NFA updates US Forex Broker Client Costs Disclosure Rules


Breaking news: NFA updates US Forex Broker Client Costs Disclosure Rules, obliging all Forex brokers to disclose all the per-trade costs information to clients on demand. Let’s discuss the specifics of the new US Forex regulatory requirement. 

6 December, AtoZForex One of the main US regulators of the financial markets, the US National Futures Association (NFA) has issued an announcement on its website. The announcement is specifically aimed at Forex brokers operating across the country.

NFA updates US Forex Broker Client Costs Disclosure Rules

The latest NFA announcement draws the attention of Forex market participants to the new disclosure requirements in regards to the transactions costs. From now on, the NFA obliges Forex brokers with the presence in the US market to provide a detailed information on transaction costs to their clients when needed.

For instance, in case a client demands the information about a certain transaction, the firm will need to provide the full breakdown. In addition, the NFA outlined that Forex dealers will also need to able to provide a detailed data on the per-trade costs. Moreover, US Forex brokers will need to disclose any commissions and any other fees in relation to every trade.

The official announcement from the NFA reads:

“Pursuant to Section 17(j) of the Commodity Exchange Act (“CEA”), as amended, National Futures Association (“NFA”) hereby submits to the Commodity Futures Trading Commission (“CFTC” or “Commission”) the proposed amendments to NFA Compliance Rules 2-36 and 2-43 regarding disclosure of retail forex costs. NFA’s Board of Directors (“Board”) unanimously approved these amendments on November 16, 2017, and NFA respectfully requests Commission review and approval of the proposed amendments.”

US STP Forex Brokers Information Disclosure Rules

Following on this, for brokers that execute their order flow through Straight Through Processing (STP), companies will need to provide the information on any mark-ups or mark-downs they set up on the price they have received.

Furthermore, brokers that do not execute their order flow via STP mode, have to disclose the mid-point spread cost. The NFA defines this point as the discrepancy between the price of execution the order of the client and the mid-point of the bid/ask spread at the time of the order execution.

Additionally, the US Forex brokers have to inform their clients properly about the new requirements. They also need to make sure that their clients are aware and are able to request the information from their brokerage.

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