To help U.S. futures commission merchants comply with new disclosure requirements related to the trading of bitcoin and other virtual currencies, the FIA Law and Compliance Division has issued an updated version of the FIA Uniform Futures and Options on Futures Risk Disclosures, commonly referred to as the FIA Risk Disclosure Booklet.
The updated booklet now includes two advisories and a disclosure on virtual currencies that were recently published by the National Futures Association and the Commodity Futures Trading Commission to ensure that customers understand the risks of trading virtual currencies and related derivatives. The additional disclosures must be provided to customers starting on Oct. 31.
The updated FIA Risk Disclosure Booklet contains the following documents:
• FIA Combined Disclosure Statement
• Cross Trade Consent
• Electronic Trading and Order Routing Systems Disclosure Statement
• Disclosure of Futures Commission Merchant Material Conflicts of Interest
• Direct Order Transmittal Client Disclosure Statement
• Foreign Trader Disclosure Statement
• Notice to Customers: Exchange For Related Positions
• CFTC Customer Advisory: Understand the Risks of Virtual Currency Trading
• NFA Investor Advisory – Futures on Virtual Currencies Including Bitcoin
• NFA Disclosure for Underlying or Spot Virtual Currencies
Why Are the Virtual Currency Advisories and Disclosure Being Added to the Risk Disclosure Booklet?
On May 17, 2018, NFA issued an Interpretive Notice about its Members’ obligation to provide specific disclosures to their customers regarding the trading of virtual currency (see Disclosure Requirements for NFA Members Engaging in Virtual Currency Activities). The notice will become effective Oct. 31, 2018.
The notice states that futures commission merchant or introducing broker members that engage in virtual currency derivative transactions must provide the “CFTC Customer Advisory: Understand the Risks of Virtual Currency Trading” and “NFA Investor Advisory – Futures on Virtual Currencies Including Bitcoin” to their customers by Oct. 30, 2018. These advisories may be posted on FCM and IB Members’ websites if the customers are eligible contract participants (“ECPs”) but must be provided in writing or electronically to customers that are not ECPs. Beginning Oct. 31, 2018, the advisories must be provided at or before the time the customer engages in the virtual currency activity. By Nov. 30, 2018, FCM and IB Members must provide the advisories to all current customers engaged in virtual currency activities.
The notice contains an additional disclosure requirement for FCMs and IBs Members that engage in underlying or spot virtual currencies. They must provide the disclosure language set forth in the “NFA Disclosure for Underlying or Spot Virtual Currencies” to their customers in accordance with the guidelines and deadlines described above.
Where Can I Find the Updated FIA Risk Disclosure Booklet?
The updated FIA Risk Disclosure Booklet is available for download here: As an additional resource, FIA makes available disclosures that may be furnished on a voluntary basis or that may be required by a governing regulator or exchange depending on the nature of an FCM’s business and the location of its customers. These additional disclosures, as well as the updated Booklet, are available at the same link.
FCMs doing business on non-U.S. exchanges may be required to give additional disclosures that are not included in the Booklet. The Booklet also does not contain disclosures that may be required for swaps business.
Am I Required to Use the FIA Risk Disclosure Booklet?
The FIA Risk Disclosure Booklet and the other disclosures are provided as a resource for firms to use as appropriate in their sole discretion. Use of the Booklet as a means to deliver certain disclosures required for U.S. futures and options on futures business is voluntary. Neither the Booklet nor any of the other disclosures are intended to constitute legal or regulatory advice. FIA specifically disclaims any legal responsibility for any errors or omissions and disclaims any liability for any losses or damages incurred through the use of the Booklet or the other disclosures. FIA undertakes no obligations to update the Booklet or other disclosures following the date of publication.