National Futures Association

The profile

NFA describes itself as the industrywide, self-regulatory organisation for the US derivatives industry. The legislation that created the Commodity Futures Trading Commission in 1974 also authorised the creation of registered futures associations, and the Commission granted NFA that designation on 22 September 1981; it began regulatory operations in 1982. Its structure rests on mandatory membership: the Commodity Exchange Act requires certain firms and individuals doing business in the derivatives industry to register with the CFTC, and Commission regulations require, with few exceptions, that registered firms be NFA members. The Commission has delegated registration itself to NFA, which therefore holds the gate rather than merely standing beside it. Beyond registration it writes and enforces its own rules, examines members for compliance, brings disciplinary actions, administers an arbitration programme for futures and forex disputes, and supplies regulatory services under contract to designated contract markets and swap execution facilities that carry self-regulatory duties of their own. It is financed by member dues and fees and by assessment fees on users of the derivatives markets, and its board mixes member and public directors. For an event contract venue the practical consequence is that the duty not to mislead comes from two directions at once: the Commission's own anti-fraud rules, and NFA Compliance Rule 2-29 on communications with the public.