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Foreign Exchange

NFA: Kind of Blu

The National Futures Association’s fight to clean up retail FX in the US continues.

It is being helped by legislation requiring that its Forex dealer members (FDMs) have to increase their amount of free net-adjusted capital to $10 million by the end of October, rising to $20 million by May 16 2009. This is undoubtedly squeezing many of the less-well capitalized firms out of the industry – there are now 26 FDMs, down from 34 a year ago – as well as forcing others, such as CMC, to examine the viability of their US operations. But as the recent story of Boston Trading and Research shows, firms can skirt around the rules and regulations.

Just over a week ago, the NFA had to spring into action again when it took emergency enforcement action against Florida-based Capital Blu Management, suspending its membership. See http://www.nfa.futures.org/basicnet/Case.aspx?entityid=0381906&case=08MRA00004&contrib=NFA. It did this after customers of the company said they had been provided with false statements about the health of its CBM FX Fund. The NFA followed this up by posting a request for information about the activities of various Capital Blu subsidiaries. There will, no doubt, be more on this one.

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