Chapter 3 How to Verify Your Broker's NFA License?
1. A Brief introduction to NFA
The National Futures Association (NFA) is the self-regulatory organization for the U.S. derivatives industry, including on-exchange traded futures, retail off-exchange foreign currency and OTC derivatives (swaps).
NFA, starting to operate in 1982, is a non-profit, independent regulatory organization and is financed from membership dues and assessment fees.
Congress passed legislation in 2000 and 2008 requiring firms acting as counterparties to retail Forex transactions, as well as Forex pool operators, trading advisors and introducing brokers to register with the CFTC and become members of NFA.
Basically, members of NFA can be divided into six categories: Commodity Pool Operator(CPO), Commodity Trading Advisor(CTA), Future Commission Merchant(FCM), Forex Dealer Member(FDM), Introducing Broker(IB) and Swap Dealer(SD), but only those registered in CFTC as Retail Foreign Exchange Dealers(RFEDs) are entitle to accept retail clients.
Notably, by now only there retail Forex brokers—Gain Capital Group,OANDA, and IG Group are regulated by NFA.
2. Steps to Verify a NFA License
For any trader who is looking for an NFA-regulated broker, it is a very simple process to check whether a Forex broker is in good standing with the body’s register.
Here are the steps:
Step 1
Go to the NFA Background Affiliation Status Information Center(BASIC) website:
https://www.nfa.futures.org/basicnet/
and type the firm name, pool name, or NFA ID in the search bar.
If a broker is regulated by the NFA, it is a requirement that their ID number is stated on its website, which makes it even easier to check.
Step 2
Confirm the regulatory status.
·If the firm is a member of NFA, and under its regulation, you will see the following address:
·If the firm is not a member of NFA, and isn’t regulated by it, you will see the following statement:
Step 3
Check the business address, phone number and business name of the firm to see if they are consistent with the information listed in the website you are trading with.
Step 4
This is the most important step:check if your broker is a RFED(Retail Foreign Exchange Dealer),in other word, if it has the right to operate retail Forex.
You can find out Under the module CFTC Registered.
For more detailed information, you can also click into View Details under the the module Activity Status. An example of qualified retail Forex broker would be like this:
