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For Immediate Release
August 16, 2001

For more information contact:
Larry Dyekman
(312) 781-1372
ldyekman@nfa.futures.org or
Jennifer Bucko
(312) 781-1373
jbucko@nfa.futures.org

NFA's Board of Directors votes to decrease its size by 45 percent

August 16, Chicago - Citing the need to operate more efficiently in a rapidly changing business environment, National Futures Association's Board of Directors approved changes to the Association's Bylaws that will reduce the size of the Board from 45 to 25 representatives. The action was taken at NFA's Board meeting on August 16 in Chicago, and the transition to the new Board will be completed by February 2002.

"Gaining acceptance of NFA in the futures community was a critical factor when we began in 1982, and a large Board representation was a primary means of attaining that acceptance," says NFA Senior Executive Vice President Dan Roth. "However, NFA now faces the challenge of responding to the momentous changes occurring in the futures and financial services industries, and we require a Board whose size supports quick and efficient decision making."

The proposal for a smaller Board originated with a Special Committee on NFA Governance ("Committee") that was created in February. The Committee, headed by Permanent Special Advisor to the Board Leo Melamed, formulated its recommendations after substantial consideration of the many issues involved in modernizing NFA's governance structure.

"The Committee's recommendations provide for a Board whose size, composition and voting rules will enable it to operate efficiently while maintaining the unique character and style that NFA's Board has developed in the last two decades," says Melamed.

NFA's new Board of Directors will consist of the following representation: Four exchange directors will represent the top four exchanges based on volume; the other two will be elected by the remaining exchanges that are not affiliated with any of the top four. Similarly, four futures commission merchant ("FCM") representatives will come from the top ten FCMs based on the amount of customer funds they hold, and another four will come from all other FCMs. One introducing broker ("IB") director will be an independent IB and the second, a guaranteed IB. In the commodity pool operator ("CPO") / commodity trading advisor ("CTA") category, two of the four directors will be affiliated with either CPOs or CTAs that are ranked in the top 20 percent of funds under management allocated to futures. The number of public directors, at five, satisfies the CFTC requirement that 20 percent of the Board must be public representatives.

In addition, the Board approved two changes concerning voting and committees. A supermajority voting rule (two-thirds of the directors present and voting) will replace the category voting rules for those matters that now require a category vote. Also, NFA's Appeals Committee will now have five members instead of nine, all of whom are directors; and the Membership Committee will consist of nine members instead of five, five of whom will be directors, and the remaining four will be affiliates of NFA.

Now that the Board has approved the changes, NFA must receive approval from both its Members and the CFTC, which should be accomplished by mid-October. The transition process requires the creation of an Interim Board that will consist of the existing directors. The Interim Board will have all the powers of the Board except the power to adopt, amend or repeal the Articles of Incorporation. NFA will hold elections for the new Board in January 2002, and the Board's first meeting will be held on February 21.

NFA is a congressionally authorized self-regulatory organization for the U.S. futures industry.

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