"CFTC Extends Registered Futures Association Membership Requirement to Introducing Brokers, Commodity Pool Operators and Commodity Trading Advisors That Use Swaps"

by Skadden, Arps, Slate, Meagher & Flom LLP
Contact

The Commodity Futures Trading Commission (“CFTC”) unanimously approved a final rule (“Final Rule”) that formally extends the existing registered futures association (“RFA”) membership requirement to registered introducing brokers (“IBs”), commodity pool operators (“CPOs”) and commodity trading advisors (“CTAs”).1 Under the longtime CFTC RFA membership rule, registered futures commission merchants, swap dealers and major swap participants have been required to become members of an RFA.2 While not subject to this CFTC rule, for many years IBs, CPOs and CTAs that facilitate the trading of futures contracts also have been required to become RFA members, due to a bylaw of the only RFA — the National Futures Association (“NFA”) — which prohibits members from dealing with nonmembers that are required to be registered with the CFTC with respect to transacting in futures contracts (“NFA Bylaw 1101”).3

Pursuant to the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010, additional IBs, CPOs and CTAs that facilitate swap but not futures transactions have been required to register with the CFTC, due to swaps being added to the definition of a “commodity interest.” While these new IBs, CPOs and CTAs have registered with the CFTC through the NFA, they are not subject to NFA Bylaw 1101, which only applies to transacting in futures and not swaps. Accordingly, registered IBs, CPOs and CTAs that transact in swaps but not futures to date have not been required to become NFA members. Under the Final Rule, all registered IBs and CPOs and almost all registered CTAs4 now will be required to become members of NFA.

Practically, the Final Rule should have little effect, as most IBs, CPOs and CTAs already have become NFA members or will not be subject to the rule, because they have claimed exemptions from registration such as the 4.13(a)(3) de minimis exemption for CPOs.5 It will, however, require registered CPOs operating funds pursuant to CFTC Regulation 4.7 that trade only swaps and no futures to become NFA members. Registered IBs, CPOs and CTAs must comply with the Final Rule no later than December 31, 2015, and can do so by completing a supplement to their existing registration statement through NFA’s online registration system.

1 The Final Rule is available here.

2 See 17 C.F.R. §§ 170.15-170.16.

3 For example, an NFA member that is a CFTC-registered futures commission merchant is prevented from taking futures contract orders from a CFTC-registered CTA unless the CTA also becomes an NFA member. See NFA Bylaw 1101, available here.

4 Persons who qualify for the exemption from CTA registration under CFTC Regulation 4.14(a)(9) (i.e., those who do not direct client accounts or provide advice tailored to a particular client) but nonetheless choose to register are exempt from the requirement to become a member of an RFA.

5 The CFTC approximated that 61 CPOs, 573 CTAs and 41 dual CPO/CTAs are currently registered with NFA but are not NFA members. See Final Rule at 18.

Download PDF

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

© Skadden, Arps, Slate, Meagher & Flom LLP | Attorney Advertising

Written by:

Skadden, Arps, Slate, Meagher & Flom LLP
Contact
more
less

Skadden, Arps, Slate, Meagher & Flom LLP on:

Readers' Choice 2017
Reporters on Deadline

"My best business intelligence, in one easy email…"

Your first step to building a free, personalized, morning email brief covering pertinent authors and topics on JD Supra:
Sign up using*

Already signed up? Log in here

*By using the service, you signify your acceptance of JD Supra's Privacy Policy.
Custom Email Digest
Privacy Policy (Updated: October 8, 2015):
hide

JD Supra provides users with access to its legal industry publishing services (the "Service") through its website (the "Website") as well as through other sources. Our policies with regard to data collection and use of personal information of users of the Service, regardless of the manner in which users access the Service, and visitors to the Website are set forth in this statement ("Policy"). By using the Service, you signify your acceptance of this Policy.

Information Collection and Use by JD Supra

JD Supra collects users' names, companies, titles, e-mail address and industry. JD Supra also tracks the pages that users visit, logs IP addresses and aggregates non-personally identifiable user data and browser type. This data is gathered using cookies and other technologies.

The information and data collected is used to authenticate users and to send notifications relating to the Service, including email alerts to which users have subscribed; to manage the Service and Website, to improve the Service and to customize the user's experience. This information is also provided to the authors of the content to give them insight into their readership and help them to improve their content, so that it is most useful for our users.

JD Supra does not sell, rent or otherwise provide your details to third parties, other than to the authors of the content on JD Supra.

If you prefer not to enable cookies, you may change your browser settings to disable cookies; however, please note that rejecting cookies while visiting the Website may result in certain parts of the Website not operating correctly or as efficiently as if cookies were allowed.

Email Choice/Opt-out

Users who opt in to receive emails may choose to no longer receive e-mail updates and newsletters by selecting the "opt-out of future email" option in the email they receive from JD Supra or in their JD Supra account management screen.

Security

JD Supra takes reasonable precautions to insure that user information is kept private. We restrict access to user information to those individuals who reasonably need access to perform their job functions, such as our third party email service, customer service personnel and technical staff. However, please note that no method of transmitting or storing data is completely secure and we cannot guarantee the security of user information. Unauthorized entry or use, hardware or software failure, and other factors may compromise the security of user information at any time.

If you have reason to believe that your interaction with us is no longer secure, you must immediately notify us of the problem by contacting us at info@jdsupra.com. In the unlikely event that we believe that the security of your user information in our possession or control may have been compromised, we may seek to notify you of that development and, if so, will endeavor to do so as promptly as practicable under the circumstances.

Sharing and Disclosure of Information JD Supra Collects

Except as otherwise described in this privacy statement, JD Supra will not disclose personal information to any third party unless we believe that disclosure is necessary to: (1) comply with applicable laws; (2) respond to governmental inquiries or requests; (3) comply with valid legal process; (4) protect the rights, privacy, safety or property of JD Supra, users of the Service, Website visitors or the public; (5) permit us to pursue available remedies or limit the damages that we may sustain; and (6) enforce our Terms & Conditions of Use.

In the event there is a change in the corporate structure of JD Supra such as, but not limited to, merger, consolidation, sale, liquidation or transfer of substantial assets, JD Supra may, in its sole discretion, transfer, sell or assign information collected on and through the Service to one or more affiliated or unaffiliated third parties.

Links to Other Websites

This Website and the Service may contain links to other websites. The operator of such other websites may collect information about you, including through cookies or other technologies. If you are using the Service through the Website and link to another site, you will leave the Website and this Policy will not apply to your use of and activity on those other sites. We encourage you to read the legal notices posted on those sites, including their privacy policies. We shall have no responsibility or liability for your visitation to, and the data collection and use practices of, such other sites. This Policy applies solely to the information collected in connection with your use of this Website and does not apply to any practices conducted offline or in connection with any other websites.

Changes in Our Privacy Policy

We reserve the right to change this Policy at any time. Please refer to the date at the top of this page to determine when this Policy was last revised. Any changes to our privacy policy will become effective upon posting of the revised policy on the Website. By continuing to use the Service or Website following such changes, you will be deemed to have agreed to such changes. If you do not agree with the terms of this Policy, as it may be amended from time to time, in whole or part, please do not continue using the Service or the Website.

Contacting JD Supra

If you have any questions about this privacy statement, the practices of this site, your dealings with this Web site, or if you would like to change any of the information you have provided to us, please contact us at: info@jdsupra.com.

- hide
*With LinkedIn, you don't need to create a separate login to manage your free JD Supra account, and we can make suggestions based on your needs and interests. We will not post anything on LinkedIn in your name. Or, sign up using your email address.