Commodity Futures Trading Commission Rule 1.55(k):
FCM-Specific Disclosure Document
The Commodity Futures Trading Commission (Commission) requires each futures commission merchant (FCM), including HSBC Securities (USA) Inc. (“HSI”), to provide the following information to a customer prior to the time the customer first enters into an account agreement or deposits money or securities (funds) with HSI. Except as otherwise noted below, the information set out is as of May 31, 2014. HSI will update this information annually and as necessary to take account of any material change to its business operations, financial condition or other factors that HSI believes may be material to a customer’s decision to do business with HSI. Nonetheless, HSI’s business activities and financial data are not static and will change in non-material ways frequently throughout any 12-month period.
HSBC Securities (USA) Inc. is a subsidiary of HSBC North America Holdings. Information that may be material with respect to HSI for purposes of the Commission’s disclosure requirements may not be material to HSBC North America Holdings for purposes of applicable securities laws.
Firm Name and Address:
HSBC Securities (USA) Inc., 452 5th Avenue New York N.Y. 10018, (212) 525-5000.
Principals:
Didier Descamps
Didier Descamps is the Chief Executive Officer of HSBC Securities (USA) Inc. and the Managing Director and Head of HSBC Global Markets, Americas. In this role, Mr. Descamps is responsible for sales and trading in conjunction with Balance Sheet Management operations in the North America and Latin America regions.
Mr. Descamps joined the Equities business of Credit Commercial de France in 1988, which became part of HSBC France in 2000. He became Chief Operating Officer of Global Markets in 2003, and in 2006, he was promoted to Treasurer and Deputy Head of Global Markets. In 2007, Mr. Descamps became Head of Global Markets for HSBC France, where he served as a member of the HSBC France Executive Committee, CEO HSBC Securities France, CEO HSBC Financial Products and General Manager of HSBC Bank PLC, Paris branch. Prior to joining HSBC, Mr. Descamps worked at Arthur Andersen for three years.
Mr. Descamps earned an MBA from École Supérieure des Sciences Économiques et Commerciales in Paris, France. He is fluent in French and Italian.
Mr. Descamps’ business address is 452 Fifth Avenue, New York, NY 10018.
Matthew J. Flanigan
Matthew Flanigan is a Managing Director and Chief Operating Officer of HSBC Global Banking and Markets, Americas. In this role, Mr. Flanigan has oversight of the functional and operational areas including Technology and Shared Services, Operations, Finance, Compliance, Legal, Compliance Risk Assessment Unit and the Business Risk Control Managers program, Chief Data Office as well as the non-revenue generating resources associated/attached to the various lines of business. Mr. Flanigan also coordinates the financial and operating plans, participate in the development of policies and guiding principles, anticipate and/or resolve challenges and issues and stakeholder feedback. Mr. Flanigan is tasked to ensure a greater co-ordination and standardization of the operations, including the monitoring of operational risks. He is also responsible for managing the total cost base of Global Banking and Markets, Americas.
Mr. Flanigan has worked for HSBC since 2011 when he joined the firm to be Head of Global Banking and Markets for the Americas. In 2012, he transitioned into his current role as COO for Global Banking and Markets, Americas. Previous to HSBC, Mr. Flanigan was at Merrill Lynch, Bank of New York, Lehman Brothers and Citibank where he held various roles in both Operations and Finance organizations.
Mr. Flanigan received his Bachelors of Business Administration with a concentration in Finance and Banking from Hofstra University.
Mr. Flanigan’s business address is 452 Fifth Avenue, New York, NY 10018.
Nial J. Kelly
Nial Kelly is a Managing Director and Chief Financial Officer of HSBC Global Banking and Markets, Americas. In this role, Mr. Kelly is responsible for Financial Reporting, the internal control framework and planning & analysis in support of markets-related activities such as trading, balance sheet management, and capital markets; banking-related activities such as client coverage, leveraged and acquisition finance, project and export finance, and advisory services; and global transaction banking activities such as payments and cash management, alternative fund services, and corporate trust and loan agency.
Mr. Kelly has worked for HSBC since 1993 in a variety of Finance roles in Japan, Hong Kong, the United Kingdom and the United States. His previous roles include Chief Financial Officer Japan; Chief Financial Officer Hong Kong; Chief Financial Officer Global Banking & Markets Asia; Global Head of Management Information Planning & Analysis.
Mr. Kelly is a Fellow of the Institute of Chartered Accountants in England & Wales and holds a degree in Finance from the University of Warwick (England).
Mr. Kelly’s business address is 452 Fifth Avenue, New York, NY 10018.
