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February 17, 2005
NFA Board Approves Rule Changes to Protect Retail Forex Customers
February 17, Chicago - The Board of Directors of National Futures Association (NFA) today approved several rule amendments to protect retail customers from fraudulent practices in the off-exchange foreign currency (forex) markets. The changes will extend the reach of NFA's forex sales practice rules and strengthen the forex capital requirements.
The retail forex business has grown dramatically over the past few years. Since the passage of the Commodity Futures Modernization Act in December 2000, the number of firms conducting retail forex business that are NFA Members and registered with the Commodity Futures Trading Commission (CFTC) has tripled and the amount of customer funds held by these firms has increased from $42 million to approximately $500 million.
"As the retail forex business continues to grow and NFA gains more experience in this area, we have discovered that the rules we adopted over the last few years need refinement," said Daniel J. Roth, president and chief executive officer of NFA.
The Special Committee to Study Customer Protection Issues appointed by NFA's Board of Directors in November 2004 recommended the rule changes. Although the Board gave the Special Committee a broad mandate to consider many significant customer protection issues, it directed the Committee to begin its work with issues involving retail forex transactions.
"These rule changes are the first step the Special Committee has taken to protect customers in these markets," says W. Robert Felker, chairman of the Special Committee and chairman of JPMorgan Futures Inc. "We will continue our work by exploring legislative alternatives to address other problems in this area."
NFA will submit the rule changes to the CFTC for review. At that time, NFA will make the proposed rules available on its Web site at www.nfa.futures.org. NFA's Web site currently contains other information about forex trading, including an educational brochure and an Investor Alert.
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