What Is the National Futures Association (NFA)
The National Futures Association (NFA) is an independent self-regulatory organization for the U.S. futures and derivatives markets. Designated by the Commodities Futures Trade Commission as a registered futures association, the NFA's mandate is to safeguard the integrity of the derivatives markets, protect investors, and ensure that members fulfill their regulatory obligations.
The NFA operates at no cost to the taxpayer and is primarily financed by membership dues, fees, and assessments paid by members and other users of the derivatives markets.
Understanding National Futures Association (NFA)
NFA membership is mandatory for all participants in the futures market, providing assurance to the investing public that all firms, intermediaries, and associates who conduct business with them on the U.S. futures exchanges must adhere to the same high standards of professional conduct.
The NFA began operating in 1982, subsequent to the establishment of the Commodity Futures Trading Commission (CFTC) in 1974; this legislation also authorized the creation of registered futures exchanges, thereby facilitating the creation of a national self-regulatory organization.
In addition to regulation of the U.S. futures market, the NFA's duties and functions include registration, compliance, and arbitration. It combats fraud and abuse in the futures markets through a combination of rigorous registration requirements, stringent compliance rules, strong enforcement authority, and real-time market surveillance.
CFTC regulations also require, with few exceptions, CFTC registered firms to be NFA Members. All futures professionals required to register must undergo a thorough background investigation before they may register.
Futures professionals are broken out into the following categories.
In addition, the following non-U.S. firms and individuals must also register:
- Exempt Non-U.S. Firm - A non-U.S. firm that transacts business directly with U.S. customers solely in futures contracts and options traded on non-U.S. exchanges.
- Retail Foreign Exchange Dealer (RFED) - An organization that acts, or offers to act as a counterparty to an off-exchange non-U.S. currency transaction with a person who is not an eligible contract participant and the transaction is either a futures contract, an option on a futures contract, or an option contract (except options traded on a securities exchange); or offered on a leveraged or margined basis, or financed by the counterparty.
- Floor Broker (FB) - An individual who purchases or sells any futures contracts, options on futures, or swaps on any contract market for any other person.
- Floor Trader (FT) - A person who purchases or sells any futures contracts, options on futures, or swaps on any contract market for such person's own account.