Andrew Ireland
Mr. Andrew Ireland is the Head of Wealth Management, North America at HSBC Securities (USA) Inc. and Executive Vice President, Retail Banking and Wealth Management, at HSBC Bank USA, N.A. Mr. Ireland’s role includes responsibility for driving growth in Wealth Management across North America. Mr. Ireland has additional lead responsibility for retail insurance distribution at HSBC Insurance Agency (USA), Inc., and is a key member of HSBC’s Retail Banking and Wealth Management North America Executive Committee.
Mr. Ireland first joined the organization in 2006. He has more than 22 years of experience in securities, insurance and banking, including 14 years with JPMorgan Chase.
Mr. Ireland is a graduate of St. Bonaventure University in Olean.
Mr. Ireland’s business address is 452 Fifth Avenue, New York, NY 10018.
Anthony M. Verga
Anthony Verga is a Managing Director and Chief Compliance Officer of HSBC Securities (USA) Inc. Mr. Verga’s role is to ensure compliance with the securities business with applicable laws and industry regulations by providing compliance support, advice and guidance to the business. He works with the business to identify, evaluate, and mitigate compliance risk. He also directs and implements effective strategies and policies for managing compliance and regulatory risk in the U.S. while ensuring adherence to all Group and business policies, and all U.S. legal and general regulatory requirements applicable to HSBC Securities (USA) Inc.'s business operations. Mr. Verga assists management in identifying and containing compliance risk, monitoring, reporting and certification, fostering a compliance culture and optimizing relations with regulators.
Mr. Verga has worked for HSBC since 2006 when he joined the Firm to be Head of Wealth Management Compliance. Prior to joining HSBC, Mr. Verga was Director of Compliance at TD Waterhouse and Director of Branch Compliance at RBC Dain Rauscher.
Mr. Verga received his Bachelors of Business Adminstration with a concentration in Finance and Banking from Hostra Universtiy.
Mr. Verga’s business address is 1 West 39th Street, New York, NY 10018.
Najib Lamhaouar
Najib Lamhaouar is a Managing Director and Global Head of OTC and ETD Clearing at HSBC Securities USA Inc. In this capacity, Mr. Lamhaouar manages professionals engaged in sales, clearing, marketing and client services for HSBC’s institutional clients located in the Americas, Europe and the Asia Pacific regions.
Prior to joining HSBC, Mr. Lamhaouar was a Managing Director and Global Head of Listed Derivatives at Citigroup Global Markets Inc. Before that, he was Dresdner Bank’s head of Foreign Exchange Derivatives Sales in North America for several years. In 1990’s, Mr. Lamhaouar was an institutional futures salesperson for Salomon Smith Barney in Paris and New York. In the 1980’s, Mr. Lamhaouar was Adjunct Professor of Mathematics at Hunter College and City College in New York, NY.
In addition to his current responsibilities, Mr. Lamhaouar is also a member of the Executive Board and the Secretary of the Global Futures Industry Associations (Washington , D.C.). In 2007, he was presented with the Manager of the Year award by the YMCA of Greater New York for his achievements in the industry.
Mr. Lamhaouar received a Master Degree in Mathemathics from Rene Descartes University in Paris, France. He is fluent in Arabic and French.
Mr. Lamhaouar’s business address is 452 Fifth Avenue, New York, NY 10018.
James Patrick Kelly
James Patrick Kelly is Deputy Head of HSBC Global Banking, North America. In this role, Mr. Kelly’s primary responsibility is to acquire new business and manage business risk.
Mr. Kelly joined the Consumer Product area at HSBC in 2004. In 2008, he became Head of Consumer, Retail and Healthcare, North America. In 2010, Mr. Kelly was given additional responsibility for Industrial, TMT and Professional Services Group. Mr. Kelly accepted his current role in 2013.
Prior to joining HSBC, Mr. Kelly was a coverage officer at Merrill Lynch and Morgan Stanley & Co. Inc. for 12 years.
Mr. Kelly’s business address is 452 Fifth Avenue, New York, NY 10018.
Steven Lombardo
Steven Lombardo is a Managing Director and Chief Financial Officer, HSBC Securities (USA) Inc. In his role, Mr. Lombardo is responsible for final approval and responsibilities for the accuracy of financial reports, including the annual audited Financial Statements and Supplemental schedules; supervision and performance of the Firm’s responsibilities under all financial responsibility rules; maintenance of the Firm’s back office operations; and computing the firm’s monthly computation of net capital and customer reserve requirements and submission of the FOCUS Report.
