NFA proposed amendments to (i) expand obligations involving discretionary customer accounts, and (ii) clarify that its rules and Interpretive Notices relating to discretionary accounts, customer information, risk disclosures and bunched orders apply to cleared swaps as well as to futures.

According to the proposal, NFA Compliance Rule 2-8 ("Discretionary Accounts") would be updated to:

  • include the word "customer" in the rule title to demonstrate more clearly that the rule is applicable to customer accounts and not to a member's principal-to-principal activities; and
  • improve recordkeeping requirements to provide that any entity exercising discretionary authority over an account must be identified.

NFA stated that proposed amendments to NFA Compliance Rule 2-30 and the related Interpretive Notices would:

  • apply customer information and risk disclosure requirements to cleared swaps; and
  • require members to obtain customer information and present the appropriate risk disclosures to non-eligible contract participants prior to allowing them to trade cleared swaps.

Additionally, NFA proposed amendments to Interpretive Notice 9029 – NFA Compliance Rule 2-10 ("The Allocation of Bunched Orders for Multiple Accounts") to:

  • increase the scope of the Interpretive Notice to include bunched orders involving cleared swaps;
  • clarify that the trading programs' quarterly reviews conducted by an Eligible Account Manager must be able to demonstrate that the allocation method was "fair and equitable";
  • reiterate that a bunched order's average price may be rounded to the nearest price increment supported by the relevant clearinghouse; and
  • modify the language to better align with CFTC Rule 1.35's delineation between the requirements for (i) Eligible Account Managers and (ii) FCMs and IBs in certain activities.

Lastly, the NFA proposed several "non-substantive amendments" designed to update and clarify the language in Interpretive Notice 9065 – NFA Compliance Rule 2-10: ("The Allocation of Bunched Retail Forex Orders for Multiple Accounts").

The NFA rule amendments will become effective ten days after submitting the proposal to the CFTC, unless the CFTC decides to review the proposal prior to approval.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.