The Commodity Futures Trading Commission has approved amended rules and a new interpretive notice ﬁled by the National Futures Association intended to enhance protections for customers in the retail foreign exchange markets. The rules also strengthen minimum capital requirements for retail foreign exchange dealers and require robust risk management practices.
“These changes will increase transparency by improving the disclosure that each dealer must make to its customers about the risks of engaging in off-exchange foreign currency trading and the dealer itself,” CFTC Chairman Tim Massad said in a statement.
The proposals require retail foreign exchange dealers to collect security deposits from institutional counterparties as well as retail customers. In addition, the proposed rules prohibit retail foreign exchange dealers from acting as counterparties to other dealers, including foreign dealers, if such other dealers do not collect appropriate security deposits from their respective counterparties.
“I am particularly pleased that the proposals include a requirement that each retail forex dealer member must establish, maintain and enforce a risk management program that takes into account not only market risks, credit risks and legal risks, but also operational risks, capital risk and risks attendant to liabilities to retail foreign exchange customers,” CFTC Commissioner Sharon Bowen said.