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More Scrutiny for US FX and Futures Industry - CFTC to Force IBs, CPOs and CTAs to Register with NFA

by Adil Siddiqui
  • US federal agency that governs financial derivatives, the CFTC, has put forward new proposals for regulated financial services firms. Under new proposed rules, IBs, CPOs and CTAs will be required to become and maintain membership with the NFA.
More Scrutiny for US FX and Futures Industry - CFTC to Force IBs, CPOs and CTAs to Register with NFA
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Regulatory reforms under the Dodd-Frank Act have revolutionised the financial trading environment in the United States. US financial markets watchdog, the Commodity Futures Trading Commission (CFTC), has issued a new set of proposed rules for firms offering financial services, all registered Introducing Brokers (IBs) ), Commodity Pool Operators (CPOs), and Commodity Trading Advisors (CTAs) will be required to become and remain members of a registered futures association, currently the NFA is the only registered association in the USA.

The CFTC has proposed a new rule for registered firms to become and maintain membership with a registered futures association in light of the recent advancements governing US regulations. Regulated broker dealers e.g. futures commission merchants (FCMs), swap dealers (SDs) and major swap participants (MSPs) must be registered with the NFA and can only deal with firms that are registered members, however due to the unique nature of swap transactions, it may be possible for certain IBs, CPOs or CTAs to offer services where they are not registered members.

In a notification issued on its website, the CFTC states: “Through the interaction of the Commission’s rules and NFA Bylaw 1101, any IB, CPO or CTA required to be registered with the Commission that desires to conduct business directly with an FCM, SD, or MSP must become a member of NFA, and derivatively, must ensure that it conducts business only with those IBs, CPOs or CTAs that also are NFA members. However, due to the unique nature of swap transactions, it may be possible for certain IBs, CPOs or CTAs to not be captured by the intersection of Sections 170.15 or 170.16 and NFA Bylaw 1101, and therefore, it may be possible for these Commission registrants to serve clients without becoming members of NFA.”

The NFA, a self regulatory organization that governs futures and retail Forex transactions, currently has several thousand registered firms, there are 1278 registered IBs, 1659 CPOs and 1042 CTAs. In order to become a registered member, firms (and individuals) need to complete proficiency exams, complete relevant applications and pay the appropriate fees.

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Regulatory reforms under the Dodd-Frank Act have revolutionised the financial trading environment in the United States. US financial markets watchdog, the Commodity Futures Trading Commission (CFTC), has issued a new set of proposed rules for firms offering financial services, all registered Introducing Brokers (IBs) ), Commodity Pool Operators (CPOs), and Commodity Trading Advisors (CTAs) will be required to become and remain members of a registered futures association, currently the NFA is the only registered association in the USA.

The CFTC has proposed a new rule for registered firms to become and maintain membership with a registered futures association in light of the recent advancements governing US regulations. Regulated broker dealers e.g. futures commission merchants (FCMs), swap dealers (SDs) and major swap participants (MSPs) must be registered with the NFA and can only deal with firms that are registered members, however due to the unique nature of swap transactions, it may be possible for certain IBs, CPOs or CTAs to offer services where they are not registered members.

In a notification issued on its website, the CFTC states: “Through the interaction of the Commission’s rules and NFA Bylaw 1101, any IB, CPO or CTA required to be registered with the Commission that desires to conduct business directly with an FCM, SD, or MSP must become a member of NFA, and derivatively, must ensure that it conducts business only with those IBs, CPOs or CTAs that also are NFA members. However, due to the unique nature of swap transactions, it may be possible for certain IBs, CPOs or CTAs to not be captured by the intersection of Sections 170.15 or 170.16 and NFA Bylaw 1101, and therefore, it may be possible for these Commission registrants to serve clients without becoming members of NFA.”

The NFA, a self regulatory organization that governs futures and retail Forex transactions, currently has several thousand registered firms, there are 1278 registered IBs, 1659 CPOs and 1042 CTAs. In order to become a registered member, firms (and individuals) need to complete proficiency exams, complete relevant applications and pay the appropriate fees.

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