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Notice I-11-05

January 25, 2011

Calculation of Profitable and Not-profitable Accounts under CFTC Regulation 5.5

CFTC Regulation 5.5 requires RFEDs, FCMs and IBs engaging in OTC retail forex transactions to provide customers opening an account with a prescribed written disclosure statement. Immediately following this statement, RFEDs, FCMs and IBs must provide the customer with the following information for the most recent four calendar quarters during which the RFED or FCM acting as the counterparty maintained retail forex accounts:

  • The total number of non-discretionary retail forex customer accounts maintained by the RFED or FCM;
  • The percentage of those accounts that were profitable during the quarter; and
  • The percentage of those accounts that were not profitable during the quarter.

The calculation must be done in accordance with the requirements of CFTC Regulation 5.18(i)(1), which requires that the calculation be prepared for all open retail forex accounts during the quarter.

NFA has received a number of questions regarding what it means to be an "open" account for purposes of this calculation. For example, there is some confusion regarding whether an account that maintained a cash balance, but had no open positions and no trading during quarter, should be included in the calculation.

After consultation with CFTC staff, NFA provides the following information:

The calculation, including determining the total number of non-discretionary retail forex customer accounts maintained by the RFED and FCM that quarter, should include only accounts that executed any trades during the quarter and/or had an open position at any time during the quarter. Any account that did not execute any trades or have an open position during the quarter should not be included in the calculation regardless of whether the account maintained a cash balance and/or was paid interest or charged any fees during the quarter.

If you have any questions regarding this notice, please contact Sharon Pendleton, Director, Compliance (spendleton@nfa.futures.org or 312-781-1401) or Laurie Gavin, Senior Manager, Compliance (lgavin@nfa.futures.org or 212-513-6017).

NFA is the premier independent provider of efficient and innovative regulatory programs that safeguard the integrity of the futures markets.
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