Proposed Rule

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Explanation of Proposed Amendments

As the industry changes, the types of services which NFA performs on behalf of the industry must also change. To that end, NFA's Board has authorized NFA to perform trade practice and market surveillance, along with other regulatory services, on behalf of evolving electronic exchanges. The regulatory services that NFA performs for these exchanges are consistent with NFA's fundamental mission of broadening the benefits of self-regulation for our Members and the users of the markets.

The complete statement of NFA's fundamental purposes as currently set forth in Section 1 of Article III of NFA's Articles reads as follows:

    Subject to the limitations in Section 2 of this Article, the fundamental purposes of NFA are to promote the improvement of business conditions and the common business interests of persons engaged in commodity futures activity (i) undertaking the regulation of persons that are members of NFA (hereinafter "Members") as set forth in this Article; (ii) relieving the Commodity Futures Trading Commission (hereinafter "Commission") from the substantial burden of direct regulation in such matters; and (iii) facilitating the allocation of increased Commission resources to contract market designations, approval of contract market rules, registration of industry professionals and other duties of the Commission affecting the growth of the commodity futures industry and the public's ability to avail itself of the industry's expanding services . . .
All of the new services NFA might perform and the new ways of providing those services are designed to "promote the improvement of business conditions," relieve the Commission "from the substantial burden of direct regulation" of NFA Members and to facilitate "the public's ability to avail itself of the industry's expanding services." The only portion of Section 1 which seems badly out of date is in subsection (iii). As you know, the Commission no longer devotes significant resources to the registration of industry professionals, the approval of contract market rules or to the approval of new contracts, and relieving the Commission of those functions is not how NFA "facilitates… the public's ability to avail itself of the industry's expanding services." The amendments to Subsection (iii) reflect the evolving roles for NFA that have been approved by our Board.

As mentioned earlier, NFA intends to make the amendments to Article III effective ten days after receipt of this submission by the Commission unless the Commission notifies NFA within the ten-day period that the Commission has determined to review the amendments for approval.

NFA is the premier independent provider of efficient and innovative regulatory programs that safeguard the integrity of the derivatives markets.
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