Forex Transactions: A Regulatory Guide

The Commodity Exchange Act (Act) gives the Commodity Futures Trading Commission (CFTC) jurisdiction over off-exchange (also called over-thecounter or OTC) foreign currency futures and options transactions as well as certain leveraged foreign currency transactions offered to or entered into with retail customers. Under the Act, only certain regulated entities may be counterparties to these off-exchange trades with retail customers. These regulated entities are certain registered futures commission merchants (FCMs) and registered Retail Foreign Exchange Dealers (RFEDs). All other off-exchange futures and options transactions with U.S. retail customers are unlawful unless done on or subject to the rules of a regulated exchange.

NFA's forex requirements apply to all NFA Members that engage in forex activities with customers. This Guide should help our Members who are subject to NFA's forex requirements understand those requirements. This Guide does not, however, include every requirement that may apply and does not deal with every detail of the requirements it does include. In addition to this Guide, you should read NFA's rules and interpretive notices and the CFTC's rules, interpretive notices and letters regarding forex transactions. NFA's most significant rules and interpretive notices regarding forex transactions are included in Appendices 1 and 2.

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