Hi everyone

Mr. Dan Roth, CEO and President for the NFA sent me his answers to the questionnaire we sent to the NFA last October 18th.
I got Mr. Roth’s feed-back through NFA’s Director, Communications and Education Mr. Larry Dyekman.

As you probably already know, we are interviewing top Forex CEO’s to get their opinion about the impact new NFA’s requirements could have on the FX industry. Some of the most important CEO’s as Drew Niv, CEO at FXCM, Gary Tilking, President & CEO at GFT, or Glenn Stevens, CEO at Gain Capital, have already answered our questions.

We thought we should also contact the NFA itself to get their opinion about such important issue. To hear the voice of the main regulator of this industry along UK’s FSA is always welcome and I just hope this has been the first of many communications between FXstreet.com and the NFA.

Thank you very much Mr. Roth and Mr. Dyekman for your collaboration

Francesc

Questionnaire from FXStreet:

1. Which is the expected impact of the new NFA’s requirements in the FX business?
NFA’s new capital requirements for Forex Dealer Members ($5 million) become effective on December 21, 2007. We have been contacting our Forex Dealer Members that currently do not have $5 million in capital to determine what actions they will be taking within the next two months to meet their new requirements. Most firms have indicated they will infuse additional capital in their business. At this point, it is unclear whether or not the new financial requirements will impact the number of forex firms in operation.

2. In September 26th, you testified before a Congressional sub-committee regarding the reauthorization of the CFTC. Highlights of your testimony included a request for net capital to increase to $20 million and that all IB, Money Managers and any solicitors become registered with the NFA. Do you think these additional measures would be enough to grant transparency and competition in the retail FX industry?
The purpose of the proposal is to improve customer protection. Acting as an off-exchange forex dealer involves greater risk than acting as an agent in on-exchange futures trading. The increase of minimum capital to at least $20 million will help ensure that forex firms can meet their obligations to their customers. Likewise, it’s difficult to protect forex customers when forex solicitors, trading advisors and pool operators are not subject to any registration and regulatory requirements.

3. Will the NFA find positive if there are some corporate moves, such as M&A’s or acquisitions? How does the NFA view the possibility of having fewer participants in the business?
The number of forex firms is not the issue for us. It’s the business practices of forex firms that we are primarily concerned with. Are they properly capitalized? Do they meet their regulatory obligations?

4. Apart from a strong vigilance on the accounting practices, will the NFA perform a strong vigilance on trading practices?
A new NFA Interpretive Notice governing electronic trading systems used for forex transactions was recently approved by the CFTC and became effective on July 1, 2007. The Notice details how NFA Forex Dealer Members can fulfill their supervisory responsibilities over the security, capacity, credit and risk management controls, recordkeeping and trade integrity of forex trading systems. We are currently monitoring our FDMs for compliance with this new Interpretive Notice.

5. Switzerland has recently started a similar process, is this process being coordinated with NFA?
We have been contacted by Swiss officials. Communication among regulatory agencies is essential as the markets become increasingly global in scope.

6. For many, the very business model of Forex brokerage firms that needs to be decided is whether or not such brokerage houses can take opposite trading positions to those held by their customers, i.e., trading "against them," which contradicts traders’ well-being. How does NFA deal with this issue? Is there any regulation in this matter that customers should know? Will the NFA regulate somehow if a FDM has the ability to act as a broker/dealer and clearer at the same time, which means in most cases taking opposite trades to their customers?
NFA is concerned that retail customers do not fully appreciate the nature of their transactions with Forex Dealer Members and the inherent conflict that exists between the FCM’s interests and those of its customers. That’s why we are proposing an amendment to our "Forex Transactions" Interpretive Notice to require Forex Dealer Members to provide disclosure language that should make clear to customers that the FDM is acting as a principal in these transactions and may profit from the market moving against the customer. We will present this amendment to our Board of Directors in November and, if approved, will submit the amendment to the CFTC for approval.

7. Customers believe the liquidity sources of a firm should be disclosed. What does the NFA say to that? Is there a way to have more transparency in pricing?
NFA is committed to ensuring that investors have the information they need to make informed investment decisions. We want to make sure that customers know what they are buying and how much they are paying for it.