The National Futures Association (NFA) is a non-governmental organization that oversees the futures, commodities, and Forex markets in the US. Brokers must meet certain rules and pay fees to become members, and traders see NFA brokers as safer. The NFA settles disputes between brokers and investors and sets rules to protect traders.
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 to be the governing body of the futures and foreign exchange markets in the United States. Brokers who wish to be included in the National Futures Association must meet certain rules and pay fees to become a member. Traders often see brokers included in this group as safer than alternative brokers.
Created in 1982, the National Futures Association grew out of the Commodity Futures Trading Commission, which resulted from legislation by Congress. This is not a government agency, but was created as a result of government legislation. Brokers in the US can decide if they want to be listed in the National Futures Association or not. Most brokers choose to be included in the group because it provides them with greater credibility in the industry. Most investors look for brokers that are listed with the NFA because it gives them an impression of security.
If there is a dispute between a broker and an investor, the National Futures Association will step in and settle the dispute. He will listen to both sides of the story and make a ruling 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 dues to the National Futures Association. These fees are generally passed on to the brokers’ clients. Many times, brokers will charge a particular fee with each trade that is placed to cover these expenses.
The NFA has the ultimate goal of protecting the merchant. They accomplish this by making up rules that racers must follow. Often times, they also govern how traders can place trades and what types of leverage can be used on an account. These rules apply to traders in the futures market, the commodity market, and the Forex market.
The National Futures Association plays a vital role in the Forex market in the United States. For example, they set rules that prevent traders from hedging and limit the amount of leverage an individual trader can use. Many traders who want to avoid the rules imposed by the NFA have established accounts with brokers in other countries that are not subject to the same rules.
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