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. National Futures Association - ...

    The independent self-regulatory organization for the U.S. futures ...
  3. Stop Order

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

    The market in which participants are able to buy, sell, exchange ...
  5. First In, First Out - FIFO

    An asset-management and valuation method in which the assets ...
  6. ICE LIBOR

    See LIBOR
Related Articles
  1. The Fundamentals Of Forex Fundamentals
    Forex Education

    The Fundamentals Of Forex Fundamentals

  2. A Primer On The Forex Market
    Options & Futures

    A Primer On The Forex Market

  3. How To Profit From Interventions In ...
    Forex Education

    How To Profit From Interventions In ...

  4. Getting Started In Forex Options
    Options & Futures

    Getting Started In Forex Options

comments powered by Disqus
Hot Definitions
  1. Elasticity

    A measure of a variable's sensitivity to a change in another variable. In economics, elasticity refers the degree to which ...
  2. Tangible Common Equity - TCE

    A measure of a company's capital, which is used to evaluate a financial institution's ability to deal with potential losses. ...
  3. Yield To Maturity (YTM)

    The rate of return anticipated on a bond if held until the maturity date. YTM is considered a long-term bond yield expressed ...
  4. Net Present Value Of Growth Opportunities - NPVGO

    A calculation of the net present value of all future cash flows involved with an additional acquisition, or potential acquisition. ...
  5. Gresham's Law

    A monetary principle stating that "bad money drives out good." In currency valuation, Gresham's Law states that if a new ...
  6. Limit-On-Open Order - LOO

    A type of limit order to buy or sell shares at the market open if the market price meets the limit condition. This type of ...
Trading Center