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At congressional hearing NFA President underscores the importance of effective self-regulation
Testifying at a hearing called by the House Committee on Agriculture to discuss Eurex U.S.'s pending application for designation as a U.S. contract market, NFA President and CEO Dan Roth highlighted the Association's commitment to market integrity and customer protection.
"We are first, foremost and only a regulatory body devoted to customer protection," said Roth. "Self-regulation is not part of what we do-it is all that we do."
Roth gave an overview of how NFA operates as a registered futures association, stressing the need for effective and efficient self-regulation in a rapidly changing futures industry.
"Effective regulation is the best way to assure public confidence, and we have all seen what happens to markets that lose the public's confidence," said Roth. "The best way to preserve that confidence is to deserve it-to ensure that the highest levels of integrity are demanded of all market participants and intermediaries."
A key element of successful regulation is the collaboration between the self-regulatory organization and the government oversight agency. Over the years the Commodity Futures Trading Commission (CFTC) has entrusted NFA with certain of its frontline regulatory responsibilities to avoid duplication of effort and to direct its own resources more efficiently.
For example, last January the CFTC delegated to NFA the authority to review the annual financial reports that Commodity Pool Operators (CPOs) are required to provide to the CFTC and to their customers. This delegation eliminated the burden of filing those reports with both the CFTC and NFA. At the same time, NFA collaborated with the CFTC to implement technology that allows CFTC to electronically access and query information NFA maintains relating to pools in NFA's databases. During the last six months, NFA's compliance staff has analyzed over 2,600 pool financial statements filed by CPOs with NFA.
"Our mission is to work as a partner with the CFTC and we think this partnership has been an extraordinary success. In the twenty-one years since NFA began operations, trading volume on U.S. futures exchanges has increased by over 400%. During that same time, customer complaints have actually dropped by over 70%."
After describing the details of NFA's proposed Regulatory Services Agreement with Eurex U.S., Roth reiterated that the increased trade practice and market surveillance duties will receive the same high level of commitment as all the other NFA responsibilities.
"Although both Congress and the Commission have allowed NFA to expand its role, our mission today is the same as it was twenty-one years ago. Everything we do is for a regulatory purpose designed to protect customers, protect market integrity and protect the public's confidence in these vital markets."
The complete text of Mr. Roth's testimony can be found in the News Center section of NFA's Web site (www.nfa.futures.org).