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#469294 - 11/10/17 15:50 Clarify: NFA-Forex-account vs. other USA accounts
AndrewAMD Offline
Member

Registered: 02/21/17
Posts: 110
Loc: Chicago
What is an "NFA account"? If one reads the Zorro manual, one might think it simply means any account in the USA. I do not think this is so.

* FINRA regulates the (USA) stock market.
* CFTC regulates the (USA) commodity market.
* And finally, NFA regulates the (USA) futures and forex markets.

NFA stands for National Futures Association. Participating organizations are:
* (USA) futures brokers
* (USA) futures options brokers
* (USA) forex brokers

The Zorro manual says all NFA accounts have to observe NFA Compliance Rule 2-43(b).

Actually, all NFA-regulated forex brokers must observe this rule.

Therefore:
* USA stocks & options, etc.
* USA futures & futures-options,

... are traded simply with orders to change a net position. In other words, "trades" are not a real thing, FIFO does not apply, and partial-closing is allowed because trades are irrelevant. And, technically, any order that puts my net position closer to or equal to zero is an order to close, regardless of how a "trade" ended.

**And**, depending on the broker, you can sometimes change the net position of an asset from net positive (long) to net negative (short) with a single trade.

Can the manual be modified to:
* Clarify the distinction between NFA-forex regulations and other USA-style regulations?
* Clarify how to handle the USA net-position style accounts, both from a Broker API and User-end perspective? (I assume I need virtual hedging with partial closing allowed, but I'm not sure.)

Thanks.

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#469299 - 11/10/17 17:29 Re: Clarify: NFA-Forex-account vs. other USA accounts [Re: AndrewAMD]
jcl Online

Chief Engineer

Registered: 07/22/00
Posts: 25939
Loc: Frankfurt
No, explaining regulations is beyond the scope of the manual. The term "NFA account" is purely technical and unrelated to real regulations.

A NFA account has several technical distinctions to a non-NFA account, but it is not necessarily a US Forex account. Many US Forex brokers don't need the NFA flag. Examples are Oanda or most MT4 brokers.

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#469300 - 11/10/17 17:36 Re: Clarify: NFA-Forex-account vs. other USA accounts [Re: jcl]
AndrewAMD Offline
Member

Registered: 02/21/17
Posts: 110
Loc: Chicago
My main issue is this: If I set the NFA flag, what happens?

* Is FIFO enabled?
* Is partial closing disabled?
* Is virtual hedging disallowed?

If any of these answers are "yes", then the NFA flag only relates to NFA forex and **not** to everything else. That is my conundrum.

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#469302 - 11/10/17 17:40 Re: Clarify: NFA-Forex-account vs. other USA accounts [Re: AndrewAMD]
jcl Online

Chief Engineer

Registered: 07/22/00
Posts: 25939
Loc: Frankfurt
FIFO is internally dealt with, partial closing is enabled for phantom trades, and virtual hedging is allowed. Real hedging is not allowed.

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