Further to the news which was broken by LeapRate this week that the Commodity Futures Trading Commission (CFTC) has approved the National Futures Association (NFA)’s proposal to ban the use of credit cards for funding retail FX accounts, with it becoming effective January 31, 2015, President and CEO of the NFA Dan Roth has today provided the regulatory rationale behind the move by stating that “Since our inception, NFA has been committed to protecting investors,”
“Forex and futures markets are both high-risk and volatile, and individuals who wish to participate should use only risk capital to fund their accounts. Allowing customers to fund accounts with credit cards encourages them to trade with borrowed money” he continued.
This prohibition is a direct result of an extensive study by NFA of Forex dealer members’ business practices. NFA looked at more than 15,000 retail forex accounts and noted that an overwhelming amount of these accounts were funded by small retail customers using a credit card or borrowed funds, and a majority of these accounts were unprofitable.
“Over the last decade, NFA has made significant strides in its regulation of the retail forex markets,” continued Mr. Roth. “From the increase in capital requirements to mandating content requirements so that all customers could receive comprehensive and accurate account information, this ban is just another very important step to fulfill our mission to protect customers.”