Tag Archives: Forex Dealer Member

NFA Makes Two Separate Announcements on New Forex Rules

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(www.hedgefundlawblog.com) Today the NFA made two separate announcements regarding proposed new forex rules.  The announcements follow a series of similar announcements last week regarding new forex rules (see NFA Continues to Pursue Forex Regulation for Current Forex Dealer Members).  The first announcement dealt with additions to Compliance Rule 2-36 and related Interpretive Notice Changes.  The second announcement dealt with a completely new forex Compliance Rule 2-43.

NFA Proposes Addition to Compliance Rules 2-36 and Related Interpretive Notices – this announcement contained a hodge-podge of different rules the NFA staff felt needed to be addressed.  The announcement centrally focuses on (i) requirement that forex hypothetical results be subject to the anti-fraud provisions of NFA Compliance Rule 2-29(c),* (ii) require FDMs to have an Associated Person file the required weekly reports, (iii) require FDMs to adopt written policies regarding the calculation of rollover interest charges and payments, and (iv) prohibits FDMs from trading a customer’s account when they are a counterparty to the trade.  Continue reading →

Forex Managers and Managed Forex Funds

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Many forex managers use a product called a managed forex fund, which is the equivalent to a mutual fund hedge fund.  In a “managed forex fund,” the manager will invest the assets under the POA with the forex dealer member in the managed fund.  The a trader or traders for the forex dealer member will then manage the pool of assets.  Typically the forex dealer member will receive both a forex management fee as well as a performance allocation.  Many managers will then charge a management fee and a performance allocation (or only one or the other) to the underlying clients. Continue reading →

NFA Continues to Pursue Forex Regulation for Current Forex Dealer Members

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Two new releases indicate that the NFA is serious about regulating the off-exchange foreign currency markets

On our sister website, www.forexlawblog.com, we have detailed the continued regulatory actions by the NFA with regard to the current regulation of the off-exchange forex markets.  The two notices, described in further detail below, apply to Forex Dealer Member and their interactions with their clients. While the CFTC has been slow to promulgate rules regarding the expected new Forex regulations, the NFA has acted swiftly and addressed many important issues.  However, forex managers should still get ready for coming forex regulations – a collegue of mine has recently discussed forex registration with a CFTC compliance person and that person expects that proposed rules will be promulgated within the first quarter of next year.  As always, stay tuned as we will continue to stay on top of this issue.

A summary of the two NFA actions is included below.  Continue reading →

NFA Increases Required Capital for Forex Dealers

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Yesterday the NFA announced that Forex Dealer Members, those brokers who engage in Forex transactions with retail customers, will need to have a minimum net capital of $10 million by October 31, 2008.  This doubles the current minimum net capital of $5 million.

The NFA has been very aggressively moving to regulate the retail forex market.  Congress has helped through passing the Farm Bill, but separately from the Farm Bill, the NFA, in conjunction with the CFTC, has been moving towards regulating not only the managers of Forex hedge funds, but also the Forex dealers.

Earlier this year the NFA changed the minimum net capital for Forex Dealers from $1 million to the current $5 million; there are two more hikes scheduled to be implemented in the first half of next year.  While this will undoubtedly serve to protect investors, it also cast a huge burden on current and future Forex Dealer Members.  The NFA notice is posted below and can be found here.

Notice I-08-27
October 24, 2008

Net Capital Requirements for Forex Dealer Members

On October 22, 2008, the Commodity Futures Trading Commission approved increases to NFA’s capital requirements for Forex Dealer Members (FDMs). As stated in a July 23, 2008 Notice to Members, the minimum requirement will be $10 million as of October 31, 2008, $15 million as of January 17, 2009, and $20 million as of May 16, 2009.

Questions concerning these requirements should be directed to Sharon Pendleton, Director, Compliance ([email protected] or 312-781-1401) or Valerie Kretschmer, Manager, Compliance ([email protected] or 312-781-1290).

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