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March 06, 2007
Effective Date of Amendments to Forex Requirements
NFA has received notice that the Commodity Futures Trading Commission has approved changes to NFA Bylaws 306 [hyperlink updated 12-01-2021] and 1507 [hyperlink updated 12-01-2021]; Compliance Rules 1-1 [hyperlink updated 12-01-2021], 2-36 [hyperlink updated 12-01-2021], and 2-39 [hyperlink updated 12-01-2021]; Code of Arbitration Section 1 [hyperlink updated 12-01-2021]; Financial Requirements Sections 1 [hyperlink updated 12-01-2021], 11 [hyperlink updated 12-01-2021], and 12 [hyperlink updated 12-01-2021]; and the Interpretive Notice Regarding Forex Transactions [hyperlink updated 12-01-2021]. Most of these changes ensure that NFA has jurisdiction over leveraged off-exchange foreign currency contracts when NFA Members act as counterparty to, solicit or introduce, or manage accounts on behalf of retail customers. The remaining changes are technical amendments that clarify the existing forex requirements. All of these amendments became effective on February 13, 2007.
The amendments adopt a new section (b) to Bylaw 1507 to define "forex" as any leveraged off-exchange foreign currency transaction offered to customers who are not eligible contract participants. The definition does, however, contain a limited exclusion for transactions that either 1) result in actual delivery within two days or 2) create an enforceable obligation to deliver between a buyer and seller who have the ability to fulfill that obligation in connection with their line of business (e.g., bona fide hedging activities). The amendments also incorporate this definition into NFA's other forex requirements by reference, eliminate language made superfluous by the new definition, and revise the introductory language to the Interpretive Notice to make it consistent with this definition.
Finally, the Board adopted several technical changes to the existing forex requirements. Those changes:
- Clarify that Compliance Rule 2-39 applies to Associates soliciting or managing forex accounts even when those activities are not conducted on behalf of an NFA Member;
- Clarify that the concentration charge includes customer positions;
- Modify current footnotes 5 and 13 of the Interpretive Notice to conform to Compliance Rule 2-39;
- Clarify that Forex Dealer Members are responsible for all their forex affiliates, including assuring that those affiliates do not engage in forex transactions unless they are authorized to do so under the Commodity Exchange Act; and
- Make a technical amendment to Financial Requirements Section 12 to update a rule reference.
NFA's November 13, 2006 submission letter to the CFTC contains a more detailed explanation of the changes and includes a copy of the forex requirements with the amendments marked. You can access an electronic copy of the submission letter through this link:1 National Futures Association | News Center
Questions concerning these changes should be directed to Michael Piracci, Senior Attorney (email@example.com or 312-781-1419) or Kathryn Camp, Associate General Counsel (firstname.lastname@example.org or 312-781-1393).
1 The submission letter does not reflect subsequent amendments to the requirements in effect at that time. The current requirements, as amended, have been incorporated into NFA's electronic rulebook, which is located at this link: National Futures Association | NFA Manual / Rules