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Notice I-97-20

September 24, 1997

Assessment Fees

On August 21, 1997, the Board of Directors of NFA approved an increase in assessment fees. The assessment fees will be increased from $.14 to $.20 per roundturn futures contract and from $.07 to $.10 per option transaction. The new fees will become effective on January 1, 1998.

Obviously, this fee increase was approved by our Board only after very care-ful scrutiny. In 1994, trading volume exceeded our projections and, as a result, NFA col-lected more revenue than it had budgeted. This, in turn, caused NFA's working capital to swell to over $20 million. NFA's Finance Committee, Executive Committee and Board all agreed that NFA should, in effect, "rebate" that revenue to those who paid it by reducing assessment fees, first to $.16/$.08 for roundturn futures and options and later to the current level of $.14/$.07. By doing so, NFA intentionally operated at a deficit for the last three years and reduced its level of working capital to approximately $12 million. We project that by December 31 working capital will be reduced to approximately $8 million. NFA's Board realized that this "rebate" program could not go on indefinitely and that at some point the assessment fee would have to be increased to cover NFA's operating expenses. Frankly, we have been able to put off the fee increase longer than the Board had projected, due mostly to the fact that NFA's expenses have remained relatively flat. In fact, over the last eight years, total expenses have increased only approximately 6%.

We realize that there is never a good time to raise fees. But there is a time when such an increase is both completely justifiable and absolutely necessary. That time is now. NFA's Finance Committee, Executive Committee and Board have carefully reviewed this situation and have voted unanimously to restore the assessment fees to its 1994 level of $.20/$.10 effective January 1, 1998.

If you have any questions, you may wish to refer to the Interpretive Notice at 9016 in your NFA Manual which answers frequently asked questions about the assess-ment fee. Or you may contact NFA's Information Center at (312) 781-1410.

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