The National Futures Association (NFA) is a self-regulatory organization reporting to the U.S. Commodity Futures Trading Commission (CFTC). The NFA focuses on overseeing and regulating the U.S. futures industry, and many forex brokers, such as FXCM, Forex.com and Oanda choose to register with it for their U.S. operations.
NFA’s main scopes of operations are fraud and abuse prevention, handling dispute resolution and drafting regulatory frameworks. NFA-registered brokers are obliged to maintain a net capital of at least $20 million to guarantee customers’ positions, which makes them extra safe to invest with.
Brokers that are registered with the NFA have to comply with an extensive set of rules. Unfortunately these rules are often limiting from traders' prospective but there is no way aroud them.
The most important NFA rules concern trading strategies, leverage and hedging:
- The FIFO Rule: The FIFO (first in, first out) policy requires traders to close their oldest trades first whenever they have more than one position open on the same currency pair. Brokers who are not registered in the USA or with the NFA are not obliged to obey the FIFO rule.
- Hedging is also not allowed in the USA and NFA-authorized brokers are to prevent it.
- The third major difference between U.S. brokers and the ones registered in other parts of the world is the leverage requirement. NFA mandates brokers to offer a leverage of up to 1:50, whereas European and other brokers can offer you leverage as high as they want (some brokers would go as high as 1:2000).
Below is a list of NFA/CFTC registered forex brokers.
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