Onus now on dealers to guard against currency derivatives scams

Jointly announced by the US Commodity Futures Trading Commission (CFTC) and the National Futures Association (NFA), a self-regulatory agency, the new rules are targeted at futures commission merchants (FCMs).

During the last few years, some unscrupulous unregulated individuals and firms – often referred to as forex bucketshops - have been involved in fraudulent activity whereby they solicit retail customers for risky currency derivative transactions, using an FCM as the counterparty.

The new rules will require FCMs to supervise employees, agents and affiliates that act as counterparties to retail currency trades, maintain a minimum net capital requirement based on the value of open customer positions, and collect security deposits from customers. Daniel Roth, the NFA’s president and chief executive, said that by adopting these rules, the NFA had acted to “protect retail forex customers against unethical business practices and loss of funds due to insolvency or related problems”.

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