Proposed Rule

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Amendments to Sections 1, 2 and 5 of NFA Financial Requirements

(additions are underscored and deletions are stricken):

FINANCIAL REQUIREMENTS

SECTION 1. FUTURES COMMISSION MERCHANT MINIMUM FINANCIAL REQUIREMENTS.

(a) Each NFA Member that is registered or required to be registered with the Commodity Futures Trading Commission (hereinafter "CFTC") as a Futures Commission Merchant (hereinafter "Member FCM") must maintain "Adjusted Net Capital" (as defined in CFTC Regulation 1.17) equal to or in excess of the greatest of:

(i) $250,000;

(ii) Four (4) percent of the funds required to be segregated pursuant to the Commodity Exchange Act and CFTC Regulations and the foreign futures or foreign options secured amount, less the market value of commodity options purchased by customers on or subject to the rules of a contract market or a foreign board of trade for which full premiums have been paid: Provided, however, the deduction for each customer shall be limited to the amount of customer funds in such customer’s account and foreign futures and foreign options secured amounts;

(iii) For Member FCMs with less than $2,000,000 in Adjusted Net Capital, $6,000 for each remote location operated (i.e., proprietary branch offices, main office of each guaranteed IB and branch offices of each guaranteed IB);

(iv) For Member FCMs with less than $2,000,000 in Adjusted Net Capital, $3,000 for each AP sponsored (including APs sponsored by guaranteed IBs);

(v) (fFor securities brokers and dealers), the amount of net capital specified in Rule 15c3-1(a) of the Regulations of the Securities and Exchange Commission (17 CFR 240.15c3-1(a)); or

(vi) Eight (8) percent of domestic and foreign domiciled customer and four (4) percent of non-customer (excluding proprietary) risk maintenance margin/performance bond requirements for all domestic and foreign futures and options on futures contracts excluding the risk margin associated with naked long option positions.

(b) Each Member FCM for which NFA is the designated self-regulatory organization ("DSRO") must file financial reports with NFA for each month-end, including its fiscal year end, within 17 business days of the date for which the report is prepared. All financial reports must be filed on Form 1-FR-FCM or, if the Member is a broker-dealer, on Form 1-FR-FCM or the FOCUS Report, and all financial reports except those required to be certified by a Certified Public Accountant must be filed electronically using an electronic media approved by NFA.

(c) A Member FCM, for which NFA is the designated self-regulatory organization (hereinafter "DSRO"), that is required to file any document with or give any notice to its DSRO under CFTC Regulations 1.10 [Financial reports of futures commission merchants and introducing brokers], 1.12 [Maintenance of minimum financial requirements by futures commission merchants and introducing brokers], 1.16 [Qualifications and reports of accountants], or 1.17 [Minimum financial requirements for futures commission merchants and introducing brokers] or is required to file any financial report or statement (e.g., FOCUS Reports) with any other securities or futures self-regulatory organization of which it is a member shall also file one copy of such document with or give such notice to NFA at its Chicago office no later than the date such document or notice is due to be filed with or given to the CFTC or the self-regulatory organization.

SECTION 2. EARLY WARNING CAPITAL REQUIREMENTS AND ELIGIBILITY TO GUARANTEE IBS.

(a) A Member FCM must file the notice required by CFTC Regulation 1.12 when the FCM which knows or should have known that its Adjusted Net Capital is less than the greatest of:

(i) $375,000;

(ii) Six (6) percent of the funds required to be segregated pursuant to the Commodity Exchange Act and CFTC Regulations and the foreign futures or foreign options secured amount, less the market value of commodity options purchased by customers on or subject to the rules of a contract market or a foreign board of trade for which full premiums have been paid: Provided, however, the deduction for each customer shall be limited to the amount of customer funds in such customer’s account and foreign futures and foreign options secured amounts;

(iii) For Member FCMs with less than $2,000,000 in Adjusted Net Capital, $9,000 for each remote location operated (i.e., proprietary branch offices, main office of each guaranteed IB and branch offices of each guaranteed IB);

