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Notice I-01-30

December 28, 2001

Changes to NFA Financial Requirements

NFA’s Board of Directors adopted several changes to NFA Financial Requirements on November 14, 2001. Included in these changes is a requirement to file financial statements electronically, which will allow FCMs and independent IBs to file their statements faster, timelier, and more accurately. They will also receive immediate notification that their filing has been received. The specific changes are detailed below.

The following changes are effective December 31, 2001.

I. Changes to the Capital Requirement
NFA’s Board adopted two minor changes to NFA’s capital rules that will simplify the capital computation. The first change amends the risk-based capital computation to eliminate calculating risk on naked long options positions. This change conforms to recent CBOT and CME changes to their risk-based capital computation.

The second change eliminates the charge for remote locations and APs for FCMs with Adjusted Net Capital of $2,000,000 or greater and IBs with Adjusted Net Capital of $1,000,000 or greater. In NFA’s experience, this alternative requirement does not impact firms of these sizes. As a result, eliminating this calculation will simplify their capital computations without having an effect on their capital requirements.

The following changes will become effective when the Winjammer 4.0 software is issued.

II. FCMs and Independent IBs will be Required to Electronically File Financial Reports
Since 1997, FCM and independent IB Members have had the option to electronically file their financial reports with NFA via the iNFAst system. Although this filing method provides many benefits for both Members and NFA, NFA did not make this filing method mandatory because a firm could not use iNFAst to file the financial form with both NFA and the CFTC.

NFA is now able to provide Members with new software—Winjammer 4.0—that will allow a Member to simultaneously send an encrypted copy of its financial reports to NFA and the CFTC (and any other location selected by the Member). NFA will provide the Winjammer 4.0 software to each FCM and independent IB Member for which NFA is the DSRO via compact disc, with upgrades accessible at the Joint Audit Committee’s web site at www.wjammer.com/jac/. NFA has sent letters to all affected firms and will work with them to ensure they file correctly.

Given the significant benefits and minimal costs of filing electronically, all FCMs and independent IBs for which NFA is the DSRO will be required to electronically file their uncertified financial reports (FOCUS II and IIA, 1FR-FCM, and 1FR-IB). This requirement will eliminate all paper filings other than financial reports that must be certified by a certified public accountant. Additionally, the CFTC has indicated that it will not require IBs to file their non-certified reports with the CFTC if they are filed electronically with NFA.

III. FCMs will be Required to File Monthly Financial Statements
All FCMs for which NFA is the DSRO will be required to submit monthly financial statements within 17 business days of the date of the statement. This amendment to NFA’s Financial Requirements is consistent with the Rules of other futures industry SROs and will provide NFA with more timely financial information.

IV. FCMs and Independent IBs will be Required to File with NFA Any Financial Reports or Statements Filed with Other SROs
Finally, the Board amended Financial Requirements Sections 1 and 5 to require FCMs and IBs for which NFA is the DSRO to file with NFA copies of any financial reports and statements that it files with another futures or securities SRO. This requirement ensures that NFA has the same information as other SROs. Furthermore, since the Member already has to file the information with another SRO, filing it with NFA will not impose an undue burden on the Member.

The Financial Requirements and the interpretive notice on “NFA Financial Requirements: The Electronic Filing of Financial Reports” (¶ 9028) will be added to the Rulebook on NFA’s web site as soon as they become effective. In the meantime, you can view the changes in the "Rule Submission" section of the NFA Online News section of this web site.

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