FCM

An FCM, or Futures Commission Merchant, is a firm licensed to accept orders for futures and options on futures from clients and to execute those trades on a regulated exchange. It is the futures market's equivalent of a stockbroker, standing between an individual trader or institution and the exchange itself, and it also handles the customer funds, margin accounts, and daily settlement that come with holding a futures position.

FCMs are registered with the Commodity Futures Trading Commission and are typically members of the National Futures Association, the industry's self-regulatory body, both of which set rules around how client money must be held and reported. A core requirement is that client funds used to margin futures positions be kept segregated from the FCM's own money, a protection designed to keep customer collateral safe even if the firm itself runs into financial trouble.

For an individual trader, the FCM relationship is mostly invisible day to day, showing up mainly through the brokerage platform used to place futures orders, since many retail brokers either are FCMs themselves or route trades through one. It becomes far more visible when something goes wrong, since the strength of segregation rules and the financial health of the FCM handling a client's account determine how safe that client's collateral is if the firm fails.