Ugly rumours are not a pretty picture

Sadly, in this case, the rumours have taken on a life of their own, and morphed into something far from the reality of the situation. The most serious of these is that the company is being forced to close down its Chicago operations.

Yes, it's true that on March 2, a complaint was filed against ODL Securities Inc, the Chicago-based arm of ODL Securities, by the National Futures Association (NFA). The most serious of the complaints was in relation to concentration charges.

Under the compliance rules of the NFA, brokers have to meet certain capital requirements for positions held in the US. Brokers have to hold 20% of their total position as a capital requirement, and a further 20% when hedging. A concentration charge of 20% of total capital is incurred if a single client holds 10% or more of the total position.

This is where a UK-based company that operates a sales office in the US risks getting entangled. The issue arises when a client takes a big position overnight (UK time) in the US, making up 10% or more of the company's total position. The company will not be able to transfer funds to the US to cover capital requirements until the following morning, with international settlement time at 10pm GMT. In the meantime, however, the company will appear to have breached capital requirement rules.

This is what happened with ODL Securities, which operates only a sales office in Chicago, with all hedging taking place in the UK. Officials at the NFA and ODL Securities said the company has been working closely with the NFA, with the industry body happy with the progress made. "We've now worked out a system where we can avoid that happening in future," said an ODL official.

The broker has also built up its compliance team in the US, with ex-NFA officials as members. Nicole Kaleta and Alan Lash both joined the company from the NFA, with Lash having previous experience in compliance consultancy.

The ODL official added that the company is looking to make more hires, with the FX desk already faring particularly well.