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August 07, 2015
Use of technology to monitor FDM forex customer liability requirements--NFA Financial Requirements Section 14 - Implementation of Phase 2
NFA Financial Requirements Section 14 requires FDMs that hold assets used to cover retail forex customer liabilities under CFTC Regulation 5.8 to instruct the depositories holding these funds to report the balances in these accounts on a daily basis to NFA or a third party designated by NFA. Financial Requirements Section 14 also provides that a depository must comply with this request in order to be an acceptable depository for retail forex assets.
As previously communicated to FDMs in Notice I-14-25, NFA is implementing Financial Requirements Section 14 in phases. Phase 1, which became effective, October 15, 2014, required all bank depositories holding assets to cover the amount owed to forex customers to report end-of-day balances in those accounts to NFA. NFA partnered with CME Group Inc. (CME) to collect these balance reports from the depositories via the SWIFT network. NFA also developed an internal system to collect these reports from depositories that do not have access to the SWIFT network.
NFA is currently implementing Phase 2, which requires all other depositories to report the end-of-day balances in all accounts holding assets that are used to cover an FDM's liability to its retail forex customers. Over the last several weeks, NFA has been working closely with FDMs and their respective depositories that hold assets used to cover retail forex customer liabilities to ensure that those depositories have established connectivity with NFA (directly or through the SWIFT network) to report the daily balances.
Phase 2 will become effective for close of business on August 31, 2015, beginning with reporting of the end-of-day balances on September 1. As a result, in order to be considered an acceptable depository for holding assets used to cover the FDM's liability to forex customers, the FDM must ensure that these depositories report the end-of-day balances in those accounts to NFA, as applicable, beginning with the August 31, 2015 balances. Any FDM with concerns regarding this requirement should contact NFA to resolve the matter.
Questions or comments on this requirement should be directed Sarah A. Walsh, Associate Director, Compliance (312-781-1202 or email@example.com) or Erin Walls, Manager, Compliance (312-781-1486 or firstname.lastname@example.org).