On February 28, 2023, the National Futures Association (NFA) submitted the proposed adoption of NFA Compliance Rule 2-51 to the Commodity Futures Trading Commission (CFTC). The new compliance rule will apply to NFA members, including commodity pool operators (CPOs) and commodity trading advisors (CTAs), engaged in activities involving digital asset commodities. For purposes of the new compliance rule, the term digital asset commodity means Bitcoin and ether.

Upon adoption, the new compliance rule will:

1) Impose anti-fraud, just and equitable principles of trade, and supervision requirements on NFA Members and Associates that engage in digital asset commodity activities, including spot or cash market activities; and

2) Require NFA Members, including CPOs and CTAs, to make disclosures required by NFA’s Interpretive Notice 9073, Disclosure Requirements for NFA Members Engaged in Virtual Currency Activities.

In the Explanation of the Proposed Rule, NFA indicated that the proposed compliance rule was intended to fill an existing gap in the oversight of digital asset markets by NFA. Specifically, NFA explained that:

Well over 100 NFA Member firms have reported to NFA that they engage in business activities related to digital assets, both in commodity interest and spot markets. However, with the exception of NFA’s Interpretive Notice 9073, which sets forth limited disclosure requirements, NFA does not have any rules that specifically address its Members’ digital asset activities in the spot markets.

Explanation of Proposed Rule, P. 3 of NFA Submission to CFTC Dated February 28, 2023

In its submission, NFA indicated that it plans to make this compliance rule effective as early as ten days after receipt of the submission by the CFTC unless the CFTC notifies NFA that the CFTC has determined to review the proposal for approval.

Good day. Good to know? DR2