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NFA

BrokerSC, on November 30, 2021 in the category:
Regulation Companies + List


National Futures Association: In 1974, the United States Congress established a federal regulatory agency called the Commodity Futures Trading Commission (CFTC).

What is the National Futures Association – NFA?

Under the Commodity Exchange Act, Congress gave it jurisdiction over commodities and futures trading, and allowed the futures industry to create a national self-regulatory organization, which in 1982 would be called the National Association of Futures (NFA – National Futures Association).
In 1998, in order to create a transparent environment, the NFA created BASIC, which is, in essence, an online database that shows all the disciplinary actions of the people and companies that manage the market.
As a means of protecting investors around the world, the NFA's seal of approval on any company it deems capable of providing adequate financial services, such as Forex, financial options, futures and other financial instrument brokers, has the value of offering an exceptional guarantee regarding the chances that the investor's money will be safe with these companies, since the NFA has the federal backing of the United States government. In this way, an investor who has his money invested with a broker that is registered and regulated by the NFA can be confident that his capital is insured and that it will be managed under transparent practices. Otherwise, the NFA allows formal customer complaints to be addressed to the companies it regulates.
Another of the most important aspects that the NFA regulates is its famous AML (anti-money laundering) or anti-money laundering policy, which in short is a set of procedures designed to protect brokers from people who try to launder money or finance the terrorism.
With this set of strict policies, we as operators will have the security that our money will be safe and the brokers will have the guarantee that they will not have in their ranks of clients any undesirable person who will try, with the funds earned in the operations, to launder the money or use it in illegal activities.
Because the regulations in the United States for companies that offer financial services are stricter than in other countries, Forex brokers registered with the NFA must comply with a series of regulations in order to provide their services to clients in that country. Regarding traders, some of the most important regulations are as follows:
  • Maximum leverage of 1:50.
  • Hedging strategies are not allowed. This means that you cannot open a buy position and a sell position on the same instrument at the same time. If a trader tries to open a position in the opposite direction to another open position, he cancels it according to the magnitude of its volume. For example, if we have a long position of 1 lot in the EUR/USD and we open a short position of 1 lot in the same pair, both are cancelled, or in other words the long position ends up being closed.
  • Open positions must be closed according to FIFO (First In First Out) criteria. This means that the trader must close his open positions on an instrument in the same order in which he opened them.
All brokers registered with the NFA are given an identification number which we can use to look up their key details on the NFA website.

Some General Tips

Entering the NFA website (www.nfa.futures.org) we can perform a search through an identification number that the NFA provides to registered companies, so that we can obtain all the information of the broker at in which we are interested to invest in the market. This website includes an individual search engine that allows the combined search of the list of all the companies and individuals that coincide with the data entered by the broker in which we are interested. For example, if we perform a search for the keyword “FXCM”, the results show both individuals or company name and all possible data.
Attention: If the broker that we are going to choose to operate in the market is not on the list, this does not mean that it is fraudulent, that it is not regulated or that it does not offer the security of the brokers that do appear. This may mean that the company is applying or simply does not belong to the jurisdiction of the United States and therefore, it is necessary to look for it in the other government entities of the country to which they belong. To learn more, you can review the other control entities available on this blog.


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