The National Futures Association (NFA), the United States self-regulatory organization for derivatives markets, has issued a new compliance rule addressing members’ conduct. The new rule complements requirements issued in 2018.

The NFA has “well over 100” members that engage in activities with digital asset commodities, but no way to address fraud or misconduct committed by those members, the organization explained to secretary of the Commodity Futures Trading Commission (CFTC) Christopher Kirkpatrick in a Feb. 28 letter as it submitted the proposed new rule for approval.

The new rule is modelled on the NFA’s antifraud rules for exchange traded futures and swaps transaction and retail foreign exchange. The NFA is the only registered self-regulatory organization that has delegated authority from the CFTC, giving it an analogous status to FINRA with the Securities and Exchange Commission.

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Currently, the NFA only imposes disclosure requirements on its members engaged in spot digital asset commodity activities with digital assets, which are detailed in a single document. When the new rule comes into effect on May 31, members will be subject to guidance on fraud, principles of trade and employee supervision. The rule applies only to Bitcoin (BTC) and Ether (ETH), as they alone “have related commodity interests certified by a registered entity for listing under Part 40 of CFTC Regulations.”

@CFTCpham applauds the National Futures Association (CFTC-designated SRO for derivatives industry) for establishing supervision and disclosure requirements for the trading of digital commodities.

✅ Importantly, the NFA (and Pham) reinforce ETH’s https://t.co/uu0Vc3WD7F…

— Alexander Grieve (@AlexanderGrieve) March 31, 2023

CFTC commissioner Caroline Pham released a statement praising the new rule:

“This is a clear example of using existing authority to ensure that there are customer protections in place, because registration with the NFA requires that firms and individuals comply with NFA rules.”

The NFA “can modify this rule in the future to include other digital asset commodities” besides BTC and ETH, Pham added. She noted that NFA rules on foreign exchange preceded the CFTC’s authority granted by Congress to regulate that market by five years. “I believe it is common sense to start with what we have and what works in order to extend our regulatory framework over spot digital asset commodity markets,” she added.

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