Sign Up

Account Registration For Futures Trading Reviewed by

Before trading in futures or other commodity derivatives, make sure the firm or individual you are dealing with is properly registered and has a clean disciplinary history. Furthermore, check the references of anyone dealing with you regarding futures trading or other commodity derivatives.

Under the Commodity Exchange Act, certain firms and individuals must register with the CFTC as brokers or dealers or principals of registrants.

Registration and examination of intermediaries is required Reviewed by

Under the Commodity Exchange Act (CEA), all intermediaries, such as futures commission merchants, commodity pool operators and advisors, introducing brokers, swap dealers, and floor traders must register with the Commodity Futures Trading Commission (CFTC). Furthermore, these individuals must also be licensed by a state regulatory agency.

The CFTC’s registration requirements are designed to guarantee market participants and customers can trade efficiently, securely, and competitively. This includes making sure brokers execute orders promptly, disclose material information, charge reasonable prices, and fully disclose any conflicts of interest.

Broker-dealers who only deal in «exempted securities» do not need to register under the CEA; however, they may need to adhere to other parts of the law. On the contrary, any broker-dealer engaging in foreign operations that seek or attempt to induce securities transactions by U.S. persons must register with the Commission under Section 15(b) of the CEA regardless of location.

This rulemaking amends SS 3.10(c) to extend the current exemption from registration as a FCM to foreign brokers and intermediaries engaged in commodity interest transactions bilaterally, on designated contract markets (DCMs), or swap execution facilities (SEFs) submitted for clearing via an approved FCM. This extension of registration exemption is expected to reduce compliance costs without sacrificing customer protection.

Moreover, the new paragraph SS 3.10(c)(5) will give regulatory certainty that activities conducted as an associated person of an SD do not necessitate registration as such. This amendment further supports CFTC efforts to promote investor protection and market integrity by clarifying confusion regarding natural person versus legal entity obligations to register as SD, as well as whether non-natural persons must be identified in a Form 7-R application.

These final regulations contain technical amendments to part 3 that update and clarify definitions, outdated cross-references to other regulations, and typographical errors. They also modernize and clarify registration mechanics by adding specificity to processes and updating outdated forms while minimizing any potential impact on small registrants.

Brokers Reviewed by

Account registration is one of the initial steps in trading futures. You’ll need to provide details about your experience, income and net worth so the broker can assess how much capital you can afford to lose. They may also inquire about your risk tolerance and investment goals.

Some brokers specialize in certain markets, while others provide a range of products and services. Generally, it’s best to open an account with a firm that provides futures and options trading on the markets you’re interested in.

Many brokers provide demo accounts that allow you to trade futures without risking your own funds. These simulated accounts also enable you to hone your strategies without actually risking anything; the ultimate goal being a stress-free trading experience.

Brokers offering a comprehensive suite of futures trading services will have more resources to help you hone your skills and make informed decisions. This could include an educational program, trading tools and research.

It’s wise to read the company’s Customer Relationship Summary (CRS), or Form CRS. This document provides an overview of their offerings and services as well as providing important legal and regulatory details.

Additionally, you should review the broker’s fees and other charges associated with your account, such as commissions or margin requirements. These can vary greatly between brokers so it pays off to shop around for the most competitive rate possible.

If you don’t possess a substantial amount of capital, depositing at least $10,000 with your brokerage is likely required before starting day trading. A day trading account typically necessitates this large sum in order to protect your funds in case you lose an important trade.

Brokers must adhere to all statutory requirements and rules set out by their self-regulatory organizations, as well as those under the Commodity Exchange Act. Furthermore, they should remain vigilant in combatting money laundering and other forms of financial crime.

Furthermore, many SROs have robust compliance and supervisory programs to detect and prevent fraud. These initiatives typically include background checks, training sessions and investigations. Furthermore, some SROs conduct examinations of newly registered broker-dealers in order to confirm they adhere to applicable regulations.

Swaps Reviewed by

Swaps are financial instruments traded privately over the counter (OTC). They involve the exchange of cash flows between two parties based on an underlying asset or assets and form one of the largest segments in the global derivatives market.

Swap contracts exist to assist businesses meet their commercial requirements and gain competitive advantages, such as converting fixed-rate assets into floating rate ones or obtaining a loan in another currency. Furthermore, they serve to mitigate risks like interest rate or currency volatility that might otherwise impact profitability.

Swaps come in various forms, such as interest rate and basis swaps, currency swaps, credit default swaps and commodity swaps. While some types are more prevalent than others, others require special knowledge or expertise to execute properly.

Total return swaps offer investors a steady source of interest income, helping to reduce their risk. They may provide an alternative to investing in shares of a company whose price fluctuations and dividends are sensitive to fluctuations, or investing in an asset class which has appreciated in value.

Currency swaps are an integral component of the financing and investment strategies used by governments, banks, companies and other institutions. They allow you to avoid foreign exchange taxes, maintain exchange rates and obtain low-cost loans in your home currency.

The NFA has jurisdiction over the Swaps market, as well as Commodity Pool Operators (CPOs), Introducing Brokers (IBs) and Futures Commission Merchants (FCMs) engaged in it. However, NFA does not have direct authority over individual Accountants acting on behalf of CPOs, IBs and FCMs that are not NFA members.

Thus, NFA requires all Swaps APs (including those acting as APs of SDs) to register with them to become associate members and pass a proficiency test to confirm they understand market and regulatory requirements and are qualified to carry out their activities.

NFA recently issued new Swaps Proficiency Requirements that must be fulfilled by January 31, 2021 for All Participants of Swap Derivatives (APs). These requirements are in addition to the existing Series 3 and other proficiency standards, but do not replace them.

Regulation Reviewed by

Account registration for futures trading involves opening a customer account with an agent who may or may not ask specific questions about your financial history. This type of account can be an ideal way to get into the market without spending a substantial amount of money.

Brokers typically provide a range of options, such as trading futures contracts on various markets and using leverage — an increase in your borrowing power to purchase or sell securities. Leverage allows you to make more money if your position is successful while decreasing losses when the market moves against you.

The National Futures Association, the industry-regulatory body, requires that all brokers engaged in futures trading register with it as CTAs (commodity trading advisors). Furthermore, you need an appropriate brokerage license for futures trading which can be acquired by filing Form B-9, Brokerage License for Commodity Trading.

If you are not registered with the NFA, then you must sign an agreement with your broker indicating that you agree to abide by its rules and regulations. These may include prohibition against false representations as well as filing reports on transactions.

To avoid regulatory action, only open accounts with trusted brokers. Furthermore, consider the fees charged by the broker for trading futures contracts and how much leverage is allowed in your account.

Regulators for futures trading are usually the same as those for securities sales. In certain instances, individuals dealing in certain «exempted securities» don’t need to register as a broker-dealer under Section 15(b) of the Act; however, those trading government securities and engaging in «narrow-based security index» futures trading must register under Section 15C of that same Act.

To foster fair and open competition in futures trading, associations must demonstrate their capacity to issue rules that provide for arbitration or other forms of dispute resolution that enable voluntary settlement of customer claims with members of the association. These regulations must adhere to standards established under the Act, without discriminating or unjustly treating members.