NFA President Discusses Forex Regulations
NFA to Appear at Forex Trading Expo
The NFA recently released its investor newsletter where it discusses some of the recent regulatory actions and other industry news. In this newsletter the NFA specifically discussed a couple of recent interviews featuring NFA President Dan Roth. The NFA also noted that they will be participating in the Forex Trading Expo which will be held on September 23-25 at Ceasar’s Palace in Las Vegas. [Subsequently the NFA announced a Forex Regulatory Workshop which they will be conducting in Las Vegas on the 25h.] We believe that the NFA’s increased focus on the new forex regulations signals that the CFTC will be finalizing the regulations which were proposed back in January.
We have summarized the content of the two videos below.
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“Before You Make a Spot Forex Trade” can be found here.
The first video answers questions on how a forex market is regulated, and who regulates it. Dan Roth explains that Congress has ultimate control over forex trading regulations but that Congress gives authority to bodies such as the NFA and, most recently, the CFTC to create and enforce the laws. He also explains that when the courts get involved, they sometimes interpret regulatory laws in a way that undermines Congress’s original intention, therefore causing laws to be subject to change. He also makes it clear that customers should know who they will be doing business with and to check if they are regulated and their disciplinary history.
Other highlights include:
- NFA regulates FCMs and Forex dealers dealing with retail customers
- There is more regulatory scrutiny now through the NFA then there was previously
- US Congress and the courts control regulatory structure and they pass authority to the CFTC and NFA
- Laws passed by Congress regulate who is being regulated and by whom
- Laws are subject change
- NFA started passing rules in 2001-02, Congress gave authority to the CFTC recently to pass regulations related to the spot forex markets
- Customers need to know the counterparty and soliciting agent
- Customers should check the disciplinary history of firms
- NFA has section on website to check disciplinary history and due diligence (BASIC)
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“Before You Start FX Trading” can be found here.
The second video uses a clip from the first video in telling customers to check the broker/counterparty to make sure they are regulated and to not do business with unregulated firms. He also explains that if the firm does have a disciplinary record, that some violations such as a technical violation may not be as dangerous as a violation such as fraud. He also says that customers should only invest in what they understand and need to have a full grasp of forex trading before they get involved. He also said to be wary of firms that assure you that all your funds will be FDIC insured, since you won’t be insured against trading losses, and he also briefly touches on the conflict of interest issue that arises when trading with a forex spot broker (you can lose money as they gain, or vice versa).
Other items he highlighted:
- Only invest in what you understand
- Check out broker/counterparty to check if they’re regulated
- Check out the name of the company and the individual
- If the firm is not regulated, check their disciplinary history
- If the history involves a technical violating, it may not be as important, but fraud is more serious
- Be careful of firms that assure your funds will be FDIC insured
- There is a conflict of interest in trading with a forex spot broker, in that the more money you lose might be the more money they make
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Other related forex law articles:
Mallon P.C. provides legal support, registration and compliance services to all types of forex managers. Bart Mallon, Esq. can be reached directly at 415-868-5345.
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