Definition of the National Futures Association (NFA)

The National Futures Association (NFA) is a self-regulatory body for the futures and derivatives markets in the United States. The National Futures Association (NFA), which is part of the Commodity Futures Trading Commission's (CFTC) registered futures group, is there to keep the integrity of derivatives markets, protect investors, and make sure that members meet their regulatory obligations.

The National Futures Association (NFA) is a self-regulatory body for the futures and derivatives markets in the United States.

NFA members pay dues to be part of the group, and they have to follow its rules. Firms and people who work in futures and derivatives have to pay.

If you don't follow the rules set by the NFA, you could be punished or lose your NFA membership.

The NFA operates at no cost to taxpayers and is largely supported by membership dues, fees, and assessments paid by members and other derivatives market participants.

Registration, compliance, and arbitration are among the tasks and functions of the NFA.

The National Futures Association: An Overview (NFA)

The NFA operates at no cost to taxpayers and is largely supported by membership dues, fees, and assessments paid by members and other derivatives market participants.

Membership in the NFA ensures the investing public that all enterprises, intermediaries, and affiliates that do business with them on US futures exchanges must adhere to the same high standards of professional behavior. Firms in the industry are required to pay membership dues to the NFA, which is how the NFA makes money.

The NFA commenced operations in 1982 after the founding of the Commodity Futures Trading Commission (CFTC) in 1974. The same law also enabled the construction of licensed futures exchanges, supporting the formation of a national self-regulatory body.

The NFA's roles and activities include registration, compliance, and arbitration, in addition to regulating the US futures market. It combats futures market fraud and abuse through a mix of registration requirements, compliance regulations, strong enforcement authorities, and real-time market monitoring.

The National Futures Association's Responsibilities

The NFA's key tasks are as follows:

Membership and registration: Firms that do derivatives activity must register with the CFTC and, in most cases, with the NFA. The CFTC has delegated registration authority to the NFA.

Rulemaking is the process of finding out what the best practices in the industry are and then making them mandatory for the whole industry.

When members violate the rules, the NFA may take disciplinary action against them.

• Member Education and Tools: The NFA offers educational resources to its members to help them understand the laws and regulations and how to follow them.

• Arbitration: Disputes involving futures or FX may be addressed via the NFA's arbitration program.

• Investor Protection: The NFA offers resources to investors before making any investment choices.

• Outreach Programs: On request, the NFA provides a range of training programs to organizations.

• Market Regulation: The NFA provides regulatory services to designated contract makers (DCMs) and swap execution facilities (SEFs).

Firms that are members of NFA

Before they may register, all futures professionals must undertake a background inquiry.

The NFA has 3,117 members as of January 31, 2022. The following are the member categories:

• Commodity Pool Operators (CPO): individuals or organizations who run and raise cash for a commodity pool.

• Commodity Trading Advisors (CTA): individuals or organizations that provide customers with advice on derivatives trading.

• Companies called Futures Commission Merchants (FCM) work in the futures market and help people buy or sell things in the futures market.

• Introducing Brokers (IB): Individuals or organizations that introduce customers to brokers.

A retail foreign exchange dealer (RFED) is a counterparty in non-US currency transactions.

Swap Dealers: Those who establish a market for and trade in swaps for a living.

Exchanges: A marketplace for the purchase and sale of financial products.

Solicits orders, customers, or customer funds on behalf of a futures commission merchant (FCM), retail foreign exchange dealer (RFED), introducing broker (IB), commodity trading advisor (CTA), or commodity pool operator (CPO) (or supervises persons engaged in such solicitation).

Individuals and businesses with a lot of outstanding swaps could have a big impact on the financial stability of the United States banking system or the financial markets.

As a self-regulatory body, the NFA has the authority to seek out and adopt what it considers to be best practices for the sector. The NFA establishes standards that its members must follow and has the authority to levy penalties or withdraw membership (which might result in the closure of a firm) of its members. It gives people and businesses a way to work out problems with each other or settle charges of wrongdoing.

Dues for Membership

The NFA charges a variety of dues and fees, which vary based on the kind of member. Membership dues for a Tier 1 swap dealer, for example, are $1.3 million, while dues for a Tier 2 swap dealer are $325,000. Dues for an introducing broker are $750, while dues for an introducing broker swaps business are $2,500. These are one-time payments.

There is a $25 late charge if payment is not received on time. If dues are not paid within 30 days of the due date, membership will be revoked.

Real-Life Illustration

Based on complaints that were made in 2018, East West Global LLC and two of its employees were punished in 2019. One of the employees had their NFA membership revoked for five years because of the complaints.

Among other things, the business and the two people were accused of employing poor advertising material, deficient sales techniques, and failing to fulfill the high standards of commercial honor.

One of the people was forced to pay a $75,000 fine jointly and severally along with the company. The company was also required to correct the flaws raised in the complaint.

Following a settlement offer, the other person agreed not to apply for NFA membership (or associate membership) for five years. If he rejoins the group after five years, he must pay a $90,000 fine right away.

Who is governed by the NFA？

It is the job of the National Futures Association (NFA) to make sure that all futures market participants, from qualified brokers to futures merchants to commodity pool operators to swap dealers to exchanges to commodity trading consultants to retail foreign exchange dealers, follow the rules.

How many people are members of the NFA？

The NFA has 3,117 members as of January 31, 2022.

Who Is Required to Register with the NFA？

The NFA requires all qualifying businesses that engage in futures markets to register. Brokers, futures merchants, commodity pool operators, swap dealers, exchanges, and commodity trading consultants are among those who fall under this category.

How Do You Become an NFA Member？

To become a member of the NFA, applicants must apply directly to the NFA. This is accomplished via the use of an electronic filing system.

Brokers are governed by the National Futures Association (NFA)

WARNING: Trading Forex and CFDs has a high level of risk and may result in the loss of your invested cash. You should not invest more than you can afford to lose, and you should be completely aware of the hazards involved. Investing in leveraged products may not be appropriate for all investors. Please examine your level of expertise and investment goals before trading, and obtain independent financial advice if required. Before making any trading choices, please verify that you completely understand the risks.

Brokers that are regulated under Natonal Futures Associations (NFA)

• Forex.com

• Interactive Brokers

• Marex Spectron

• BDSwiss

• PUPrime

• ATC

• AMP Global

• MOKFX Global

• Warlock Market

• Pioneer Capital

• FVP Trade

• AM Markets

• BBH

• Just2Trade

• ED&F Man

RISK WARNING:

Trading Forex and CFDs involves significant risk and can result in the loss of your invested capital. You should not invest more than you can afford to lose and should ensure that you fully understand the risks involved. Trading leveraged products may not be suitable for all investors. Before trading, please take into consideration your level of experience, and investment objectives and seek independent financial advice if necessary. Please ensure that you fully understand the risks before you make any trading decisions.