NFA Forex Dealer Members must meet higher net capital requirements

Many of the U.S. firms currently offering retail off-exchange foreign currency (forex) trading are Members of NFA. Effective December 21, 2007, these firms must maintain a minimum net capital requirement of $5 million.

"Because a Forex Dealer Member's activities create greater financial risks than the type of traditional exchange-traded futures and options, these firms need to maintain a larger amount of capital," says NFA General Counsel Tom Sexton. "We believe that this additional net capital requirement will provide better customer protection."

All Futures Commission Merchants, including Forex Dealer Members, are required to submit monthly financial statements to the Commodity Futures Trading Commission. The CFTC compiles this information and posts it on its Web site (www.cftc.gov). In addition, Forex Dealer Members submit weekly financial statements to NFA so that NFA can closely monitor the firms' financial status.

Remember that forex trading is a high-risk venture. NFA offers several resources to help you understand the risks of forex trading, including a brochure, an online learning program and a forex investor alert. In addition, individuals should always check the registration status of any forex firm (using NFA's online Background Affiliation Status Information Center) before opening an account.