What is the National Futures Association – NFA?
In 1974, the U.S. Congress established a federal regulatory agency called the Commodity Futures Trading Commission (CFTC). According to the Commodity Exchange Act, the Congress gave CFTC complet jurisdiction over commodities and futures trading, and allowed the futures industry to create a national organization of self-regulation, which in 1982 became known as the National Futures Association (NFA ).
In 1998, as a way to create a transparent environment, the NFA created BASIC, which is essentially an online database that shows all disciplinary actions for individuals and companies that manage the market.
As a way to protect investors from around the world, the seal of approval provided by the NFA to any company that it deems capable of providing adequate financial services such as Forex brokers, financial options brokers, futures brokers and other companies related to financial sector, has the value to offer an exceptional warranty that the investor’s money is safe with these companies, as the NFA has the backing of the federal government of United States. Thus, all investors who invested money with a broker that is registered and regulated by the NFA can be confident that their capital is secure and will be managed under transparent practices. Otherwise, the NFA can conduct formal investigations for customer complaints against the companies it regulates.
Likewise, the NFA monitors that their registered companies have good practices with respect to the financial services related to the market that they offer to their clients.
Other very important aspect included in the NFA regulation is its anti-money laundering policy, which in essence is a set of procedures designed to protect brokers from persons attempting money laundering or financing terrorism. With this set of strict policies we as operators have confidence that our money will be safe and brokers will have to guarantee that they will have in its ranks of customers who will try any undesirable person, with the funds earned on operations, launder money or use in illegal activities.
Because the regulations in the U.S. for companies offering financial services are more stringent than in other countries, Forex brokers registered with the NFA must meet a series of regulations to provide services to customers in that country. With respect to traders, some of the most important regulations are:
- Maximum leverage of 1:50.
- The hedging strategies are not allowed. This means that a trader can not open a long position and a short position on the same instrument at the same time. If a trader tries to open a position in the opposite direction to another open position, both positions are canceled according to the magnitude of their volume. For example, if we have a long position of 1 lot in the EUR/USD and we open short position of 1 lot in the same pair, both are canceled, or in other words the long position is closed.
- Open positions are closed according to FIFO (First In First Out) rule. This means that the traders must close their open positions in an instrument in the same order in which they opened them.
*All brokers registered with the NFA receives an identification number which can be used to find their main data in the website of the NFA.
General Advices Related to NFA
In the NFA website (www.nfa.futures.org) we can perform a search using an identification number provided by the NFA to the registered companies, so we can get all the information of the broker in which we are interested to invest in the market if this broker is registered with the NFA. This website includes a search feature that shows a combined list of all companies and individuals that match the entered data about the broker of our interest. For example, if we perform a search for the keyword “Ikonfx”, the results show both individuals related with this broker and the corporate name of the company and all relevant data available
Note: If the broker that we choose to trade in the market is not in the list, this does not mean that this company is fraudulent, is not regulated or does not offer the same leve of security of the brokers that are listed. This may mean that the company is applying or simply does not belong to the jurisdiction of the United States and therefore we need to search in the regulatory government agencies in the country to which it belongs. To learn more, please review the information about other financial regulatory agencies that appear in this site.
List brokers regulated by the NFA
The following is a list of brokers that are currently regulated by the NFA:
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Other companies regulated by the NFA
- Zulutrade: Company specialized in Forex autotrading.
- Collective2: Company specialized in autotrading services to trade with currency pairs (Forex), options, futures and stocks.