The National Futures Association (NFA) the self-regulatory organization for the U.S. derivatives markets has issued a new compliance rule to address member conduct. The new rules supplement the requirements issued in 2018.
The NFA explained to Commodity Futures Trading Commission (CFTC) Secretary Christopher Kirkpatrick in February that the NFA has “more than 100” members engaged in digital asset commodity activities, but has been unable to address fraud or misconduct by those members. The 28 letter submitting the proposed new rules for approval.
The new rules are modeled on the National Futures Association's anti-fraud rules for exchange-traded futures, swaps and retail foreign exchange. The NFA is the only registered self-regulatory organization authorized by the CFTC, giving it similar status to the SEC's Financial Industry Regulatory Authority. Currently, the NFA only imposes disclosure requirements on its members using digital assets to engage in physical commodity activities, which are detailed in a document. Members will be guided on fraud, trading principles and employee oversight when the new rules come into effect on May 31. This rule only applies to Bitcoin and Ethereum, because only they "have a relevant merchandise interest certified as a registered entity under Part 40 of CFTC regulations."
CFTC Commissioner Caroline Pham issued a statement applauding the new rules: “This is a clear example of using existing powers to ensure customer protections are in place, as registration with the NFA requires firms and individuals to comply with NFA rules.”
Pham added that the NFA “may amend this rule in the future to include other digital asset commodities” in addition to BTC and ETH. She noted that the NFA's foreign exchange rules predated Congress by five years giving the CFTC authority to regulate the market. She added: “I think that in order to extend our regulatory framework to spot digital asset commodity markets, it is common sense to start with what we have and what works.”
