On August 27, 2015, the US Commodity Futures Trading Commission approved rule amendments and a new interpretive notice filed by the National Futures Association heightening protections for retail customers of NFA Forex Dealer Members. Among other things, the rule amendments (i) impose additional capital requirements on FDMs; (ii) require FDMs to collect security deposits for off-exchange foreign currency transactions from both eligible contract participant counterparties as well as retail counterparties; (iii) require FDMs to adopt and implement more stringent risk management programs; and (iv) require FDMs to provide additional market disclosures and firm-specific information on their websites.
Statements issued by Chairman Timothy Massad and Commissioner Sharon Bowen emphasized the heightened risks faced by retail customers investing in the foreign exchange markets, including the losses retail investors face as a result of minor price movements in the foreign exchange market. In her statement, Commissioner Bowen further stated that the CFTC should consider imposing additional regulations on retail forex dealers, including, but not limited to: (i) imposing concentration charges on RFEDs if they are overly exposed to a particular currency pair or liquidity provider to incentivize RFEDs to balance their, and their retail counterparties’ positions; (ii) requiring that RFEDs get the best possible prices for their retail counterparties; and (iii) requiring or incentivizing RFEDs to clear in order to lower the credit risks that retail foreign exchange investors face.
The CFTC press release is available at: http://www.cftc.gov/PressRoom/PressReleases/pr7219-15.
The NFA’s rule submission to the CFTC is available at: http://www.cftc.gov/ucm/groups/public/@newsroom/documents/file/nfaforexsubmission052815.pdf.
The text of Commissioner Bowen’s statement on enhancing protections for retail forex customers is available at: http://www.cftc.gov/PressRoom/SpeechesTestimony/bowenstatement082715. The text of Chairman Massad’s statement on enhancing protections for retail forex customers is available at: http://www.cftc.gov/PressRoom/SpeechesTestimony/massadstatement082715.