Futures 101

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.

Table of Contents