Home > Foreign Currency Investments > Opening a Futures Account
At the time of applying to establish a futures trading account, you can expect to be asked for certain information beyond simply your name, address and phone number. The information requested will usually include (but not necessarily be limited to) your income, net worth, what previous investment or futures trading experience you have had, and any other information required in order to advise you of the risks involved in trading futures contracts. At a minimum, the person or firm who will handle your account is required to provide you with risk disclosure documents or statements specified by the CFTC and get written acknowledgment that you have received and understood them.
Opening a futures account is a serious decision— no less so than making any major financial investment — and obviously should be approached as such. Just as you wouldn’t consider buying a car or a house without carefully reading and understanding the terms of the contract, neither should you establish a futures trading account without first reading and understanding the Account Agreement and all the other documents supplied by your broker. It is in your interest and the firm’s interest that you clearly understand your rights and obligations as well as the rights and obligations of the firm with which you are dealing before you enter into any futures transaction. If you have questions regarding the provisions of the Agreement, don’t hesitate to ask. A good and continuing relationship can exist only if both parties have, from the beginning, a clear understanding of the relationship.
Nor should you hesitate to ask, in advance, what services you will be getting for the trading commissions the firm charges. Not all firms offer identical services, and not all clients have identical needs. For example, if it is important to you, you might find out about the firm’s research capability and what reports it makes available to clients. Other things to find out could be - how transaction and statement information will be provided, and how your orders will be handled and executed.
In the case of a dispute
Only a small percentage of transactions involving regulated futures contracts lead to any problems or misunderstandings. In any business in which millions of contracts are traded each year, occasional disagreements are inevitable. Generally, the best way to resolve a disagreement is through direct discussions by the parties involved. Failing this, participants in futures markets have several alternatives (unless some particular method has been agreed to in advance). One method is to file a claim for reparations at the CFTC. However, a more informal, and generally faster, alternative is to resolve the dispute through arbitration - either at the exchange where the contracts were traded or at the National Futures Association (NFA). There are many advantages in choosing NFA arbitration:
For an explanation of the arbitration program and how it works, contact NFA for a free copy of NFA Arbitration: Resolving Customer Disputes.
- You don’t have to use an attorney
- You can state your claim in your own words - without citing any law or rule
- You can elect, if you choose, to have a majority of arbitrators who have no connection with the futures industry
- Parties to an NFA arbitration can seek resolution through NFA’s mediation program at no extra charge
- In some cases, it could be possible to conduct arbitration entirely through written submissions
- If a hearing is needed, NFA can hold hearings in many metropolitan areas throughout the country.
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