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August 21, 2001
NFA rules regarding security futures products approved by CFTC
August 21, Chicago - National Futures Association (NFA) received notice yesterday from the Commodity Futures Trading Commission (CFTC) approving NFA's rules regarding the trading of single stock futures and narrow-based security indices (security futures products). The new rules, which have also been submitted to the Securities and Exchange Commission (SEC), became effective upon CFTC approval. With the approval of these rules, NFA has met the obligations that the regulators required it to meet by August 21, paving the way for the trading of security futures products on a principal-to-principal basis.
"NFA has worked very closely during the past few months with representatives from the CFTC and the SEC to ensure that our regulatory responsibilities were met prior to the August 21 deadline," says NFA's General Counsel Tom Sexton.
NFA is still working with the CFTC, the SEC and other SROs on several issues-best execution, disclosure and proficiency-that must be resolved before the December 21 date for retail trading of security futures products. "We are confident that all of these issues will be resolved in time for retail trading to begin on December 21," says Sexton.
The Commodity Futures Modernization Act of 2000 (CFMA) lifted the 18-year ban on security futures products and regulates these products as both securities and futures. Before these products can trade, NFA was required to qualify as a limited purpose national securities association for the purpose of regulating the activities of members who are registered as brokers or dealers in security futures products. The Exchange Act was also amended to require NFA to have anti-fraud, anti-manipulation and customer protection rules reasonably comparable to those of the NASDR for the purpose of governing the security futures activities of those broker-dealers.
"NFA already had rules that have proven effective in governing the futures activities of its Members," says Sexton. "However, because our rules sometimes take a different approach than NASDR's rules, we have adopted a series of rule amendments in order to ensure that NFA meets the standards imposed by the new legislation."
NFA has posted all of the rule amendments relating to security futures products on its web site (www.nfa.futures.org). NFA is a congressionally authorized self-regulatory organization for the U.S. futures industry.