The US National Futures Association (NFA) has issued a new disclosure requirement on brokers. Forex dealers in the US must provide a detailed breakdown of transaction costs to their clients whenever a customer demands the information.
The NFA outlines that brokers will need to be able to provide a detailed breakdown of per-trade costs. Forex brokers need to disclose any commissions and any other fees related to every trade.
For brokers that are executing their order flow via Straight Through Processing (STP), firms have to provide a breakdown on any mark-ups or mark-downs they imposed on the price that they received for offsetting the position.
Brokers that are not processing orders on an STP basis, have to disclose the mid-point spread cost. This is defined by the NFA as the difference between the price at which the forex broker is executing the order of the client and the mid-point of the bid/ask spread at the time when the order was executed.
Forex dealers in the US will have to inform their clients diligently about the new rule and make sure their clients know and can request the information from their brokerage.
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