Inside the Currency Market: Mechanics, Valuation, and Strategies

National Futures Association and Currencies

The adverse decisions to traders and currency markets in particular may be based on a number of factors. The NFA, as a regulator, has pondered the question of what is a currency without asking what are currency pairs. Can one currency be classified as a security or as a derivative, and how should it be treated in relation to other traded instruments?

NFA regulators haven't objectively answered these questions, so they treat a currency as a security—a stock—and place limits on its trading ability just as a stock would trade. To treat one currency as a derivative is just not objectionable either, due to the lack of an underlying instrument, so that concept doesn't exist unless the decisions were rendered ...