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May 1, 2021

How Revenue is Spent at the National Futures Association

by Anne Paddock

In 1974, Congress established the Commodities Futures Trading Commission (CFTC) as an independent agency of the federal government to regulate the US derivatives market, which includes futures, swaps, and certain types of options.

The National Futures Association (NFA) is a tax-exempt, non-profit 501 (c) 6 business association that is a self-regulatory organization for the US derivatives market.  Sounds almost the same so what’s the difference? Both organizations are working to ensure legal standards are being adhered to but the NFA is only concerned with members of the NFA while operating under the authority of the CFTC.

The NFA has a governing body with 29 members, all of whom are independent.  31 board members are listed on the Form 990 (2018 for the year ending June 30, 2019), of which 25 (81%) are male while 6 (19%) are female.  Unlike most boards, members of the NFA governing body were compensated $0 – $47,000 that year.

In 2019, the NFA reported total revenue of $115 million (compared to $96 million in 2018), which came from four (4) sources:

  • $69 million (% of revenue):  Assessment Fees and Market Service Revenue
  • $40 million (% of revenue):  Membership Dues
  • $ 4 million (% of revenue):  Regulatory Fines, Reg and Testing Fees, Arbitration Fees, Etc)
  • $ 2 million (% of revenue):  Investment Income

Expenses totaled $94 million (not including $7 million in depreciation) and can be categorized as follows:

  • $75 million (65% of revenue):  Compensation
  • $11 million (10% of revenue):  Office-Related Expenses
  • $ 4 million (3% of revenue):  Fees for Services
  • $ 4 million (3% of revenue):  Travel and Conferences

Using the above information, every $100 in revenue was spent as follows:

$100:  Revenue

-$ 65:  Compensation

-$ 10:  Office-Related Expenses

-$  3:  Fees for Services

-$  3:  Travel and Conferences

-$ 81:  Total Expenses

 $ 19:  Remaining Revenue:  To General Fund

As illustrated above, the NFA spent 81% of total revenue with the largest expense being compensation which is understandable given the mission of the organization is to regulate an industry.  592 employees received $75 million in compensation which equates to an average compensation of $127,000.  However, only 223 employees received more than $100,000 in compensation with the most highly compensated employee reported to be the President and CEO, Thomas Sexton, who received $806,702 in compensation.

Because NFA has not spent as much as they have raised, the organization has $118 million in net assets.

To read the IRS Form 990 (2018 for the year ending June 30, 2019), click here.

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