In 1974, Congress established the Commodity Futures Trading Commission (CFTC). The same legislation also authorized the creation of registered futures associations, giving the industry the opportunity to create a self-regulatory organization1.
In 1976, Leo Melamed, chairman of the Chicago Mercantile Exchange (currently Permanent Special Advisor to the NFA Executive Committee and Board of Directors), persuaded other industry leaders that a Title III organization would unquestionably benefit the futures industry and the public it serves. Mr. Melamed created an NFA Organizing Committee comprised of industry leaders which included himself as chairman, David T.Johnston, Vice-Chairman; John J. Conheeney; George D.F. Lamborn; Warren W. Lebeck; Leslie Rosenthal and Howard A. Stotler. The committee developed articles of incorporation.
Mr. Melamed then convinced Senator Robert Dole to drop his proposed legislation to institute a federal transaction tax to defray the cost of the CFTC and instead to support legislation for the creation of the NFA under Title III—a private-sector, self-funding, and self-regulating organization. In February 1977, the CFTC heard the proposal of the NFA Organizing Committee and, five days later, announced that it "endorses the concept of cooperative regulation and considers the NFA proposal to be a valuable first step toward implementing the purposes of Title III".
The creation of NFA was an historic event—one that gave the futures industry the regulatory framework on which its markets could continue to grow and succeed without the need for a federal transaction tax. Early in its deliberations, the Organizing Committee reached certain important conclusions. First, substantial cost savings could be realized from a single organization representing all futures industry segments. Second, industry segments could not be successfully self-regulated unless its membership was mandatory. Third, that a private sector self-regulatory organization would serve the futures industry more efficiently and at a lessor cost than would the government.
NFA's formal designation as a registered futures association was granted by the CFTC on September 22, 1981. Robert K. Wilmouth became NFA's first president and CEO, and Leo Melamed, its first chairman. In 1982, NFA began its regulatory operations, marking the end of an extraordinary organizational effort that had spanned more than six years. Daniel Roth followed Mr. Wilmouth as NFA president and CEO (serving from 2003 to 2017).
Congress passed legislation in 2000 and 2008 requiring firms acting as counterparties to retail forex transactions, as well as forex pool operators, trading advisors and introducing brokers to register with the CFTC and become Members of NFA. Similarly, in 2010, Congress passed the Dodd-Frank Wall Street Reform and Consumer Protection Act, which gave the CFTC rulemaking authority and oversight over swaps, swap dealers and major swap participants. Subsequently, the CFTC passed regulations requiring swap dealers and major swap participants to register with the CFTC and become Members of NFA.
1Section 17 was added to the Commodity Exchange Act by Title III of the Commodity Futures Trading Commission (CFTC) Act of 1974 and provides for the registration and CFTC oversight of self-regulatory associations of futures professionals.