Since 2008, derivatives have earned the reputation of being the wild west of finance- unregulated and unreliable. We shake our heads when people try to stretch the metaphor that is so appropriate in the world of off-exchange, non-regulated swaps to the world of regulated, exchange-traded futures. As anyone in the futures industry will tell you, they are heavily regulated, indeed. To take part in the world of futures trading from a brokerage standpoint, registration is mandatory with the industry’s regulatory body, the National Futures Association (NFA). From time to time, we will comment about what it’s like to be NFA-regulated (particularly compared to lax standards of other industries).
The next couple of weeks will be a testament to just this around the Attain offices, as the NFA is conducting their regular audit, which all members are subject to every three years or so. They’ll be poring over financial records, documentation, communications, promotional material and supporting evidence for days on end. To be fair, the promotional material review alone is laborious with us. The NFA requires that its members keep their promotional material on file for a period no less than 5 years after first use. Less than two years of our Twitter and Facebook compliance records alone spanned over 600 pages, and that’s not even close to our most active social media platform. We really won’t want to be them three years down the road…
In other words, this is far from the financial wild west. In fact, it’s probably more akin to a circa 1942 all-girls Catholic boarding school in Nebraska some days. To be clear, NFA membership and subjection to audits doesn’t guarantee that the businesses in question belong to the good guy club. There have been regulatory failures – MF Global (a former NFA member) being the most recent of many- but if you’re not an institutional titan spending millions on lobbying and obfuscating, odds are that the regulatory powers that be aren’t going to be overlooking much or doing you any favors. Being small isn’t a guarantee either, but at least you know they aren’t spending all that money on pushing for legislation that gives them license to screw you over. In our opinion, it’s just another benefit of working with smaller firms. Do we sound like a broken record yet?