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The National Futures Association (NFA) is a non-governmental organization that governs the futures, commodities, and forex markets in the US. Brokers must follow NFA rules and pay commissions to become members. The NFA mediates disputes and sets regulations to protect investors. Many traders prefer NFA-regulated brokers for their credibility and safety.
The National Futures Association (NFA) is an organization that provides information to investors in the futures, commodities and foreign exchange (Forex) markets. The organization is considered the governing body of the futures and forex markets in the United States. Brokers who wish to be included in the National Futures Association must abide by certain rules and pay commissions to become a member. Traders often consider brokers included in this group to be safer than alternative brokers.
Created in 1982, the National Futures Association emerged from the Commodity Futures Trading Commission, which resulted from legislation in Congress. This is not a government body, but was created as a result of government legislation. Brokers in the US can decide whether they want to be included in the National Futures Association or not. Most brokers choose to be included in the group because it gives them more credibility in the industry. Most investors look for brokers that are included in the NFA because it gives them a secure impression.
In the event of a dispute between a broker and an investor, the National Futures Association will step in and mediate the dispute. He will hear both sides of the story and pass judgment on the situation. This provides some level of protection for investors in the futures and forex markets.
Brokers who wish to be included in this organization must pay membership fees to the National Futures Association. These commissions are usually passed on to the brokers’ clients. Many times, brokers will charge a particular commission for every trade you make to cover these expenses.
The NFA has the ultimate goal of protecting the merchant. They do this by inventing rules that brokers are supposed to follow. Many times, they also regulate how traders can trade and what types of leverage can be used in an account. These rules apply to traders in the futures market, commodity market and forex market.
The National Futures Association plays a vital role in the Forex market in the United States. For example, they set regulations that prevent hedging by traders and limit the amount of leverage an individual trader can use. Many traders who wish to avoid the rules imposed by the NFA have opened accounts with brokers in other countries that are not subject to the same rules.
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