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Screenshot of a breaking news alert e-mail from Q2 2017
LeapRate has learned that the National Futures Association (NFA) has just sent a letter to the Commodity Futures Trading Commission (CFTC), in which if within 10 days no review is requested, the transaction fee is set to increase for each order segment a Forex Dealer Member (FDM) submits to NFA’s Forex Transaction Reporting Execution Surveillance System which is named “Fortress”. The Fortress system allows the NFA to act in its designated self regulatory organization (DSRO) role of surveilling the FDMs under its watch.
Specifically, the NFA requests that each Forex Dealer Member shall pay an assessment of $.004 instead of $.002 on each order segment submitted by the Forex Dealer Member to NFA’s Forex Transaction Reporting Execution Surveillance System. For purposes of this requirement, an order segment is a record of any line of data associated with an order, and includes when an order is added, modified, cancelled or filled.
The NFA will invoice the Member monthly for the Forex Transaction Reporting Execution Surveillance System assessment amount and the Member must send the dues to NFA within 30 days after the date of the invoice.
So what’s the explanation behind the fee hike?
NFA’s forex regulatory program currently obtains the revenue needed to operate the program from three sources:
(i) annual membership dues for FDMs for which NFA serves as the DSRO;
(ii) annual membership dues for non-FDM Forex Members; and
(iii) an assessment of $.002 on each order segment submitted to NFA’s Fortress by FDM Members. NFA utilizes Fortress to perform surveillance of FDMs’ trading activity.
NFA strives to ensure that each of its regulatory programs is financially self-sufficient and from Fiscal 2012 through Fiscal 2015, this three pronged revenue structure covered the forex regulatory program’s on-going operating costs.
However, recently it has become apparent that the current forex fee structure is not sufficient to adequately cover the costs NFA incurs with respect to the current forex regulatory program. In the current fiscal year, FY 2016, the revenue will marginally cover its costs. However, if there are no changes to the revenue structure, then the forex regulatory program is projected to operate at a deficit of several hundred thousand dollars.
As a result, in order to provide reasonable assurance that the forex regulatory program remains financially self-sufficient, NFA proposed to amend NFA Bylaw 1301(e) and the Interpretive Notice entitled Forex Transactions to increase the Fortress segment fee from $.002 to $.004.
Members of the NFA are Forex Dealer Members (FDMs) if they are registered with the CFTC as retail foreign exchange dealers (RFEDs) or if they are the counterparty or offer to be the counterparty to forex transactions.