Mr. Lombardo has worked for HSBC since 1997 in various Finance roles. He holds a degree in Finance from Syracuse University and a Series 27 General Financial Operations Principal license.
Mr. Lombardo’s business address is 330 Madison Avenue, New York, NY 10017.
Alexis Vasquez Meissner
Alexis Vasquez Meissner is a Managing Director & the Head of HSBC Securities Services (HSS) Americas, where she is responsible for the Region's Sub-custody and Corporate Trust & Loan Agency Businesses. She is a member of the Global HSS Management Committee and the Americas Global Banking and Markets Management & Risk Committees.
Ms Vasquez Meissner joined HSBC from BNY Mellon, where she held a variety of roles in Issuer Services and Global Client Management over 12 years. Her most recent role at BNY Mellon was as Client Executive with the Platinum Client Group, a small team of executives responsible for developing global strategic relationships with core clients of the firm across all product lines.
Prior to joining BNY Mellon, Alexis spent two years as an IR consultant with Thomson Financial (now Thomson Reuters).
Alexis has a BA from Pacific Lutheran University (Tacoma, Washington) in Economics and Spanish Literature, and an MA from Tulane's Roger Thayer Stone's Center for Latin American Studies (New Orleans, Louisiana), where she concentrated in Economic Development and Sociology. Alexis is a Fulbright fellow, and spent two years in Concepcion and Santiago, Chile studying economic development and natural resource management. She speaks Spanish and conversational Portuguese.
Firm’s Business Activities:
HSI engages in the execution and/or clearing of Exchange Traded Derivatives, as well as, theclearing of IRS and CDS Swaps. This business activity supports both Institutional and affiliated clients. In addition, certain business units within HSI engage in trading and market making
FCM’s Assets and Capital Usage are available in the following chart:
HSBC Securities (USA) Inc.Assets and Capital Usage
30-September-14
Activity/Product / Assets / % / Capital Usage / %
Financing Transactions / 61,602,964,076 / 76.20% / 19,318,369 / 4.54%
Inventory:
U.S. and Canadian Government Debt / 13,124,231,998 / 16.23% / 31,077,920 / 7.30%
Corporate Debt / 1,957,437,989 / 2.42% / 131,934,169 / 30.98%
Other Securities / 59,147,006 / 0.07% / 58,799,933 / 13.81%
Receivables from Affiliates / 8,328,364 / 0.01% / 8,328,364 / 1.96%
Receivables from Brokers and Customers / 2,045,141,049 / 2.53% / 18,077,964 / 4.24%
Receivables from Clearing Organizations / 1,416,308,031 / 1.75% / 10,484,762 / 2.46%
Other Assets / 629,972,494 / 0.78% / 147,861,290 / 34.72%
80,843,531,007 / 100.00% / 425,882,770 / 100.00%
FCM Customer Business
HSI’s business on behalf of its customers includes but is not limited to the execution and/or clearing of Exchange Traded Derivatives. It also is engaged in the OTC clearing of IRS and CDS swaps, in its capacity as such, its customers, markets traded and other additional information include the following:
- Types of customers:Institutional clients (asset managers, pension funds, insurance companies, banks); commercial (agricultural, energy); proprietary (Excluding HFT)
- Markets traded:mostly financial and equity futures, energy, agricultural and IRS & CDS cleared swaps
- International businesses:Europe, Asia, Latin America
- HSI Exchange Memberships and HSI Swap Execution Facility Customer Clearing Services
Exchange Memberships / SEF Clearing Services
CBOE Futures LLC / Bloomberg SEF LLC
Chicago Board of Trade / TradeWeb Markets LLC
Chicago Mercantile Exchange, Inc. / MarketAxess Holdings Inc.
Commodity Exchange Inc.
ICE Futures US, Inc.
LCH.Clearnet Limited
New York Mercantile Exchange, Inc.
