Release: #4662-02
For Release: June 27, 2002

CFTC Approves NFA Rules on Retail Foreign Currency Trading

Washington, D.C. -- The Commodity Futures Trading Commission has approved a National Futures Association (NFA) bylaw and rule that create a "Forex Dealer Member" membership category and prohibit fraud by these members. The Commodity Futures Modernization Act of 2000 amended the Commodity Exchange Act to provide that the offering of foreign currency futures or options to retail customers on an off-exchange basis is unlawful unless the counterparty is one specifically approved in the Act, such as a futures commission merchant registered with the CFTC.

Under the new rule, a "Forex Dealer Member" is any NFA member that derives 35% or more of its revenue as a counterparty to off-exchange foreign currency futures or options transactions with retail customers. Further, the rule prohibits any such member from fraudulent or manipulative behavior involving off-exchange foreign currency futures and options transactions with retail customers.

James E. Newsome, Chairman of the Commission, commented:

"Off-exchange retail foreign currency trading is an area that historically has involved substantial fraudulent activity. I applaud NFA for taking a significant step in signaling that fraudulent activity in this area will not be tolerated. I look forward to working with the NFA in the future to make sure that the scope of this rule serves as an appropriate deterrent of all fraud in this business."

Copies of the Commission's approval letter can be obtained by contacting the Office of the Secretariat, Three Lafayette Centre, 1155, 21st Street, N.W., Washington, DC 20581, (202) 418-5100 or by accessing the Commission's website.