Certified Anti-Money Laundering Specialist Certification (CAMS) Practice Exam

What is a Futures Commission Merchant (FCM)?

1. A regulatory body overseeing futures contracts

2. A firm that exclusively sells commodities

3. A firm that solicits or accepts orders on futures contracts

4. An independent advisor for futures trading

The correct answer is: A firm that solicits or accepts orders on futures contracts

A Futures Commission Merchant (FCM) is accurately defined as a firm that solicits or accepts orders for futures contracts. This role is essential in the futures market, as FCMs act as intermediaries between buyers and sellers. They facilitate the trading of futures contracts by executing customer orders on exchanges, managing their clients' accounts, and ensuring compliance with regulatory requirements. As part of their responsibilities, FCMs also handle collateral management and provide clients with access to market information and trading tools. Their involvement helps maintain liquidity in the markets and supports participants in managing their trading risks effectively. The incorrect choices reflect various misconceptions about the function of an FCM. A regulatory body does not have a trading role but instead oversees market operations and ensures that all parties comply with laws and regulations. A firm that exclusively sells commodities does not encapsulate the broader role of an FCM, which focuses on futures contracts, not just physical commodities. Lastly, an independent advisor for futures trading refers to a different kind of service, as this role typically involves providing advice or strategy rather than executing trades directly, which is the core function of an FCM.