December 21, 2007, could be a day of reckoning for forex brokerages.
posted Novenber 30, 2007

NFA announces effective date for increased minimum net capital requirements for Forex Dealer Members

Beginning on December 21, 2007, NFA Forex Dealer Members (FDMs) will be required to maintain a minimum net capital requirement of $5 million. The increase also raises to $10 million the amount of capital required for a security deposit exemption under NFA Financial Requirements Section 12(b). The amendments to NFA Financial Requirements Section 11 and the Interpretive Notice entitled "Forex Transactions" were approved by the Commodity Futures Trading Commission (CFTC) in late September.

New guidelines could alter forex brokerage space. Thatís the day new requirements passed by the National Futures Association (NFA) will go into effect, mandating every Forex Dealer Member (FDM) that is a member of the NFA have at least $5 million in capital. Firms offering more than 50:1 leverage will be required to have at least $10 million.

Many forex firms are below that capital threshold, but what happens to them on Dec. 21 is still unclear. Many say they will have the necessary capital by that time, others are likely to be purchased by larger firms, and a few will probably go out of business.

In addition to the increased capital requirements, the amendments eliminate the concentration charge and replace it with restrictions on the types of firms with which an FCM may maintain assets and cover its exposure for purposes of CFTC Regulation 1.17.

"We have taken these steps because a Forex Dealer Member's activities create greater financial risks than the type of transactions involved in traditional exchange-traded futures and options," says NFA General Counsel Tom Sexton. "The increased capital requirement will result in greater customer protection."

FDM capital requirements have been a great cause of concern recently. During the past ten years, NFA has issued 11 emergency enforcement actions against FDMs for failing to demonstrate compliance with NFA financial requirements. In addition, since March 2007, nine different FDMs have fallen under the early warning requirement of $1.5 million.

"Customers trading off-exchange forex do not receive a priority under the Bankruptcy Code in the event of a firm's insolvency," says Sexton, "so it's crucial that FDMs have adequate capital."

NFA is closely monitoring its FDMs to ensure that those firms that wish to continue operating past December 21 will take the necessary steps to meet their new financial requirements.

Questions concerning these requirements should be directed to Sharon Pendleton, Director, Compliance ( or 312-658-6540) or Valerie Kretschmer, Field Supervisor, Compliance ( or 312-658-6588).

recommended forex brokers
FxPro  FxPro
GFC Markets  GFC Markets
Finexo  FBS
Finexo  Finexo
FxCompany  FxCompany
LiteForex  LiteForex
HY Markets  HY Markets
Dukascopy  Dukascopy
GFX Group SA  GFX Group SA
MoneyForex  Money Forex
dbFX Deutsche Bank  dbFX Deutsche Bank
MF Global UK Limited  MF Global UK Limited
Sponsored links


Featured list of the forex brokerage firms, online currency trading and forex trading related services.

Forex Trading Software | Futures Brokers | Forex Brokers  © 2013 "" All Rights Reserved
forex broker germany