If you are a forex trader you should know what your broker's regulation is. There is a lot of regulation in the world.

CFTC and NFA

If you are a forex trader, you should know your broker's regulations. There is a lot of regulation in the world. Almost every country has its own regulation, but if you are a forex trader from the United States, you should be proud. We all know the US has one of the most solid and bona fide legal guarantees for the best forex broker, they are CFTC and NFA.

What are the CFTC and NFA?

  • CFTC: Developed in 1974 to protect individuals in futures and commodities trading
  • NFA: An independent self-regulatory organization for the US futures and derivatives markets

These agencies are totally useful in deciding the quality broker. What are they enforced?

 

Commodities Futures Trade Commission (CFTC)

The agency is so popular in the United States and has licensed many brokers. CFTC was developed in 1974 to protect individuals in futures and commodities trading. When the currency on markets is categorized as part of the future, this agency has the right to protect traders from fraud.

Since 1974, this agency has made many changes, improving trading conditions and creating a level playing field for everyone. The main mission of this agency is to protect all kinds of market users related to the sale of a commodity, financial futures, and options from fraud, manipulation, and abusive practices.

If you are a forex trader, the license from this agency shows a good signal. If this agency has licensed a broker, there is no doubt the broker has good quality. Before CFTC releases a license for brokers, several conditions should be met. This regulatory agency will soon help you determine if a forex company is reliable or trustworthy.

 

CTFC Enforcement

Using its Division of Enforcement, the Commission conducts investigations into breaches of the Commodity Exchange Act (CEA) and the regulations set forth by the Commodity Futures Trading Commission (CFTC).

The violations investigated by the Commission's Division of Enforcement include:

1. Fraud:

  • Fraudulent solicitation
  • Misappropriation of customer funds
  • Issuing false customer account statements
  • Mishandling customer funds
  • Ponzi schemes
  • Affinity schemes

2. Market Manipulation:

  • Attempted market manipulation
  • Disruptive trading practices
  • Fictitious and non-competitive transactions
  • Illicit trading strategies designed to manipulate or attempt to manipulate prices
  • Spoofing (entering an order with the intent to cancel it before it is consummated in a complete transaction)

3. Trade Practice Violations:

  • Wash sales
  • Fictitious sales
  • Noncompetitive transactions
  • Violation of position limits
  • Noncompetitive exchange of futures for physical transactions opposite each other
  • Unauthorized swap transactions
  • Inadequate oversight of traders
  • Undercapitalization
  • Improper controls and supervision
  • Improper handling and/or segregation of customer funds
  • Failing to comply with applicable record-keeping and audit trail rules
  • Creating after-the-fact trading records containing fictitious information that was submitted for clearing

 

2. National Futures Association (NFA)

The next bona fide regulator in the United States is the National Futures Association (NFA). This is an independent self-regulatory organization for the U.S. futures and derivatives markets. Think of the Commodities Futures Trade Commission (CFTC) as a big brother and the National Futures Association (NFA) as a little brother.

This organization strives every day to develop rules, programs, and services to maintain market integrity, protect investors, and assist members in fulfilling responsibilities for agreed rules. This is done so all members can safely do business publicly on the US futures exchange.

NFA's mission is to ensure futures industry integrity, protect market participants, and enforce NFA's members to meet their regulatory responsibilities. In the United States, everyone who conducts futures or options on futures business with the public must be registered with the CFTC and a Member of the NFA.

Briefly, investing and trading is a high-risk business. There is a lot of aspects that make the participant get robbed by illegal or unregulated company. So, that's why following the guidance of a regulatory agency is important if you want to be an investor or trader.

You must follow these two main agents in the United States to decide on the most qualified broker. When you want to choose a futures company or brokerage, you should first check their regulation. If they have been licensed by one of the agencies above, it must be a good company and worthy.

The National Futures Association (NFA) is a self-regulatory organization that operates in the United States and oversees the derivatives industry. Its primary tasks and responsibilities include:

  • Registration and Membership: Under the Commodity Exchange Act (CEA), specific entities and individuals engaged in derivatives trading must undergo registration with the Commodity Futures Trading Commission (CFTC). Additionally, CFTC-registered firms must become members of the National Futures Association (NFA).
  • Rulemaking: Self-regulation entails identifying industry best practices and implementing them as mandatory standards across the entire industry.
  • Enforcement and Registration Actions: NFA takes disciplinary actions against Members when appropriate.
  • Member Education & Resources: NFA offers various educational opportunities to assist its members in comprehending their regulatory obligations.
  • Arbitration: NFA provides a cost-effective and streamlined arbitration program to assist customers and Members in resolving futures- and forex-related disputes.
  • Investor Protection: NFA provides various resources to aid investors in conducting due diligence before making investment decisions.
  • Outreach Programs: NFA provides training, as requested, to regulators, exchanges, and self-regulatory organizations from across the globe.
  • Market Regulation: NFA delivers regulatory services to designated contract markets (DCM) and swaps execution facilities (SEF), with each platform responsible for self-regulation in monitoring trading activities.

 

NFA and CFTC Brokers

Usually, US brokers are regulated by both CFTC and NFA. Some notable examples of NFA and CFTC brokers are:

  1. TD Ameritrade: Regulated by NFA (license number: 0313199) and a member of CTFC. Offers 0 commission trading for their clients as well as providing good educational programs.
  2. IG Broker: A member of the CTFC and regulated by NFA (license number 0509630) and equipped with a spread as low as 0.8 pips and an award-winning mobile trading platform.
  3. OANDA: This broker offers lower spreads on their premium account. OANDA is regulated by NFA (license number 0325821) and is a member of the CFTC.
  4. AMP Global: Regulated by NFA (license number: 0412490) and a member of CTFC. Raw spread starts from 0.5 pips and leverages up to 1:100.
  5. Interactive Brokers: Regulated by NFA (license number 0258600) and a member of CTFC. This broker offering low cost trading with no minimum deposit.