NFA wants a bigger chunk of broker revenues - 4% to be precise!

NFA just announced that its assessment fees increase will become effective on January 1, 2011. Effective January 1, 2011, NFA's Futures Commission Merchant (FCM) assessment fee will increase from $0.01 per side to $0.02 per side. In addition, the 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 Member (FDM) assessment fee will increase from $0.01 per $10,000 of notional value to $0.02.

The increase will mark only the third time in NFA's 28-year history that it has increased the fee. Conversely, NFA has decreased the fee eight times during the past 10 years.

In January 2008, NFA reduced the FCM assessment fee by 50% to $0.01 per side. When Members were notified of this fee reduction, NFA noted that the fee reduction may be sustainable for two years. In fact, NFA has been able to sustain the fee for the past three years despite a reduction in public trading volume. However, in order for NFA to continue to fund its operations and maintain adequate reserves, an increase in the assessment fee has become necessary.

Bluntly speaking, NFA wants a bigger cut of the very profitable forex business - and who can blame it? NFA is looking to charge 40 cents per each standard lot while most brokers profit around $10 per 1 standard lot. Conservatively estimating the US market at around $2-3 trillion a year (Oanda, FXCM and Gain alone report over $500b a month) NFA can expect to make around $8-12 million a year. No wonder NFA wants all US clients back in US subsidiaries...