In a “technical amendment” notice made to the NFA’s Forex Requirements the NFA announced several new requirements for all FCMs/RFEDs operating in the US. The NFA listed these as “minor amendements”, and while a couple of the changes minor, one is somewhat more substantial.
The full amendment reads:
Notice I-12-16
July 26, 2012
Effective Date of Technical Amendments to NFA’s Forex Requirements
NFA recently made several minor amendments to its forex requirements – amending NFA Financial Requirements Section 14 and the interpretive notice entitled Forex Transactions to conform the requirements to applicable CFTC Regulations and amending the interpretive notice related to bulk assignment and liquidation
to clarify the reporting responsibilities of assignor/transfer or FDMs
and assignee/transferee FDMs. These amendments, which are described more
fully below, do not impose any additional or new obligations on FDMs
and are effective immediately.NFA Financial Requirements Section 14
NFA Financial Requirements Section 14 and CFTC Regulation 5.8(a)
require FCMs/RFEDs to calculate the amount owed to retail forex
customers and hold assets equal to or in excess of that amount in one or
more qualifying institutions. Currently, Section 14 requires the
calculation only with respect to U.S. customers while the CFTC
requirement applies to all retail forex customers. Therefore, NFA is
amending Section 14 to remove the reference to U.S. customers.NFA’s Interpretive Notice entitled Forex Transactions
In September 2011, as required by the Dodd-Frank Act, the CFTC
implemented changes to its regulations to remove any references to
relying on credit ratings. To keep NFA’s requirements consistent with
the underlying rationale of the CFTC’s amendments, NFA is amending its
interpretive notice entitled Forex Transactions to remove
references to credit ratings as a factor NFA considers in determining
whether to approve an FDM’s affiliate or an unregulated person as a
person which the FDM may use to hold firm assets or to cover forex
transactions for purposes of calculating adjusted net capital.NFA Interpretive Notice entitled NFA Compliance Rule 2-40: Procedures for Bulk Assignments or Liquidation of Forex Positions: Cessation of Customer Business
NFA is amending its interpretive notice on bulk assignments and
liquidation of forex positions to clarify that immediately after the
bulk assignment, liquidation or transfer, Assignee/Tranferee FDMs must
provide NFA with a list of affected accounts and the value of each
account as of the date of the transaction.More information on this Interpretive Notice can be found in NFA’s March 8, 2012 Submission Letter to the CFTC. Questions concerning these amendments should be directed to Rachel Brandenburg, Manager, Compliance at [email protected] or 312-781-1472 or Sarah Walsh, Manager, Compliance at [email protected] or 312-781-1202.
Original text here
The first amendment to Section 14 of the NFA Financial Requirements should make clients sleep easier and will require brokers to hold not only a percentage of US clients’ funds in a qualifying bank but also a percentage of non-us clients’ assets as well. Where a US RFED may have 400 US clients with a total of $4million on deposit, and 250 non-us clients with a total of $2 million on deposit the broker used to be required to keep between 10-40% of that $4million on deposit will not be required to keep between 10-40% of the entire $6 million on deposit.
All in all, the more funds a broker has in their bank, the safer they are from liquidation – That is unless your broker has been forging bank statements for the past 20 years.
Article by forexindustryinsider.com
