1. Diversifying Your Portfolio with Futures and Forex Larry Dyekman Director, Communications and Education National Futures Association

2. What We’ll Talk About Today Why more individual investors are trading futures and forex What risks are involved in trading futures and forex How to conduct due diligence What questions to ask before trading

3. What We’ll Talk About Today How to look for warning signs of possible fraud How to resolve disputes Where to go for additional information

4. National Futures Association Safeguard market integrity Protect market participants Help NFA Members meet their regulatory responsibilities

5. National Futures Association Registration Compliance Dispute Resolution Education

6. Why More People Want to Diversify Their Portfolios Risk Management Easier Access to Markets

7. What is a Futures Contract? A futures contract is a legally binding agreement to buy or sell a commodity or financial instrument at a later date. Futures contracts are standardized according to the quality, quantity and delivery time and location for each commodity. The only variable is price.

8. What is Forex? Forex refers to trading foreign currency. Retail customers generally participate in the forex market as speculators who are hoping to profit from changes in currency rates.

9. Most Commonly Traded Currencies EUR – Euro USD – United States dollar CAD – Canadian dollar GBP – British pound JPY – Japanese yen AUD – Australian dollar CHF – Swiss franc

10. Trading Currencies Forex transactions are quoted in pairs because you are buying one currency while selling another. The first currency is the base currency and the second currency is the quote currency. The price, or rate, that is quoted is the amount of the second currency required to purchase one unit of the first currency.

11. Trading Currencies For example, a EUR/USD spread of 1.2170/1.2178 means that you can sell one Euro for $1.2170 and buy one Euro for $1.2178.

12. Why Futures Trading is a High-risk Venture Zero-sum game Volatility Leverage Margins

13. Why Forex Trading is a High-risk Venture No central clearinghouse No protection for your money in light of the firm’s bankruptcy Leverage Margins

14. Initial Margin Maintenance Margin

15. Deciding Whether to Participate in the Futures or Forex Markets Assess your financial situation Assess your tolerance for risk Conduct due diligence

16. Methods of Participating in Futures or Forex Markets Trade your own account Futures Commission Merchants Retail Foreign Exchange Dealers Introducing Brokers Have someone manage your account Use a Commodity Trading Advisor Participate in a commodity pool

17. Background Affiliation Status Information Center BASIC

18. What You’ll Find in BASIC Current and historical registration information Disciplinary actions taken by NFA, the CFTC and all the US futures exchanges Financial information for futures commission merchants (FCMs) NFA arbitration and CFTC reparations cases

28. Questions to Ask Before Opening an Account What is your NFA ID number? How long has your company been in business? Where exactly will my money be held? And what type of regular account statements do you provide?

29. Questions to Ask Before Opening an Account How much of my money will go for commissions, management fees, etc.? How can I liquidate if and when I decide I want my money?

30. Warning Signs of Possible Fraud Expectation of large profits Promise of low risk Seasonal trades

31. If a Dispute Arises Civil Suit CFTC Reparations NFA Arbitration/Mediation

32. NFA Arbitration Program No attorney is necessary Do not need to allege a rule violation Non-industry arbitrators Written submission option

33. Additional Resources NFA publications www.nfa.futures.org www.cftc.gov www.finra.com Futures exchanges

34. Website: www.nfa.futures.org Information Center: 1-800-621-3570 1-312-781-1410 8:00 a.m. – 5:00 p.m. CT Monday - Friday

35. Questions?