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

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) Introducing Brokers (IBs) An introducing broker (IBs) represents an entity that is facilitating the relationship between the clients and the broker or futures commission merchants (FCMs). Introducing brokers are generally seeking to provide an added value to the relationship between the parties by offering support or specific services. These may or may not be a subsidiary of the broker.Introducing brokers do not hold client money, execute orders or provide any trade-related services to the clients. In developed markets s An introducing broker (IBs) represents an entity that is facilitating the relationship between the clients and the broker or futures commission merchants (FCMs). Introducing brokers are generally seeking to provide an added value to the relationship between the parties by offering support or specific services. These may or may not be a subsidiary of the broker.Introducing brokers do not hold client money, execute orders or provide any trade-related services to the clients. In developed markets s Read this Term), 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 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 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.