US NFA Changes Retail Forex Trade Costs Disclosure Rules

In the latest US financial markets regulation developments, US NFA changes retail Forex trade costs disclosure rules. What exactly has changed for the Forex dealer members in the US?

12 January, AtoZForex One of the key regulatory bodies for the US financial markets, the National Futures Association (NFA), has made a public announcement today. The self-regulatory organization that controls the US derivatives industry has stated that it has approved certain changes in regards to the disclosure rules of retail Forex costs.

US NFA Changes Retail Forex Trade Costs Disclosure Rules

The approved amendments are scheduled to take effect on April 5, 2018. The new changes require Forex dealer members to provide extra trade disclosures and firm-specific information. The data should include commission and any other fees involved. Only last month, the NFA has submitted the proposed rule changes to the CFTC for the purpose of review.

Specifically, the amended framework would oblige STP Forex brokers to disclose the full breakdown of any mark-ups or mark-down they put on the price they receive to execute the orders of the customer. This information will need to be provided upon client demand.

For the non-STP model brokers, the rule amendment implies disclosing the mid-point spread cost. The NFA defines this cost as the discrepancy between the price of order execution and the mid-point of the bid/ask spread at the time of order execution.

NFA clarifies the prohibition on price adjustments

The official announcement from the NFA also outlines clarification regarding the prohibition on price adjustments. It reads:

“The amendment to NFA Compliance Rule 2-43 clarifies that the prohibition on price adjustments does not include situations in which an FDM favorably adjusts all customer orders that were adversely affected by circumstances beyond the customer’s control. Circumstances beyond the customer’s control include, but are not limited to, issues with third-party vendors such as liquidity providers, trading platforms, and related connectivity providers.”

In addition, Forex dealers in the US should clearly display a notice on its website that informs their customers of their ability to request this information.

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