NFA Issues Reporting Requirements for CPOs and CTAs that Trade Virtual Currency Products | Practical Law

NFA Issues Reporting Requirements for CPOs and CTAs that Trade Virtual Currency Products | Practical Law

The National Futures Association (NFA) issued Notice I-17-28, which sets out reporting requirements for commodity pool operators (CPOs) and commodity trading advisors (CTAs) that trade virtual currency products.

NFA Issues Reporting Requirements for CPOs and CTAs that Trade Virtual Currency Products

by Practical Law Finance
Published on 11 Jan 2018 • USA (National/Federal)
The National Futures Association (NFA) issued Notice I-17-28, which sets out reporting requirements for commodity pool operators (CPOs) and commodity trading advisors (CTAs) that trade virtual currency products.
On December 14, 2017, the National Futures Association (NFA) issued Notice I-17-28, which sets out reporting requirements for commodity pool operators (CPOs) and commodity trading advisors (CTAs) that trade virtual currency products
In light of recent virtual currency derivatives offerings on CFTC-regulated trading venues (see Legal Update, CFTC Announces Bitcoin Derivatives Self-Certification Process and New Bitcoin Contracts on Three Futures Exchanges), as well as the volatile nature of virtual currency products, the NFA will require each CPO and CTA to notify the NFA if it executes a transaction which involves any virtual currency or derivative of a virtual currency on behalf of a pool or managed account.
The notification requirement is effective immediately and will require CPOs and CTAs to amend the firm-level section of the NFA's annual questionnaire.
The annual questionnaire has been amended to include the following questions:
  • For CPOs:
    • does your firm operate a pool that has executed a transaction involving a virtual currency (e.g., bitcoin)?
    • does your firm operate a pool that has executed a transaction involving a virtual currency derivative (e.g., a bitcoin future, option, or swap)?
  • For CTAs:
    • does your firm offer a trading program for managed account clients (other than a pool reported under the CPO questions) that has engaged in any transaction involving a virtual currency (e.g., bitcoin)?
    • does your firm manage an account (other than a pool reported under the CPO questions) that has executed a transaction involving a virtual currency derivative (e.g., a bitcoin future, option, or swap)?
Additionally, beginning with the first quarter of 2018, CPOs and CTAs that have executed transactions involving virtual currencies or related derivatives must report:
  • The number of their pools or managed accounts that executed one or more transactions involving a virtual currency during each calendar quarter.
  • The number of their pools or managed accounts that executed one or more transactions involving a virtual currency derivative during each calendar quarter.
This information will be submitted to the NFA no later than 15 days after the end of each quarter.