The National Futures Association, the regulatory body for Forex brokers in the United States, already had a reputation for being the strictest regulatory agency in the world, but the agency is continuing to support this reputation by continuing to propose regulation that will crack down on futures commission merchants (FCMs) dealing with client segregated funds.
The new proposal was approved by the NFA's Board of Directors on May 17th and was subsequently passed to the CFTC for approval. The primary stipulations include the requirement that all FCMs codify in writing the procedures governing the maintenance of the firm's residual interest in its client segregated funds. Each FCM must stipulate a percentage or dollar amount that it intends to maintain as residual interest in each account, so that the FCM will be able to comply with the segregation requirements.
Each FCM will also be required to adhere to stricter monthly reporting to the NFA, with the understanding that some of the reported information may be published on the agency's website at a future date. Finally, no futures commission merchant may withdraw or use funds from its customer segregated fund account in an amount which surpasses 25% of the FCM's residual interest in the account without pre-approval from the CEO or CFO.
Should they be confirmed (which is likely), the proposed requirements above will apply not only to segregated fund accounts for American citizens, but for all segregated fund accounts being held by NFA regulated FCMs, even those of foreign account holders.
It should be noted that these regulations will apply specifically to FCMs, or primary Forex brokers, rather than to introducing brokers (IBs), which make up a significant percentage of the US Forex market.