National Futures Association

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National Futures Association (NFA)
NFA Logo2.jpg
Founded 1974
Headquarters 320 South Canal, #2400, Chicago, IL 60606

NFA Headquarters Map in Chicago Illinois

Key People Thomas W. Sexton, President, CEO
Alicia Crighton, Chair
Products Registration Screening, Compliance Rules, Rules Enforcement, Member Education, Market Regulation, Investor Protection, Investor Resources, Investor Outreach, Dispute Resolution
Website www.nfa.futures.org

The National Futures Association (NFA) is the industrywide, self-regulatory organization for the U.S. derivatives industry, including on-exchange traded futures, retail off-exchange foreign currency (forex) and OTC derivatives (swaps). It is designated by the Commodity Futures Trading Commission (CFTC) as a registered futures association. NFA's role is to safeguard the integrity of the derivatives markets, protect investors and ensure members meet their regulatory responsibilities.

NFA membership includes swap dealers (SD), futures commission merchants (FCM), commodity pool operators (CPO), commodity trading advisors (CTA), retail foreign exchange dealers (RFED), introducing brokers (IB) and the associated persons (AP) of FCMs, CPOs, CTAs and IBs.

History[edit]

National Futures Association (NFA) was established in 1982 as a self-regulatory organization for the U.S. futures industry. Its creation was authorized by Congress in 1974 through the Commodity Futures Trading Commission Act, which added Section 17 to the Commodity Exchange Act.

The initiative to form NFA began in 1976 when Leo Melamed, then chairman of the Chicago Mercantile Exchange, persuaded other industry leaders of the benefits of creating a self-regulatory organization under Title III of the Act. Melamed formed an NFA Organizing Committee comprising key industry figures, including himself as chairman, David T. Johnston as vice-chairman, and other notable members such as John J. Conheeney, George D.F. Lamborn, Warren W. Lebeck, Leslie Rosenthal, and Howard A. Stotler.

A crucial moment in NFA's formation came when Melamed convinced Senator Robert Dole to support legislation for the creation of NFA as a private-sector, self-funding, and self-regulating organization, instead of instituting a federal transaction tax to fund the Commodity Futures Trading Commission (CFTC).

The CFTC formally granted NFA its designation as a registered futures association on September 22, 1981. Robert K. Wilmouth became the organization's first president and CEO, with Melamed serving as its first chairman. NFA officially began its regulatory operations in 1982, marking the culmination of over six years of organizational efforts.[1]

Daniel Roth succeeded Wilmouth as NFA president and CEO in 2003. He retired in 2017 and was replaced by Thomas W. Sexton, III, who had been NFA's general counsel.

The creation of NFA was considered a historic event for the futures industry, providing a regulatory framework that allowed the markets to grow and succeed without the need for a federal transaction tax. The organization was designed to represent all segments of the futures industry, with mandatory membership to ensure effective self-regulation.

In subsequent years, NFA's role expanded. Congress passed legislation in 2000 and 2008 requiring various entities involved in retail forex transactions to register with the CFTC and become NFA members. Similarly, the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 led to the requirement for swap dealers and major swap participants to register with the CFTC and join NFA.

In 2014, NFA reduced its transaction assessment fee by 50 percent to .01 cent per contract. The move to a lower fee was facilitated by NFA having the reserves to be sustainable at that time. In 2017, NFA's board of directors agreed to increase the fee back to .02 per contract for futures and options starting January 1, 2018 in order to "fund its operations without compromising the quality of its regulatory programs, and maintain adequate reserves.[2]

Various Functions[edit]

Registration Screening[edit]

NFA screens CFTC registration and NFA membership applicants to ensure they meet stringent fitness and proficiency requirements. NFA has the authority to deny, revoke, suspend or restrict any firm or individual’s registration. The CFTC has delegated registration responsibility to NFA.[3]

Compliance Rules[edit]

NFA adopts and enforces rules covering the business conduct of its members including sales practices, recordkeeping, reporting, risk disclosure, discretionary trading, disclosure of fees and minimum capital requirements. NFA monitors its members for compliance with its rules by performing risk-based examinations, reviewing member filings, conducting financial surveillance and investigating customer complaints.[4]

Rule Enforcement[edit]

NFA takes disciplinary actions against members who violate NFA rules and CFTC regulations. These actions range from warning letters for minor rule infractions to formal complaints. Penalties resulting from complaints include expulsion, suspension, and fines up to $250,000 per violation. NFA frequently collaborates with the CFTC, FBI and other law enforcement agencies.[5]

Member Education[edit]

NFA provides educational resources, including webinars, workshops and reference materials to ensure members understand their regulatory obligations.[6]

Market Regulation[edit]

NFA provides regulatory services to designated contract markets (DCM) and swap execution facilities (SEF), each of which has self-regulatory responsibilities to monitor trading on its platform.[7]

Investor Protection[edit]

NFA offers a number of resources to educate investors. Before participating in the derivatives markets, investors should understand how the markets work and perform background checks of firms and individuals offering investments.[8]

Dispute Resolution[edit]

NFA offers an arbitration program to help customers and members resolve futures and forex-related disputes.[9]

Governance[edit]

NFA's board of directors is its principal governing and policy development body. The board consists of both member directors and public directors. NFA's board is structured to ensure representation of each membership category. Member directors are selected by the members they represent through an election process. The Board meets quarterly in February, May, August and November.[10]

NFA's board also elects individuals for NFA Committees.

NFA Leadership[edit]

Board of Directors

Futures Commission Merchants

Swap Dealers and Major Swap Participants

Commodity Pool Operators and Commodity Trading Advisors

Introducing Brokers

Contract Markets

Public Representatives

(*) Executive Committee Member

Officers

Office Locations[edit]

NFA Headquarters Map in Chicago Illinois

Chicago
320 South Canal, Suite 2400, Chicago, IL 60606
312-781-1300
312-781-1467 (fax)

NFA New York Office Location Map

New York
200 Liberty Street, #2800, New York, NY 10281
212-608-8660
212-964-3913 (fax)

References[edit]

  1. ↑ NFA History. NFA.
  2. ↑ NFA's Executive Committee recommends increase to NFA's assessment fee effective January 1, 2018. National Futures Association.
  3. ↑ Registration and Membership. NFA.
  4. ↑ Rulemaking. NFA.
  5. ↑ Enforcement and Registration Actions. NFA.
  6. ↑ Member Resources. NFA.
  7. ↑ Market Regulation. NFA.
  8. ↑ Investor Protection. NFA.
  9. ↑ Arbitration. NFA.
  10. ↑ Board of Directors. NFA.
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