure template is intended as a resource for FCMs.  Use of the template disclosure is voluntary.  Firms are free to modify the template disclosure in their discretion based on their legal and business needs.  The disclosure template is not intended, nor should it be interpreted, to constitute legal or regulatory advice.  FIA specifically disclaims any legal responsibility for any errors or omissions and disclaims any liability for any losses or damages incurred through use of this disclosure template.  FIA undertakes no obligations to update this disclosure template following the date of publication.

  • Law & Compliance