Reed Smith Client Alerts

In March 2018 the NFA issued a reminder notice reminding CPOs, CTAs and IBs that trade in, solicit or accept orders in virtual currency products (spot and derivatives) of their ongoing obligation to notify the NFA by amending the annual questionnaire. 

Authors: Kari S. Larsen Peter Y. Malyshev Joseph M. Motto

Jurisdictional matters

In a recently published opinion of the U.S. District Court for the Eastern District of New York, senior judge Jack B. Weinstein confirmed the Commodity Futures Trading Commission’s (CFTC) position that virtual currency is a “commodity,” and therefore the CFTC can “exercise its jurisdiction over fraud that does not directly involve the sale of futures or derivative contracts.”1 Therefore, to further the goal of fraud and manipulation prevention and oversight, any member2 of the National Futures Association (NFA) may be required by the NFA to comply with additional requirements related to virtual currency transactions3.  

Possibly in response to the new bitcoin futures contracts traded on the Chicago Mercantile Exchange and Chicago Board Options Exchange, as well as the growing number of enforcement actions and litigation involving virtual currencies, on December 14, 2017, the NFA issued Notice I-17-28 requiring additional reporting for commodity pool operators (CPOs) and commodity trading advisors (CTAs) that execute transactions involving virtual currency derivatives4. That same day, the NFA issued Notice I-17-295 requiring introducing brokers (IBs) that solicit or accept orders in virtual currency derivatives6 to also report these transactions to the NFA. Please see Reed Smith client alert discussing these NFA notices.