Security Deposit Rules
The following is the text of Section 12 of NFA’s Financial Requirements from NFA’s Rules Manual:
[Adopted Effective December 1, 2003. Effective dates of amendments: June 6, 2004; September 15, 2005; February 13, 2007; May 14, 2008; October 31, 2008; and November 30, 2009.]
(a) Each Forex Dealer Member shall collect and maintain the following minimum security deposit for each forex transaction between the Forex Dealer Member and a person that is not an eligible contract participant as defined in Section 1a(12) of the Act:
(i) 1% of the notional value of transactions in the British pound, the Swiss franc, the Canadian dollar, the Japanese yen, the Euro, the Australian dollar, the New Zealand dollar, the Swedish krona, the Norwegian krone, and the Danish krone;
(ii) 4% of the notional value of other transactions;
(iii) for short options, the above amount plus the premium received; and
(iv) for long options, the entire premium.
(b) The Executive Committee may temporarily increase these requirements under extraordinary market conditions.
(c) For purposes of this rule:
(1) “Forex” has the same meaning as in Bylaw 1507(b); and
(2) “Forex Dealer Member” has the same meaning as in Bylaw 306.
(d) In addition to cash, a Forex Dealer Member may accept those instruments described in CFTC Rule 1.25 as collateral for customers’ security deposit obligations. The collateral must be in the FDM’s Possession and control and is subject to the haircuts in CFTC Rule 1.17.
Two general security deposit requirements are 1% or 4%. Between the FDM and customer (who is not an Eligible Contract Participant (ECP):
- 1% (British pound, the Swiss franc, the Canadian dollar, the Japanese yen, the Euro, the Australian dollar, the New Zealand dollar, the Swedish krona, the Norwegian krone, and the Danish krone);
- 4% (All other currencies);
- For short options, the above amount plus the premium received; and
- For long options, the entire premium.
- FDMs complying with the 150% rule (pursuant to Section 11(a)(i) or (ii)), can have lower security deposits
- Acceptable Collateral – cash and other items pursuant to CFTC Rule 1.25, subject to haircuts
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