(iv) For Member FCMs with less than $2,000,000 in Adjusted Net Capital, $4,500 for each AP sponsored (including APs sponsored by guaranteed IBs); or

(v) (fFor securities brokers or dealers), the amount of capital specified in Rule 17a-11(b) of the Regulations of the Securities and Exchange Commission (17 CFR 240.17a-11(b)). ; or

(vi) Eight (8) percent of domestic and foreign domiciled customer and four (4) percent of non-customer (excluding proprietary) risk maintenance margin/performance bond requirements for all domestic and foreign futures and options on futures contracts excluding the risk margin associated with naked long option positions may not enter into a guarantee agreement with an IB until it files three successive month-end statements where the Member FCM’s Adjusted Net Capital is equal to or greater than the amount required by this subsection.

(b) A Member FCM which is subject to the financial reporting requirements of CFTC Regulation 1.12(b) may not enter into a guarantee agreement with an IB.

(c) A Member FCM which is a party to a guarantee agreement with an IB and whose Adjusted Net Capital is less than the amount set forth in paragraph (a) of this Section, must also provide its DSRO, NFA and any IBs which it guarantees with a copy of the notice that the FCM’s Adjusted Net Capital is less than the amount required by paragraph (a). If the FCM cannot demonstrate to NFA and its DSRO, within 30 days after filing the required notice, that its Adjusted Net Capital is greater than the amount required by paragraph (a), the FCM must immediately notify, in writing, any IB which it guarantees that the guarantee agreement will terminate 30 days following the notice. A copy of the notice must also be filed with the CFTC, NFA, and the DSRO of the FCM. If the FCM demonstrates to its DSRO and NFA prior to the effective date of the termination of the guarantee agreement that its Adjusted Net Capital is greater than the amount required by paragraph (a), then it may notify any IB which it guarantees, the CFTC, NFA, and its DSRO, that the guarantee agreement will not terminate.

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SECTION 5. INTRODUCING BROKER FINANCIAL REQUIREMENTS.

(a) Each Member IB, except an IB operating pursuant to a guarantee agreement which meets the requirements set forth in CFTC Regulation 1.10(j), must maintain Adjusted Net Capital (as defined in CFTC Regulation 1.17) equal to or in excess of the greatest of:

(i) $30,000;

(ii) For Member IBs with less than $1,000,000 in Adjusted Net Capital, $6,000 per office operated by the IB (including the main office) ;

(iii) For Member IBs with less than $1,000,000 in Adjusted Net Capital, $3,000 for each AP sponsored by the IB; or

(iv) (fFor securities brokers and dealers), the amount of net capital required by Rule 15c3-1(a) of the Securities and Exchange Commission (17 CFR 240.15c3-1(a)).

(b) Each Member IB, except an IB operating pursuant to a guarantee agreement which meets the requirements set forth in CFTC Regulation 1.10(j), must file financial reports with NFA semi-annually, including its fiscal year end, within 17 business days of the date for which the report is prepared. All financial reports must be filed on Form 1-FR-IB or, if the Member is a broker-dealer, on Form 1-FR-IB or the FOCUS Report, and all financial reports except those required to be certified by a Certified Public Accountant must be filed electronically using an electronic media approved by NFA.

(c) A Member IB that is required to file any document with or give any notice to the CFTC under CFTC Regulations 1.10 [Financial reports of futures commission merchants and introducing brokers], 1.12 [Maintenance of minimum financial requirements by futures commission merchants and introducing brokers], 1.16 [Qualifications and reports of accountants], or 1.17 [Minimum financial requirements for futures commission merchants and introducing brokers] or is required to file any financial report or statement (e.g., FOCUS Reports) with any other securities or futures self-regulatory organization of which it is a member shall also file one copy of such document with or give such notice to NFA at its Chicago office no later than the date such document or notice is due to be filed with or given to the CFTC or the self-regulatory organization.

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