NFA Tightens Reporting Rules for FDM on Customers' Liabilities
- Starting from October 15th, Forex Dealer Members will have to inform each qualifying institution about their assets holdings used to cover the liabilities to its retail forex customers on a daily basis.
According to existing regulations, the National Futures Association (NFA) requires Forex Forex Foreign exchange or forex is the act of converting one nation’s currency into another nation’s currency (that possesses a different currency); for example, the converting of British Pounds into US Dollars, and vice versa. The exchange of currencies can be done over a physical counter, such as at a Bureau de Change, or over the internet via broker platforms, where currency speculation takes place, known as forex trading.The foreign exchange market, by its very nature, is the world’s largest tradi Foreign exchange or forex is the act of converting one nation’s currency into another nation’s currency (that possesses a different currency); for example, the converting of British Pounds into US Dollars, and vice versa. The exchange of currencies can be done over a physical counter, such as at a Bureau de Change, or over the internet via broker platforms, where currency speculation takes place, known as forex trading.The foreign exchange market, by its very nature, is the world’s largest tradi Read this Term Dealer Members to daily calculate the amount owed to their customers for forex transactions and hold at least the same amount of assets in a qualifying banking institution or in the US or money center country (forex funds depository).
The so-called Financial Requirements Section 14, has been amended with additional rules which will require FDMs to report the balances of these accounts to the NFA or to a third party which has been designated by the NFA. Complying with this requirement is mandatory for all FDMs.
The move comes a month after the NFA presented amendments to a crucial ruling affecting client money for US regulated FX dealers.
The regulator has chosen the CME Group to collect the balance reports directly via the Society for Worldwide Interbank Financial Telecommunication (SWIFT) network. For those who have no access to SWIFT, the NFA has prepared an internal reporting system which collects the data on retail forex funds directly from forex funds depositories.
Over the last several weeks, NFA has been working closely with FDMs and their bank depositories to ensure that those banks have established connectivity with CME, or NFA directly, to report the daily balances.
Up until now, the NFA has had access to this data by requesting it directly from the corresponding banks of the FDMs.
Starting on October 16th, the bank depositories will be required to report end of day cash balances, so FDMs must ensure that all banks holding their retail forex customer funds are sufficient to cover the amount owed to customers for foreign exchange transactions.
The NFA intends to expand its requirements over the next several months requiring all fund depositories, including prime brokers, to report all balances for accounts holding assets being used to cover an FDM's liability to its retail forex customers.
The NFA states that it will provide FDMs with sufficient advance notice before phasing in other depositories and reporting requirements, and will of course work with the FDM and depository communities in implementing the requirements.
The US operating environment for FDMs has faced a plethora of reforms after the 2008 "great financial crisis". With spot FX being classified as an OTC derivatives instrument, the country's obsession with Regulation Regulation Like any other industry with a high net worth, the financial services industry is tightly regulated to help curb illicit behavior and manipulation. Each asset class has its own set of protocols put in place to combat their respective forms of abuse.In the foreign exchange space, regulation is assumed by authorities in multiple jurisdictions, though ultimately lacking a binding international order. Who are the Industry’s Leading Regulators?Regulators such as the UK’s Financial Conduct Authority ( Like any other industry with a high net worth, the financial services industry is tightly regulated to help curb illicit behavior and manipulation. Each asset class has its own set of protocols put in place to combat their respective forms of abuse.In the foreign exchange space, regulation is assumed by authorities in multiple jurisdictions, though ultimately lacking a binding international order. Who are the Industry’s Leading Regulators?Regulators such as the UK’s Financial Conduct Authority ( Read this Term of the space after the implementation of the Dodd-Frank Act, changed the entire regulatory landscape.
Several companies have already left the US retail foreign exchange market with FXDD and ILQ being the most recent examples of predatory regulatory scrutiny in the country. The number of market participants has been dwindling in the past couple of years with widespread industry consolidation.
According to existing regulations, the National Futures Association (NFA) requires Forex Forex Foreign exchange or forex is the act of converting one nation’s currency into another nation’s currency (that possesses a different currency); for example, the converting of British Pounds into US Dollars, and vice versa. The exchange of currencies can be done over a physical counter, such as at a Bureau de Change, or over the internet via broker platforms, where currency speculation takes place, known as forex trading.The foreign exchange market, by its very nature, is the world’s largest tradi Foreign exchange or forex is the act of converting one nation’s currency into another nation’s currency (that possesses a different currency); for example, the converting of British Pounds into US Dollars, and vice versa. The exchange of currencies can be done over a physical counter, such as at a Bureau de Change, or over the internet via broker platforms, where currency speculation takes place, known as forex trading.The foreign exchange market, by its very nature, is the world’s largest tradi Read this Term Dealer Members to daily calculate the amount owed to their customers for forex transactions and hold at least the same amount of assets in a qualifying banking institution or in the US or money center country (forex funds depository).
The so-called Financial Requirements Section 14, has been amended with additional rules which will require FDMs to report the balances of these accounts to the NFA or to a third party which has been designated by the NFA. Complying with this requirement is mandatory for all FDMs.
The move comes a month after the NFA presented amendments to a crucial ruling affecting client money for US regulated FX dealers.
The regulator has chosen the CME Group to collect the balance reports directly via the Society for Worldwide Interbank Financial Telecommunication (SWIFT) network. For those who have no access to SWIFT, the NFA has prepared an internal reporting system which collects the data on retail forex funds directly from forex funds depositories.
Over the last several weeks, NFA has been working closely with FDMs and their bank depositories to ensure that those banks have established connectivity with CME, or NFA directly, to report the daily balances.
Up until now, the NFA has had access to this data by requesting it directly from the corresponding banks of the FDMs.
Starting on October 16th, the bank depositories will be required to report end of day cash balances, so FDMs must ensure that all banks holding their retail forex customer funds are sufficient to cover the amount owed to customers for foreign exchange transactions.
The NFA intends to expand its requirements over the next several months requiring all fund depositories, including prime brokers, to report all balances for accounts holding assets being used to cover an FDM's liability to its retail forex customers.
The NFA states that it will provide FDMs with sufficient advance notice before phasing in other depositories and reporting requirements, and will of course work with the FDM and depository communities in implementing the requirements.
The US operating environment for FDMs has faced a plethora of reforms after the 2008 "great financial crisis". With spot FX being classified as an OTC derivatives instrument, the country's obsession with Regulation Regulation Like any other industry with a high net worth, the financial services industry is tightly regulated to help curb illicit behavior and manipulation. Each asset class has its own set of protocols put in place to combat their respective forms of abuse.In the foreign exchange space, regulation is assumed by authorities in multiple jurisdictions, though ultimately lacking a binding international order. Who are the Industry’s Leading Regulators?Regulators such as the UK’s Financial Conduct Authority ( Like any other industry with a high net worth, the financial services industry is tightly regulated to help curb illicit behavior and manipulation. Each asset class has its own set of protocols put in place to combat their respective forms of abuse.In the foreign exchange space, regulation is assumed by authorities in multiple jurisdictions, though ultimately lacking a binding international order. Who are the Industry’s Leading Regulators?Regulators such as the UK’s Financial Conduct Authority ( Read this Term of the space after the implementation of the Dodd-Frank Act, changed the entire regulatory landscape.
Several companies have already left the US retail foreign exchange market with FXDD and ILQ being the most recent examples of predatory regulatory scrutiny in the country. The number of market participants has been dwindling in the past couple of years with widespread industry consolidation.