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At the time you apply to establish a futures
trading account, you can expect to be asked for
certain information beyond simply your name,
address and phone number. The requested
information will generally 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 needed 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 obtain 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 should obviously
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
trading account without first reading and
understanding the Account Agreement and all
other documents supplied by your Orion Futures
Group, Inc. broker.
It is in your interest and the firm's interest that you
dearly know 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 about exactly what any provisions of the
Agreement mean, don't hesitate to ask. A good and continuing
relationship can exist only if both parties have, from the
outset, a clear understanding of the relationship. Nor
should you be hesitant to ask, in advance, what services you
will be getting for the trading commissions the firm
charges. As indicated earlier, not all firms offer identical
services. And not all clients have identical needs. If it is
important to you, for example, you might inquire about the
firm's research capability, and whatever reports it makes
available to clients. Other subjects of inquiry could be how
transaction and statement information will be provided, and
how your orders will be handled and executed.
If a Dispute Should Arise
All but a small percentage of transactions involving
regulated futures contracts take place without problems or
misunderstandings. However, in any business in which some
150 million or more contracts are traded each year,
occasional disagreements are inevitable. Obviously, the best
way to resolve a disagreement is through direct discussions
by the parties involved.
Failing this, however, participants in futures
markets have several alternatives (unless some
particular method has been agreed to in advance).
Under certain circumstances, it may be possible to
seek resolution through the exchange where the
futures contracts were traded. Or a claim for
reparations may be filed with the CFTC. However, a
newer, generally faster and less expensive
alternative is to apply to resolve the disagreement
through the arbitration program conducted by
National Futures Association. There are several
advantages:
- You can elect, if you prefer, to have
arbitrators who have no connection with the
futures industry.
- You do not have to allege or prove that any
law or rule was broken only that you were dealt
with improperly or unfairly.
- In some cases, it may be possible to conduct
arbitration entirely through written
submissions. If a hearing is required, it can
generally be scheduled at a time and place
convenient for both parties.
- Unless you wish to do so, you do not have to
employ an attorney.
For a plain language explanation of the
arbitration program and how it works, write or phone
NFA for a copy of Arbitration: A Way to Resolve
Futures-Related Disputes. The booklet is available
at no cost.
Next:
What is a Futures Contract?
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