The NFA issued an alert to members engaged in retail forex activities, notifying them of changes made to NFA requirements by the CFTC. These amendments affect NFA Bylaws, Compliance Rules, Code of Arbitration, and three Interpretive Notices. They will go into effect on October 1, 2011.
The changes are as follows:
Bylaw 306 and Compliance Rule 2-39
These rules will be amended to eliminate Forex Dealer Member (“FDM”) exemptions. Now, all NFA members engaged in retail forex transactions must comply with NFA Forex requirements. The only entities still able to claim exemptions will be Futures Commission Merchants (“FCMs”) that only use over-the-counter forex trading to hedge currency risk for other exchange traded transactions that are settled in foreign currencies. These FCMs will be exempt from all NFA Forex requirements exception the anti-fraud provisions, and the duty to act “according to just and equitable principles of trade.”
Bylaw 301(j)
Firms engaged in retail forex activities firms will be required to have at least one principal that is registered as an AP and approved as a forex AP, in addition to current requirements. This person must pass the Retail Off-Exchange Forex Examination (Series 34).
Compliance Rule 2-36 and Interpretive Notice 9053
This rules will now include “know-your-customer” requirements detailed in NFA Compliance Rule 2-30 for forex transactions.
Compliance Rule 2-10(b)
FDMs must now maintain an office in the continental United States, Alaska, Hawaii or Puerto Rico that prepares and maintains CFTC and NFA financial records and reports. This office must be under the supervision of a listed principal and registered AP of the FDM who resides in that office.
There will be other technical clarifications to the NFA’s Code of Arbitration Section 1, NFA’s Interpretive Notice 9058 entitled NFA Compliance Rule 2-40: Procedures for Bulk Assignment or Liquidation of Forex Positions: Cessation of Customer Business and NFA’s Interpretive Notice 9060 entitled Compliance Rule 2-36(e): Supervision of the Use of Electronic Trading Systems.
Read more about this NFA interpretive notice.
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