On September 10, , the CFTC approved its final rules regarding off-exchange retail foreign exchange transactions. Although the rulemaking pre-dated the Dodd-Frank Act , once the Act was signed in July , the commission's forex rules, along with the forex rules of other regulatory authorities, became a part of Dodd-Frank.
Under Dodd-Frank, the CFTC will have jurisdiction over retail foreign exchange transactions, except in the case of entities which fall under the authority of one of the following regulatory agencies " Prudential Regulators ":.
The Act requires that such rules include appropriate requirements with respect to disclosure, record keeping, capital and margin, reporting, business conduct, documentation, and any other standards or requirements as Federal regulatory agencies shall determine to be necessary.
In early , prudential regulators submitted proposed rules and requests for comment on forex regulation. While these proposals generally mirror the CFTC Final Rule, minor differences such as dispute resolution vary among regulators. Documents related to these rule proposals can be found below, under Prudential Regulators' Forex Regulation.
According to the Dodd-Frank Act , the list of eligible companies who may serve as counterparties to off-exchange retail forex transaction, only U. Insurance companies are no longer allowed to participate as counterparties. The CFTC stated that regulation of the retail forex space depends on the type of firm which will act as a counterparty. If an SEC registered broker or dealer is handling retail forex will be regulated by that agency. Financial institutions will be regulated by banking regulators see Prudential Regulators Forex Proposals below.
According to the letter:. From and after October 18, , the period of time described in Regulation 4. On July 14, , the Federal Register published a final rule from the OCC regarding the authorization of national banks, federal branches and agencies of foreign banks, and their operating subsidiaries collectively, national banks to engage in certain off-exchange transactions in foreign currency with retail customers.
According to the final rule, such a retail transaction is defined as "a transaction in foreign currency between a national bank and a retail customer that is:.
The rule became effective on July 15, A separate order addressing the expansion of the rules to Federal savings associations appeared in the Federal Register on September 12, The deadline for public comment was May 23, The final rulemaking, as it appeared in the Federal Register on July 14, , can be found below. Under the proposed rule, retail customers with relationships with a bank, and are not cleared through an exchange, will be required to post a margin of 2 percent in major currencies such as the U.
The margin amount would rise to 5 percent of the notional value of the transaction on other currencies, according to a Reuters story on the FDIC rule. The final rule applies to foreign currency futures, options on futures, and options as these terms are used in the Commodity Exchange Act. The rule would also apply to transactions that are "functionally or economically similar" to futures and options, such as "rolling spot" trades.
Highlights of the rule:. The Federal Reserve issued its rule proposal and request for public comment on July 28, The comment deadline is October 11, To submit a comment click here. Futures Commission Merchant Regulation. Commodity Futures Trading Commission. Your Daily Dose of Financial News. Legal updates provided by JD Supra. Retrieved from " http: Navigation menu Personal tools Log in. Views Read View source View history.
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