The NFA is the self-regulatory organization for the US derivatives industry. This includes on-exchange traded futures, retail off-exchange foreign currency (FOREX) and over-the-counter OTC derivatives (Swaps). The NFA is headquartered in Chicago and maintains an office in New York City. The NFA is a non-profit, independent regulatory organization. The organization does not operate any markets and is not a trade association. The NFA operates at no cost to the taxpayer and is primarily financed by membership dues, fees and assessments paid by members and other participants of the derivatives markets.
Membership in the NFA is mandatory, therefore guaranteeing that everyone conducting business with the public on US futures exchanges and in the retail FOREX marketplace must adhere to the same standards and requirements. NFA membership is also mandatory for swap dealers and major swap participants. The NFA's membership currently numbers over 4,000 firms and around 55,000 associates.
For FOREX companies specifically, the NFA plays two fundamental roles: to uphold transparency, and to prevent fraud. Given its good reputation, a significant number of FOREX brokers and binary options brokers from all over the world have obtained registration from the NFA.
Each US FOREX broker with which you are considering opening an account ought to be licensed by the NFA. Details for this should be easily accessible on websites of the US brokers you want to deal with. They each should have a register number. In cases where a company claims it is licensed by the NFA, but where you have doubts, you can easily verify this information by going here. If you find results, then the company’s claims for licensing are legitimate. Otherwise, the company in question is not licensed by the NFA and should be avoided at all costs.
With very few notable exceptions, CFTC regulations also require CFTC-registered firms to be NFA members, and all futures professionals are required to register and must undergo a background check and training before they are allowed to become listed.
Futures professionals are broken down into the following six categories.
Commodity Pool Operators (CPO): People or organizations that operate and solicit funds for a commodity pool.
Commodity Trading Advisors (CTA): People or organizations that advise clients on derivatives trades.
Futures Commission Merchants (FCM): An entity that accepts or solicits trades.
Introducing Brokers (IB): People or organizations that connect clients with a broker.
Retail Foreign Exchange Dealer (RFED): A counterparty to non-US currency transactions.
Swap Dealers: Makes a market for, and transacts in, swaps as its business.
Additionally, the following non-US firms and individuals must also register:
Exempt Non-US Firm: A non-US firm that transacts business directly with US customers solely in futures contracts and options traded on non-US exchanges.
Associated Person (AP): A person who solicits customers, orders or funds on behalf of a CPO, CTA, FCM, IB, or RFED.
Floor Broker (FB): An individual who purchases or sells derivatives for any other person.
Floor Trader (FT): A person who purchases or sells derivatives for their own account.
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