Futures SRO Talks Budget

The National Futures Association (NFA) is an SRO which governs futures participants and Futures SRO Talks about its budget too.

“In 1974, Congress established the Commodity Futures Trading Commission (CFTC). The same legislation that established the CFTC also authorized the creation of registered futures associations, giving the industry the opportunity to create a self-regulatory organization. NFA’s formal designation as a “registered futures association” was granted by the CFTC on September 22, 1981. NFA began its regulatory operations in 1982.” According to its website.


NFA held its board meeting in May in Washington D.C. and Tom Sexton, NFA’s President and Chief Executive Officer (CEO) along with Maureen Downs, the Vice-Chairman of the Board of NFA, put together a video summarizing how it went.

The board meeting was attended by some VIPs Downs noted; the meeting was also attended by: Colin Peterson, a Democrat from the State of Minnesota, who is the Chair of the House Agriculture Committee.

It was also attended by Dawn Stump and Dank Berkovitz, CFTC Chairs and James McDonald, CFTC’s Head of Enforcement.

Downs said NFA hosted a reception for members of Congress, their staff, and other industry professionals.

“Tom, I think you would agree that our Washington meeting and reception is a wonderful opportunity for NFA to showcase the important role it plays in regulating derivatives markets.” Downs said.

Downs said at the meeting the board approved a $107 million operating budget for fiscal year 2020 which begins on July 1, 2019.

This includes a five percent increase in spending, Downs said.

There is a complex relationship between NFA, CFTC, and derivatives players and, in announcing a surcharge on certain firms, Downs provided an example when she stated. “The budget also includes a one thousand seven hundred fifty due surcharge for certain firms which are approved as swap firms, this would include IB’s, CTA’s, CPO, and FCM’s for which NFA is the DSRO (Designated Self-Regulatory Organization). The surcharge pending approval by the CFTC would go into effect January 1st, 2020.”

IB is an introducing broker, defined as, “an individual or organization that solicits or accepts orders to buy or sell futures contracts, commodity options, retail off-exchange forex contracts, or swaps but does not accept money or other assets from customers to support these orders.” On the NFA’s website.

A CTA is a commodity trade advisor, defined as “an individual or organization that, for compensation or profit, advises others, directly or indirectly, as to the value of or the advisability of trading futures contracts, options on futures, retail off-exchange forex contracts or swaps.” On NFA’s website.

A CPO is a commodity pool operator, defined as, “an individual or organization that operates a commodity pool and solicits funds for that commodity pool. A commodity pool is an enterprise in which funds contributed by a number of persons are combined for the purpose of trading futures or options on futures, retail off-exchange forex contracts, or swaps, or to invest in another commodity pool. On the NFA’s website.

FCM is “an entity that solicits or accepts orders to buy or sell futures contracts, options on futures, retail off-exchange forex contracts or swaps, and accepts money or other assets from customers to support such orders.” Also, according to NFA’s website.

The NFA, on its site, said member firms who don’t do any SWAPs trading but are registered as  IB’s, CTA’s, CPO, and FCM’s should do this, “In order to avoid this surcharge, a current or pending swap-approved Member firm that is not engaged in swaps activities and is not required to be a swap-approved firm should withdraw its swap approval status by completing Form 7-W using NFA’s online registration system (ORS).

“An authorized ORS user can access the Form 7-W by going to the ORS Links menu, selecting ‘Update/Withdraw Registration Information’ and then clicking on ‘Process a Firm Withdrawal Request.’ Under the Withdrawal Categories section of the Form 7-W, check the box next to the Swap Firm category to withdraw the firm’s swap approval status.

“To ensure proper processing, NFA encourages firms to file the Form 7-W prior to January 1, 2020. However, any firm that withdraws its swaps approval prior to the firm’s 2020 renewal date will not be required to remit the additional surcharge.”

Meanwhile, the relationship between NFA and CFTC is like FINRA’s relationship with the Securities and Exchange Commission (SEC). All its rule changes must be approved, which is what that surcharge is waiting.

The surcharge was not the only change for swaps.

Sexton said that there will be new SWAPs proficiency requirements which will be rolled out end of January 2020. “Those particular requirements we have been working on this past and they are almost complete so we will be prepared to roll them out at the end of January.” Sexton said.