Notices to Members

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Notice I-20-04

January 31, 2020

Effective date for NFA rule amendments related to discretionary customer accounts, customer information, risk disclosures and bunched orders

NFA recently amended several NFA rules and Interpretive Notices related to discretionary customer accounts, customer information, risk disclosures and bunched orders. These amendments will become effective on March 1, 2020 and accomplish the following substantive changes:

Amendments to NFA Compliance Rule 2-8

  • Expand NFA's existing discretionary customer account requirements to apply to discretionary customer accounts trading cleared swaps; and
  • Clarify that each futures commission merchant (FCM) and introducing broker (IB) Member must maintain a record that identifies the Member, any Associate, or any third party controller that exercises discretionary authority over each account.

Amendments to NFA Compliance Rule 2-30 and related Interpretive Notices

  • Expand NFA's existing customer information and risk disclosure requirements to apply to cleared swaps; and
  • Update the required risk disclosures to include those required by CFTC Regulation 22.16 (Disclosures to Cleared Swaps Customers).

Amendments to Interpretive Notice 9029 — NFA Compliance Rule 2-10: The Allocation of Bunched Orders for Multiple Accounts

  • Expand this Interpretive Notice's scope to apply to bunched orders involving cleared swaps;
  • Specify that Eligible Account Managers that routinely execute bunched orders on behalf of the same group of customers must conduct a quarterly review of that trading to ensure that the allocation method used to allocate the bunched orders is fair and equitable; and
  • Clarify that the average price of a bunched order may be rounded to the next price increment supported by the relevant clearing house and accounting systems as long as any cash residuals greater than a penny are paid to the relevant customers.

More information on these and other amendments is available in the December 3, 2019 submission letter to the CFTC. If you have any questions regarding these amendments, please contact Tracey Hunt, Associate Director, Compliance (312-781-1284 or thunt@nfa.futures.org) or Jennifer Sunu, Director, Compliance (312-781-1402 or jsunu@nfa.futures.org.