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Notice I-12-15

July 20, 2012

Effective Date of NFA Interpretive Notice to NFA Bylaw 1301 Regarding the Assessment Fee for Diminutive Notional Contracts and Security Futures Products

NFA has adopted an Interpretive Notice entitled NFA Bylaw 1301(b): NFA Assessment Fee - Diminutive Notional Value Contracts and Security Futures Products. The Interpretive Notice implements a reduced assessment fee rate for contracts designated by NFA's Executive Committee as diminutive notional value contracts (DNVCs) and for security futures products (SFPs). The Interpretive Notice also provides that NYMEX's micro crude oil contract (clearing symbol MCL) has been designated a DNVC. The Interpretive Notice and reduced assessment fee rate are effective September 1, 2012.

Under the Interpretive Notice, contract markets and exempt commercial markets may request that NFA's Executive Committee designate certain contacts as DNVCs. If granted DNVC status, NFA's assessment fee under NFA Bylaw 1301(b) for these contracts will be reduced from $0.04 per round turn to $0.00008 per round-turn, with a minimum fee of $0.01 per round-turn in the event a customer trades less than 100 contracts. If any computation results in a fraction of a cent, the fee will be rounded to the nearest penny. Although the Board indicated that these contracts will typically have a notional value of less than $100, the Board did not define a specific notional amount that qualifies as a DNVC for the reduced assessment fee. Rather, the Board authorized the Executive Committee to approve future requests from contract markets or exempt commercial markets to designate other contracts as DNVCs and therefore be eligible for the reduced assessment fee rate.

The Interpretive Notice also provides that this reduced assessment fee rate will apply to SFPs. The Board emphasized that its decision to apply the lower rate to SFPs was not based on the notional value of SFPs. Rather, the Board acknowledged that NFA's current assessment fee vis--vis securities industry fees may provide a disincentive to carry SFPs in a futures account and therefore determined to eliminate any disincentive for customers to engage in these transactions or carry SFPs in a futures account at NFA Member firms.

More information on this Interpretive Notice can be found in NFA's June 1, 2012 Submission Letter to the CFTC. Questions concerning the assessment fee rate for DNVCs and SFPs should be directed to Michael Saturley, Director, Treasurer's Office at msaturley@nfa.futures.org or Matthew Saxinger, Senior Financial Analyst, Treasurer's Office at msaxinger@nfa.futures.org.

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