The National Futures Association (NFA) announced that its Board approved a ban on the use of credit cards to fund retail forex and futures accounts. This prohibition is subject to approval by the Commodity Futures Trading Commission. Although NFA's proposed rule prohibits the use of credit cards to fund both futures and retail forex accounts, NFA determined through its study that futures commission merchants currently don't permit this practice.
"Since our inception, NFA has been committed to protecting investors," says NFA President and CEO Dan Roth. "Forex and futures markets are both high-risk and volatile, and individuals who wish to participate should use only risk capital to fund their accounts. Allowing customers to fund accounts with credit cards encourages them to trade with borrowed money."
This prohibition is a direct result of an extensive study by NFA of forex dealer members' business practices. NFA looked at more than 15,000 retail forex accounts and noted that an overwhelming amount of these accounts were funded by small retail customers using a credit card or borrowed funds, and a majority of these accounts were unprofitable.
"Over the last decade, NFA has made significant strides in its regulation of the retail forex markets," Roth says. "From the increase in capital requirements to mandating content requirements so that all customers could receive comprehensive and accurate account information, this proposal is just another very important step to fulfill our mission to protect customers."