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NFA – National Futures Association

The National Futures Association (NFA) is the self-regulatory organization for the US derivatives industry, such as on-exchange traded futures, retail off-exchange Forex and OTC derivatives (swaps).

DESCRIPTION

The National Futures Association (NFA) is the self-regulatory organization for the US derivatives industry. Including the on-exchange traded futures, retail off-exchange Forex and OTC derivatives (swaps). The independent regulatory organization is headquartered in one of the US financial district Chicago. However, the National Futures Association also maintains an office in New York City. Similar to the funding of the UK regulator FCA, the National Futures Association operates at no cost to the taxpayers. Also, the organization is financed solely from membership and assessment fees.

National Futures Association’s four key policies

In the United States it is mandatory for every firm that provides financial services to become a member of the NFA. In order to assure that every firm conducts business on the US futures exchanges with the same guidelines. Also, for the retail Forex market, the NFA set out standards which every firm needs to uphold. Furthermore, under the supervision of the National Futures Association are approximately 55,000 associates and 4,000 firms.

The regulatory framework of the organization provides the NFA the opportunity to safeguard market transparency and protect investors across the futures industry in the US. The independence regulatory body possesses over four key policies in relation to the fraud and abuse. These include thorough registration check procedures, complex compliance framework, strong enforcement power, and trade practice and market observation. An example of a recent intervention is when the NFA temporarily raised the margin requirements in December for a number of Forex futures.

What is the connection between CFTC and NFA?

In 1974, the US Congress established the Commodity Futures Trading Commission (CFTC) to oversee the futures trading. The same legislation has certified the creation of registered futures associations. Thus, the National Futures Association was created to supervise the futures industry across the United States. On September 22, 1981, the CFTC inaugurated the official designation of National Futures Association as a “registered futures association”.

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