NFA Compliance Rule 2-43b

AAA

DEFINITION of 'NFA Compliance Rule 2-43b'

A 2009 rule implemented by the U.S. forex industry's self-regulatory organization, the National Futures Association (NFA), regarding forex trading by U.S. regulated forex companies. It prohibits hedging by requiring multiple positions held in the same currency pair to be offset on a first-in, first-out (FIFO) basis. It also prohibits price adjustments to executed customer orders except to resolve a complaint in the customer's favor or in the case of certain straight-through processing transactions, and these changes must be reviewed, approved and documented by the NFA.

INVESTOPEDIA EXPLAINS 'NFA Compliance Rule 2-43b'

Traders refer to Rule 2-43b as the FIFO rule. The rule's supporters say it increases transparency for customers and brings forex trading practices more in line with those of the equities and futures markets. The change forced many forex firms to change their trading platforms because the old software allowed users to choose which orders they want to close out, thus not complying with the FIFO rule. Under the new rules, it is still possible to place stop and limit orders, but they must now be entered differently. It was also possible to avoid the changes altogether by moving one's forex account to a firm in another country where forex trading rules are different.

RELATED TERMS
  1. Limit Order

    An order placed with a brokerage to buy or sell a set number ...
  2. Stop Order

    An order to buy or sell a security when its price surpasses a ...
  3. Forex Market

    The market in which participants are able to buy, sell, exchange ...
  4. National Futures Association - ...

    The independent self-regulatory organization for the U.S. futures ...
  5. First In, First Out - FIFO

    An asset-management and valuation method in which the assets ...
  6. Exchange Traded Derivative

    A financial instrument whose value is based on the value of another ...
RELATED FAQS
  1. How is fair value calculated in the futures market?

    The fair value is the theoretical calculation of how a futures stock index contract should be valued considering the current ... Read Full Answer >>
  2. What are the major types of insurance policies that insurance companies will offer?

    The principal commodities used in producing chemicals are oil, natural gas, coal and a wide variety of metals and minerals. ... Read Full Answer >>
  3. What is the difference between speculation and hedging?

    Speculators and hedgers are different terms that describe traders and investors. Speculation involves trying to make a profit ... Read Full Answer >>
  4. What is the difference between underwriting and investment income for an insurance ...

    Underwriting and investing are two different methods an insurance company uses to generate income. The underwriting income ... Read Full Answer >>
  5. What are the benefits of using open interest as an indicator?

    Open interest is a good technical indicator of trends and trend reversals for derivative securities markets. The open interest ... Read Full Answer >>
  6. How can I profit from a decline of stock prices in the insurance sector?

    Some of the methods of profiting from a decline in the insurance sector are shorting insurance stocks, shorting insurance ... Read Full Answer >>
Related Articles
  1. Forex Education

    The Fundamentals Of Forex Fundamentals

    Charting is not the only way to analyze the foreign-exchange market. Learn how to apply fundamental analysis to the economic indicators.
  2. Options & Futures

    A Primer On The Forex Market

    Moving from equities to currencies requires you to adjust how you interpret quotes, margin, spreads and rollovers.
  3. Forex Education

    How To Profit From Interventions In The Forex Market

    The forex market can be extremely profitable. Learn how to spot an intervention and trade when it's occurring.
  4. Options & Futures

    Getting Started In Forex Options

    Stocks are not the only securities underlying options. Learn how to use FOREX options for profit and hedging.
  5. Forex Education

    Top 7 Questions About Currency Trading Answered

    Whether you're puzzled by pips or curious about carry trades, your queries are answered here.
  6. Options & Futures

    Getting Started In Forex

    Before entering this market, you should define what you need from your broker and from your strategy.
  7. Investing Basics

    Understanding Non-Deliverable Forward (NDF)

    A foreign exchange hedging strategy where the parties agree to settle the profit or loss in a foreign currency futures contract before the expiration date.
  8. Forex Education

    How To Lock In An Exchange Rate

    Currency risk can be effectively hedged by locking in an exchange rate through the use of currency futures, forwards, options, or exchange-traded funds.
  9. Investing Basics

    Explaining Currency Swaps

    A swap that involves the exchange of principal and interest in one currency for the same in another currency.
  10. Forex Education

    Top Economic Factors That Depreciate The $US

    A variety of factors contribute to currency depreciation, including monetary policy, inflation, demand for currency, economic growth and export prices.

You May Also Like

Hot Definitions
  1. Butterfly Spread

    A neutral option strategy combining bull and bear spreads. Butterfly spreads use four option contracts with the same expiration ...
  2. Unlevered Beta

    A type of metric that compares the risk of an unlevered company to the risk of the market. The unlevered beta is the beta ...
  3. Moving Average - MA

    A widely used indicator in technical analysis that helps smooth out price action by filtering out the “noise” from random ...
  4. Yield Curve

    A line that plots the interest rates, at a set point in time, of bonds having equal credit quality, but differing maturity ...
  5. Productivity

    An economic measure of output per unit of input. Inputs include labor and capital, while output is typically measured in ...
  6. Variance

    The spread between numbers in a data set, measuring Variance is calculated by taking the differences between each number ...
Trading Center