Offsetting transactions, Compliance Rule 2-43(b)

The NFA will require that FDMs close trades on a first-in first-out basis beginning July 31, 2009. This effectively prevents them from facilitating the practice known as hedging, where a trader opens two canceling positions in the same account. Rule 2-43(b) is as follows:

Forex Dealer Members may not carry offsetting positions in a customer
account but must offset them on a first-in, first-out basis. At the
customer’s request, an FDM may offset same-size transactions even if
there are older transactions of a different size but must offset the
transaction against the oldest transaction of that size.

About The Author

Felix Shipkevich

Felix Shipkevich is a Manhattan-based attorney and general counsel for Shipkevich Law Firm. He has extensive experience working with the CFTC and NFA on registration, compliance, and enforcement issues for CPOs, CTAs, FCMs, IBs, and RFEDs. Felix also practices intellectual property and corporate governance law.