Most popular reads

A Comprehensive Guide To NFA Forex Regulation

Organized By
Feb 23
09:03 AM - 09:03 AM
Big Data

For those within the derivatives industry in the USA, you may already be more than a little aware of just who the NFA are. For those that don’t know, however, let us explain. The NFA is a regulatory agency within the US, with headquarters based in Chicago, that regulates and oversees activity by a range of firms that offer services within the derivatives market. This can include anything from OTC derivatives to Forex. While this information might suffice for those who don’t need to act under NFA regulation, those within their rules need to know what is expected of them. Here, we’re exploring the NFA and their regulation on Forex so read on to find out more!

Who Are The NFA

The American Congress founded the NFA back in 1982 as a result of a need for farer practices and better conduct from all kinds of organisations. Any firm that dealt with the general public in the way of services in retail or trading would be regulated and watched by the NFA, but rather than a hindrance, this was actually designed to help these firms and their consumers. Any firm offering derivatives related services could become a member of the NFA and as a result, had to be willing to adhere to strict guidelines and certain standards. The NFA is, of course, still going and not only acts as a safeguard for investors, but is also a type of platform for consumers and firms to interact with fairness and ease.

Protection Of Consumer Rights

The NFA does so much more than offer safeguarding for new FinTech start-ups or financial institutions. In fact, one of the main focuses of the NFA is to protect the public, however this has only come about in recent years. The NFA have begun working with other organisations such as CFTC, CME Group and many more to completely overhaul regulatory guidelines to suit consumer rights. In 2011, the NFA have worked to safeguard client funds against fraud or abuse and with brand new requirements for audits and regular reports, this has opened the industry up to far more transparency.

Compliant members of the NFA also have to ensure that all customer funds are kept separately from their main accounts in order to keep them safe and secure. This ensures that, in the case of liquidation or bankruptcy, consumers will have their funds rightfully returned to them. Nearly all of the NFA’s members are proving to be compliant to new regulations, which not only protects the consumer, but the NFA too.

Advantages And Disadvantages

The NFA regulation certainly has mixed reviews, and while some of this can be down to a lack of education on the subject, there are undoubtedly advantages and disadvantages that are worth taking into consideration:


  • NFA regulation ensures that all client funds are kept safe and segregated from business finance. If the business were to go bust, clients could have their funds returned to them.
  • The NFA acts as a platform for the resolution of disputes between consumers and NFA members. This ensures that the company remains honest, and protects consumers from fraud.
  • If your broker is NFA regulated, you can rest assured that they are adhering to all regulation, and you will even be allowed access to the results of screening to see a company’s financial profile.


  • The NFA and the CFTC are unfortunately known for putting their nose where it may not be wanted. Freedom of traders can be put at risk with certain trading restrictions, however when these restrictions are protecting customer rights, it can be a difficult battle to fight.
  • The NFA enforces low leverage, no-hedging policies and scalping rules that can all act as a deterrent for new traders.

Who Is Affected?

To become a member of the NFA and to therefore be affected by their regulations, you must be a forex broker, brokerage firm, swap dealer, signals provider or any other associates. After legislations passed in 2000 and 2009, any and all organisations operating within the derivatives market on US soil must join the NFA to be able to operate legally, and must also adhere to all rules and regulations. Failure to do so will result in being penalised, usually with legal action.

Finding a broker who operates within NFA regulation is a must for all new and existing traders. Those who don’t are unregulated and probably can’t be trusted. However, while NFA regulation can usually assure a level of trust with the company, it’s important to do your research to ensure you’re choosing the right broker for your needs and experience level. Hopefully this has given you an insight into the NFA and just what their regulation means for those acting in the derivative market so you can go forth and trade with extra peace of mind and a better understanding!


Chicago startup guides

Best Companies to Work for in Chicago
Inside the Best Software Engineer Jobs in Chicago
Tour the Coolest Offices in Chicago Tech
Inside the Best Sales Jobs in Chicago
Your Guide to the Best Perks at Chicago Tech Companies
Your Guide to Healthtech in Chicago
Inside the Best Data Science & Data Analyst Jobs in Chicago
Inside the Best Marketing Jobs in Chicago