- Clearinghouses used:member, non-member
Clearing Organization / HSI
a Member / HSI Affiliate a Member
ASX Clear (Futures) / X
BM&F / X
Chicago Board of Trade / X
Chicago Mercantile Exchange / X
COMEX / X
Dubai Mercantile Exchange / X
Eurex Clearing / X
Hong Kong Exchange / X
ICE Clear US Inc. / X
ICE Clear Europe / X
ICE Clear Credit LLC / X / X
Korea Exchange / X
LCH.Clearnet Limited / X / X
LCH.Clearnet SA / X
LME / X
New York Mercantile Exchange / X
NYSE Liffe / X
New Zealand Futures Exchange / X
Options Clearing Corporation / X
Osaka Securities Exchange / X
Singapore Exchange Derivatives Clearing / X
Tokyo Financial Exchange / X
Tokyo Stock Exchange / X
- carrying brokers used:affiliates, non-affiliates
Carrying Brokers
US/Non-US / Affiliated with HSI
Y/N
HSBC Broking Futures (Hong Kong) Limited / Y
HSBC Bank plc. / Y
BMO Capital Markets / N
JPMorgan Chase / N
SG Americas Securities LLC / N
Scotiabank Inverlat SA / N
Permitted Depositories and Counterparties:
The process of evaluating settlement banks and depositories is managed by Risk & Credit teams. When opening an account with a settlement bank or a clearing relationship, Operations will work with Network Management to confirm the bank is on HSI's preferred list. The process of monitoring settlement banks activities and depositories is managed by the Network Management team.
HSINetwork Management and Market Intelligence has been established to monitor and keep under review the firm's Network of Custodians used by the Global Custody business and other specific custodian appointments used elsewhere within the Group.Agent Risk Assessment (“ARA), will undertake an independent risk review of all proposed agents, regardless of whether these are to be used as part of the Approved Sub-Custodian network or otherwise. This assessment must take into account, credit risk, operational risk, legal risk, country risk, infrastructure risk and contract risk. An overall riskscore is determined and this gives rise to the due diligence and review visit frequency that will apply. ARA must undertake ongoing risk assessment based upon a number of country factors. This will produce an earlywarning system aimed at detecting difficulties that may affect the Agent's ability to safeguard assets.
Material Risks:
Entrusting Customer Funds to FCM:
HSI’s written policies and procedures are reasonably designed to ensure that customer funds are segregated for futures, foreign futures or cleared OTC as required by the Act and CFTC regulations and must, at a minimum, include or address the following:
Once Front Office and Network Management authorize opening of an account, Operations will secure an acknowledgement letter prior to accepting funds or transferring of any funds to the client account. "Client margin is segregated in a “permitted depository” per CFTC regulations. Custodians and Carrying or Clearing Brokers used by HSI are required to sign an acknowledgement letter prior to HSI accepting funds into the account.
Operations maintain a process for withdrawal of cash, securities or other property from accounts holding segregated funds, where the withdrawal is not for the purpose of payment to or on behalf of HSI’s customer.
In addition, Operations maintains a process for assessing the appropriateness of specific investments of customer funds in permitted investments in accordance with CFTC regulations, taking into consideration the market, credit, counterparty, operational and liquidity risks associated with such investments, and assessing whether such investments comply with CFTC regulations.
To ensure that there is a minimum standard of task segregation in place to minimize the associated exposure to risk of fraud and error associated with individuals performing incompatible tasks, Operations ensures that tasks are appropriately segregated between roles and that individuals are not performing incompatible tasks.
(i)the nature of investments made by FCM:
For cleared swaps and Futures, customer invested assets are limited to CME IEF2 Money Market Funds and, in addition for Futures, the CME IEF5 Bank Deposits. Currently, HSI only accept collateral which is eligible at the CME or LCH which is readily marketable and highly liquid. Collateral haircuts and/or concentration limits at a minimum match the prevailing CCP haircuts.
In order to assure that it is in compliance with its regulatory capital requirements and that it has sufficient liquidity to meet its ongoing business obligations, HSI holds a significant portion of its assets in cash and US Treasury securities guaranteed as to principal and interest. HSI also invests in other short-term highly liquid instruments such as money market instruments, commercial paper, and certificates of deposit.
(ii)FCM’s creditworthiness, leverage, capital, liquidity, principal liabilities, balance sheet leverage and other lines of business;
Liquidity risk
HSBC North America Holdings, in compliance with overall firm policy, manages liquidity risk at the major legal entity level, including HSI.Accordingly, HSI is required to maintain sufficient, reliable liquidity to support it through a 90-day stress event, where both the markets are stressed and HSI, as a firm, is under pressure globally. As a general policy, liquidity is managed on a standalone legal entity basis with no reliance on any other HSI affiliated entity, unless pre-committed. In such cases, transactions between HSI and the affiliate are reflected symmetrically in the stress scenarios of both entities.
Financial Instruments with Off-Balance-Sheet Risk
In the normal course of business, the HSI’s customer and trading activities involve the execution, settlement, and financing of various financial instrument transactions. These activities may expose HSI to off-balance-sheet risk in the event the customer or other broker is unable to fulfill its contracted obligations and HSI has to purchase or sell the financial instrument underlying the contract at a loss.