National Futures Association


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National Futures Association (NFA)

Founded	1924
Headquarters	320 South Canal, #2400, Chicago, IL 60606
Key People	Thomas W. Sexton, President, CEO Maureen C. Downs, Chairman
Products	Registration Screening, Compliance Rules, Rules Enforcement, Member Education, Market Regulation, Investor Protection, Investor Resources, Investor Outreach, Dispute Resolution
Website	www.nfa.futures.org

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Futures Commission Merchant Regulation - Comment Letter - National Futures Association - January 18, 2011

Position Limits Regulation - Comment Letter - National Futures Association - December 2, 2010

Swaps Definitions

Futures Commission Merchant Regulation

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]

The same legislation that established the CFTC in 1974 also authorized the creation of registered futures associations, giving the industry the opportunity to create a self-regulatory organization. NFA's formal designation as a "registered futures association" was granted by the CFTC on September 22, 1981. NFA began its regulatory operations in 1982.

In 2010, Congress passed the Dodd-Frank Wall Street Reform and Consumer Protection Act, which gave the CFTC rulemaking authority and oversight over swaps, SDs and major swap participants (MSP). Subsequently, the CFTC passed regulations requiring SDs and MSPs to register with the CFTC and become NFA Members.

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, the NFA 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.^[1]

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.^[2]

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.^[3]

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.^[4]

Member Education[edit]

NFA provides educational resources, including webinars, workshops and reference materials to ensure members understand their regulatory obligations.^[5]

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.^[6]

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.^[7]

Dispute Resolution[edit]

NFA offers an arbitration program to help customers and members resolve futures and forex-related disputes.^[8]

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.^[9]

NFA's board also elects individuals for NFA Committees.