A self-regulatory group for US futures and derivatives markets wants to broker
and other financial professionals to give customers more risk warnings
associated with products and exchanges of virtual currencies.
The National Futures Association "is concerned that these products may attract
customers who do not fully understand their nature, the substantial risk of loss
which could derive from trading and from the limits of the NFA supervisory role, "the
group said in a letter dated 20 July and interpretative notice
sent to the Commodity Futures Trading Commission.
The listing of bitcoin-based futures contracts on the Chicago Mercantile Exchange
and the CBOE exchange in December was one of the most significant events for the industry
leading to the need for more information for virtual currency products, the
NFA said in his interpretative notice of 20 July.
Further information concerns customers who feel aware of risks, including volatility
and discovery of prices, pseudonymy, the potential for market manipulation and the
lack of regulatory supervision of virtual currency trading in real time.
"It appears clear from the warning that they have particular concerns about riskiness
trading in virtual currencies and derivatives on virtual currencies, "Jason Grimes,
a Washington associate with global futures and derivatives from Covington & Burling
practice group, said Bloomberg Law.
Different disclosure requirements would be placed on different types of NFA members:
commodity pool operators and commodity trading consultants in a group and introduction
brokers and futures commission traders in another. These categories represent the
various types of intermediaries or organizations that solicit or execute futures contracts,
options on commodities, swaps and other exchanges for customers.
The advanced disclosure notice is in line with the general concern of the NFA for the customer
protection, Grimes said. The board of directors of the NFA raised doubts about the fact that the raw materials pools e
other trading programs of derivatives on virtual currencies "could attract participants to the pool
and managed accounts customers who do not fully understand the nature of these products
or the substantial risk of loss that could result from trading. "The NFA could lead
audit or put other fines on members who fail to follow the advanced disclosures.
This is not the first time the NFA has reported problems with currency-based virtual derivatives
products. The group
published an investor notice in December 2017 just like two future stock exchanges
set to list the first bitcoin futures products.
The requirements should be relevant only for "a rather modest number" of the
The 3,855 individual members of the NFA, especially those engaged in virtual currency products,
Karen Wuertz, NFA senior vice president for strategic planning and communication,
said Bloomberg Law.
Notice to the CFTC calls for an effective date rule of 10 days, but disclosure requirements
it probably will not come into force later, Wuertz said.
"We want to make sure that our members have enough time to be ready to respect
the requirements, so we will have to sit down internally to determine the effectiveness
date, "he said.
To contact the reporter on this story: Lydia Beyoud in Washington a
To contact the editor responsible for this story: Michael Ferullo at
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