Shipkevich Bitcoin and ICO Attorney
Felix Shipkevich December 19, 2017
NFA Bitcoin Virtual Currency Requirements

This month the National Futures Association announced to its members additional reporting requirements for Bitcoin or cryptocurrency soliciting, orders, trading, and offering such products. The notice to members was address to Introducing Brokers (IBs), Commodity Pool Operators (CPOs), Commodity Trading Advisors (CTA), and Futures Commission Merchant (FCMs) for which the NFA is the DSRO.

Any of these NFA members that currently takes part in Bitcoin or cryptocurrency activities, or will in the futures, must notify the NFA by adding it to the firm’s annual questionnaire. New questions have been added to the questionnaire regarding firm involvement with cryptocurrency. The forms can be found below for respective members with the notices listed below. Each notice is hyperlinked to the original post at the NFA website.

Additional reporting requirements for IBs

Notice I-17-29

December 14, 2017

A number of CFTC-regulated trading venues have launched or announced plans to offer derivatives on virtual currency products, including bitcoin. Given the volatility in the underlying virtual currency products, NFA is requiring each IB to immediately notify NFA if it solicits or accepts any orders in virtual currency derivatives. Until further notice, this obligation will apply on a continuous basis—any IB that does not currently offer virtual currency derivatives must notify NFA if it begins soliciting or accepting orders in these products.

Effective immediately, an IB that solicits or accepts orders for one or more virtual currency derivatives must notify NFA by amending the firm-level section of its annual questionnaire, which is accessible by authorized users through the following link: https://www.nfa.futures.org/electronic-filing-systems/annual-questionnaire.html. The following question has been added to the firm-level section of the questionnaire:

  • Does your firm solicit or accept orders involving a virtual currency derivative (e.g., a bitcoin future, option or swap)?

Beginning with the first quarter of 2018, IBs that solicit or accept orders for virtual currency derivatives will also be required to report the number of accounts they introduced that executed one or more trades in a virtual currency derivative during each calendar quarter. This information must be submitted to NFA through the firm’s questionnaire no later than 15 days after the end of a quarter. NFA will issue a separate notice reminding Members of this obligation.

If you have any questions on these new requirements please contact Dale Spoljaric, Managing Director, Compliance ([email protected] or 312-781-7415) or Mark Kloet, Manager, Compliance ([email protected] or 312-781-7896).

Additional reporting requirements for CPOs and CTAs

Notice I-17-28

December 14, 2017

A number of CFTC-regulated trading venues have launched or announced plans to offer derivatives on virtual currency products, including bitcoin. Given the volatility in the underlying virtual currency products, NFA is requiring each CPO and CTA to immediately notify NFA if it executes a transaction involving any virtual currency or virtual currency derivative on behalf of a pool or managed account. Until further notice, this obligation will apply on a continuous basis—any CPO or CTA that does not currently trade virtual currencies or related derivatives must notify NFA if it begins trading these products.

Effective immediately, a CPO or CTA that executes a transaction involving a virtual currency or derivatives must notify NFA by amending the firm-level section of its annual questionnaire, which is accessible by authorized users through the following link: https://www.nfa.futures.org/electronic-filing-systems/annual-questionnaire.html. The following questions have been added to the firm-level section of the questionnaire:

CPO Questions

  • Does your firm operate a pool that has executed a transaction involving a virtual currency (e.g., bitcoin)?
  • Does your firm operate a pool that has executed a transaction involving a virtual currency derivative (e.g., a bitcoin future, option or swap)?

CTA Questions

  • Does your firm offer a trading program for managed account clients (other than a pool you reported under the CPO questions) that has engaged in any transaction involving a virtual currency (e.g., bitcoin)?
  • Does your firm manage an account (other than a pool you reported under the CPO questions) that has executed a transaction involving a virtual currency derivative (e.g., a bitcoin future, option or swap)?

Beginning with the first quarter of 2018, CPOs and CTAs that have executed transactions involving virtual currencies or related derivatives will also be required to report the number of their pools or managed accounts that executed one or more transactions involving a virtual currency as well as the number of their pools or managed accounts that executed one or more transactions involving a virtual currency derivative during each calendar quarter. This information must be submitted to NFA through the firm’s questionnaire no later than 15 days after the end of a quarter. NFA will issue a separate notice reminding Members of this obligation.

If you have any questions on these new requirements please contact Christine Roche, Associate Director, Compliance ([email protected] or 312-781-1562) or Mary McHenry, Associate Director, Compliance ([email protected] or 312-781-1420).

Additional reporting requirements for FCMs for which NFA is the DSRO

Notice I-17-27

December 06, 2017

This Notice was issued to FCM Members for which NFA is the DSRO.

A number of CFTC regulated futures exchanges have announced plans to offer futures contracts on virtual currency products, including Bitcoin. Given the volatility in the underlying virtual currency products, NFA is requiring each FCM for which NFA is the DSRO to immediately notify NFA if the firm decides to offer its customers or non-customers the ability to trade any virtual currency futures product. This is an ongoing obligation—any FCM that does not currently intend to offer such products must notify NFA if it begins offering these products. FCMs should email this notification to their NFA examination manager.

Additionally, beginning Tuesday, December 12, NFA is requiring FCMs for which NFA is the DSRO to report certain information regarding virtual currency futures contracts on their daily segregation report filed through Winjammer™. This information should be based on the information as of the prior business day and includes the following:

  • Number of customers who traded a virtual currency futures contract (including closed out positions).
  • Number of non-customers who traded a virtual currency futures contract (including closed out positions).
  • Gross open virtual currency futures positions (i.e., total open long positions, total open short positions).

An FCM should report zero if it does not offer these products or if none of its customers or non-customers have traded a virtual currency futures contract.

If you have any questions on these new requirements please contact Dale Spoljaric, Managing Director, Compliance ([email protected] or 312-781-7415) or Mark Kloet, Manager, Compliance ([email protected] or 312-781-7896).