National Futures Association (NFA) and FX Alliance Inc. (FXall) today announced that they have entered into an agreement that paves the way for NFA to perform regulatory services for FXall's swap execution facility (SEF).
The Agreement establishes a preliminary framework for the exchange of information and the development of technology standards that will enable FXall and NFA to develop, test and launch automated trade practice and surveillance systems and also to develop procedures and processes necessary for FXall to fulfill its SEF self-regulatory obligations. Upon the issuance of the Commodity Futures Trading Commission's (CFTC) final SEF rules, NFA and FXall anticipate that they will enter into a formal Regulatory Services Agreement.
Under the Dodd-Frank Act and the rules and regulations currently being written by the CFTC, SEFs will have surveillance and other regulatory responsibilities. The CFTC has proposed to allow SEFs to contract with a registered futures association, such as NFA, or another registered entity for regulatory services.
"This is a significant step forward as we engage in new regulatory activity on behalf of SEFs. For over ten years, NFA has been successfully performing trade practice and market surveillance functions on behalf of futures exchanges," said NFA President Daniel J. Roth. "We look forward to working with FXall as we enhance our surveillance systems to assist FX Alliance and other SEFs in meeting their regulatory responsibilities."
Wayne Pestone, Chief Regulatory Officer of FXall commented, "While SEF rules are still in development, our agreement with NFA is a step in the right direction toward our readiness for SEF registration with the CFTC. We are committed to meeting the new regulatory responsibilities that will be expected of SEFs. NFA's experience and customized surveillance systems will allow us to prepare for quick deployment once SEF requirements are finalized."