The National Futures Association (NFA), a US regulator, announced on Tuesday that it is creating a Swaps proficiency requirements program. This program is derived from the Commodity Exchange Act's regulatory requirements.

This piece of Regulation has been in existence since 1936 but has been subject to multiple amendments since then. The proficiency requirements program was formed in 1988 but yesterday’s announcement pertains to an amendment made in September of last year.

Prior to the amendment, individuals working in a number of different futures trading job functions were required to take proficiency requirements program tests. The exception was swaps trading which was not covered by the regulation.

Back to the books

That has now changed. Individuals dealing in the swaps market who wish to obtain the NFA’s regulatory approval will soon have to take a test before they can get that approval. The test must have been taken, and passed, within the two years preceding the individual’s application to the NFA.

The program will have to be taken by individuals in almost any function related to swaps trading. For instance, anyone working in swaps for futures commission merchants, introducing brokers or commodity pool operators will have to take the test.

The content of the test is still unconfirmed because, as noted, it is still in developmental stages. It is almost certain, however, that the content will focus on two key areas - market knowledge and knowledge of regulatory requirements.

Swap traders who, having read this article thus far, have started to tear through the latest NFA regulation in a wild panic, don’t have to worry just yet. The NFA noted that the various consultations, research and developmental stages of the test are just starting. As such, the test is unlikely to go live until 2020, meaning swap traders have plenty of time to familiarise themselves with the riveting literature that comprises the NFA’s regulatory requirements.