The National Futures Association (NFA) serves as the self-regulatory organization for the U.S. derivatives industry, which encompasses on-exchange traded futures, retail off-exchange foreign currency (forex), and over-the-counter (OTC) derivatives such as swaps. Designated as a registered futures association by the Commodity Futures Trading Commission (CFTC), the NFA is dedicated to maintaining the integrity of the derivatives markets, protecting investors, and ensuring that its Members fulfill their regulatory obligations.

NFA membership includes various entities such as swap dealers (SD), futures commission merchants (FCM), commodity pool operators (CPO), commodity trading advisors (CTA), retail foreign exchange dealers (RFED), introducing brokers (IB), and the associated persons (AP) of FCMs, CPOs, CTAs, and IBs. The organization aims to foster investor confidence by creating rules, programs, and services that uphold market integrity, as well as assisting in the resolution of consumer complaints.

Registration Screening

NFA conducts thorough screenings of applicants for CFTC registration and NFA membership to ensure they meet rigorous fitness and proficiency standards. The NFA has the authority to deny, revoke, suspend, or restrict the registration of any firm or individual, as the CFTC has delegated this responsibility to the NFA.

Compliance Rules

The NFA establishes and enforces rules that govern the business conduct of its Members, covering areas such as sales practices, recordkeeping, reporting, risk disclosure, discretionary trading, fee disclosure, and minimum capital requirements. The organization monitors compliance through risk-based examinations, reviews of Member filings, financial surveillance, and investigations of customer complaints.

Rule Enforcement

The NFA takes disciplinary action against Members who breach NFA rules or CFTC regulations. These actions can range from Warning Letters for minor infractions to formal Complaints. Penalties from Complaints may include expulsion, suspension, and fines of up to $250,000 per violation. The NFA often collaborates with the CFTC, FBI, and other law enforcement agencies to ensure thorough prosecutions.

Member Education

The NFA offers educational resources such as webinars, workshops, and reference materials to help Members understand their regulatory responsibilities.

Market Regulation

The NFA provides regulatory services to designated contract markets (DCM) and swap execution facilities (SEF), both of which have self-regulatory duties to oversee trading on their platforms.

Investor Protection

The NFA provides various resources to educate investors. Before engaging in the derivatives markets, investors should familiarize themselves with how these markets operate and conduct background checks on firms and individuals offering investments.

In 1974, Congress established the Commodity Futures Trading Commission (CFTC). The same legislation that created the CFTC also permitted the formation of registered futures associations, allowing the industry to establish a self-regulatory organization. The CFTC granted the NFA formal designation as a “registered futures association” on September 22, 1981, and the NFA commenced its regulatory operations in 1982.

The NFA’s Board of Directors serves as its primary governing and policy development body. The Board is composed of both Member Directors and Public Directors, ensuring representation from each membership category. Member Directors are elected by the Members they represent, maintaining the structure as much as possible.