On September 9, 2015, the CFTC adopted a final rule requiring each registered commodity pool operator (CPO), commodity trading advisor (CTA) and introducing broker (IB) to become and remain a member of at least one registered futures association or RFA (which is a futures association registered under Section 17 of the Commodity Exchange Act (CEA)). Currently, the National Futures Association (NFA) is the only RFA.

The rule is subject to an exception for persons exempt from registration as CTAs under CFTC Regulation 4.14(a)(9) (17 CFR 4.14(a)(9)), which exempts persons from CTA registration if they do not engage in:

An RFA is an association of persons registered with the CFTC under Section 17 of the CEA that serves a self-regulatory role by functioning as a regulator of its members, which also remain subject to CFTC oversight. However, an RFA cannot enforce its rules over non-members.

Under NFA Bylaw 1101, no NFA member may “carry an account, accept an order or handle a transaction in commodity futures contracts” for, or on behalf of, any non-member of NFA that is required to be registered with the CFTC as, among other things, a CPO, CTA or IB. This means that any CPO, CTA or IB required to be registered with the CFTC must also be an NFA member in order to conduct business in commodity futures directly with an FCM that is an NFA member. Further, it must ensure that it only conducts business with those CPOs, CTAs and IBs that also are NFA members.

In January 2012, the CFTC promulgated Regulations 170.15 (17 CFR 170.15) and 170.16 (17 CFR 170.16) to require each registered swap dealer (SD) major swap participant (MSP) and registered futures commission merchant (FCM) to be an RFA member, subject to an exception for certain notice-registered broker-dealers (see Legal Update, Final Rules on Registration of Swap Dealers and Major Swap Participants under Dodd-Frank Issued by CFTC). The CFTC did not promulgate regulations requiring other CFTC registrants, including IBs, CPOs and CTAs, to be members of an RFA.

CFTC Regulations 170.15 and 170.16, at the time they were promulgated, operated in conjunction with NFA Bylaw 1101 to assure essentially complete NFA membership of FCMs, CPOs, CTAs and IBs.

However, Title VII of the Dodd-Frank Act amended the CEA so that certain persons that engage in regulated swaps activity are now required to register with the CFTC as CPOs, CTAs or IBs. Therefore the universe of CPOs, CTAs and IBs has expanded to include many non-NFA members -- parties that may enter into swaps but not necessarily futures contracts. The final rule is intended to require membership in RFAs for these parties as well.

The final rule will be codified as CFTC Regulation 170 (17 CFR 170) and will become effective 60 days after the date of publication in the Federal Register. All persons subject to the final rule must comply with the final rule by December 31, 2015.