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Financial Requirements



SECTION 11. FOREX DEALER MEMBER FINANCIAL REQUIREMENTS.
[Adopted Effective December 1, 2003. Effective dates of amendments: June 6, 2004; November 30, 2005; July 31, 2006; August 9, 2006; February 13, 2007; March 31, 2007; May 7, 2007; December 17, 2007; December 21, 2007; October 31, 2008; November 30, 2009; October 1, 2010; October 18, 2010; February 1, 2011 and January 4, 2016.]

(a) Each Forex Dealer Member must maintain "Adjusted Net Capital" (as defined in CFTC Regulation 5.7) equal to or in excess of the greatest of:

    (i) $20,000,000;

    (ii) the amount required by subsection (a)(i) above plus:

      (aa) 5% of all liabilities the Forex Dealer Member owes to customers (as customer is defined in Compliance Rule 2-36(g)(2)) and to eligible contract participant counterparties that are not an affiliate of the Forex Dealer Member and are not acting as a dealer exceeding $10,000,000; and

      (bb) 10% of all liabilities the Forex Dealer Member owes to eligible contract participant counterparties that are an affiliate of the Forex Dealer Member not acting as a dealer; and

      (cc) 10% of all liabilities eligible contract participant counterparties that are an affiliate of the Forex Dealer Member and acting as a dealer owe to their customers (including eligible contract participants), including liabilities related to retail commodity transactions as described in Section 2(c)(2)(D) of the Act; and

      (dd) 10% of all liabilities the Forex Dealer Member owes to eligible contract participant counterparties acting as a dealer that are not an affiliate of the Forex Dealer Member, including liabilities related to retail commodity transactions as described in Section 2(c)(2)(D) of the Act;

      or

    (iii) For FCMs, any other amount required by Section 1 of these Financial Requirements.

(b) A Forex Dealer Member may not include assets held by an affiliate (unless approved by NFA) or an unregulated person in its current assets for purposes of determining its adjusted net capital under CFTC Regulation 5.7.

For purposes of this section and section (c), a person is unregulated unless it is:

    (i) a bank or trust company regulated by a U.S. banking regulator;

    (ii) a broker-dealer registered with the U.S. Securities and Exchange Commission and a member of the Financial Industry Regulatory Authority;

    (iii) a futures commission merchant registered with the U.S. Commodity Futures Trading Commission and a Member of NFA;

    (iv) a retail foreign exchange dealer registered with the U.S. Commodity Futures Trading Commission and a Member of NFA;

    (v) a bank or trust company regulated in a money center country which has in excess of $1 billion in regulatory capital; or

    (vi) any other entity approved by NFA.

(c) A Forex Dealer Member may not use an affiliate (unless approved by NFA) or an unregulated person, as defined in section (b), to cover its currency positions for purposes of CFTC Regulation 5.7(b)(2)(v)(A).

(d) An FDM for which NFA is the DSRO that is required to file any document with or give any notice to its DSRO under CFTC Regulations 5.6 [Maintenance of minimum financial requirements by retail foreign exchange dealers and futures commission merchants offering or engaging in retail forex transactions], 5.7 [ Minimum financial requirements for retail foreign exchange dealers and future commission merchants offering or engaging in retail forex transactions] and 5.12 [Financial reports of retail foreign exchange dealers], or is required to file any financial report or statement with any other securities or futures self-regulatory organization of which it is a member shall also file one copy of such document with or give such notice to NFA at its Chicago office no later than the date such document or notice is due to be filed with or given to the CFTC or the self-regulatory organization.

(e) For purposes of this rule:

    (1) "Forex" has the same meaning as in Bylaw 1507(b);

    (2) "Forex Dealer Member" has the same meaning as in Bylaw 306;

    (3) As used in section (c), "currency" refers to open foreign currency positions with counterparties regardless of whether those counterparties are eligible contract participants as defined in Section 1a(18) of the Act;

    (4) "Affiliate" means any person that controls, is controlled by, or is under common control with the Forex Dealer Member; and

    (5) "Dealer" means any person that (i) holds itself out as a dealer in forex or in retail commodity transactions as described in 2(c)(2)(D) of the Act; (ii) makes a market in forex or in retail commodity transactions as defined in 2(c)(2)(D) of the Act; (iii) regularly enters into forex or in retail commodity transactions as described in 2(c)(2)(D) of the Act with counterparties as an ordinary course of business for its own account; or (iv) engages in any activity causing the person to be commonly known in the trade as a dealer or market maker in forex or in retail commodity transactions as described in 2(c)(2)(D) of the Act. Dealer includes other FDMs, as well as any entity acting in this manner that is not required to be an FDM. For purposes of (a)(ii)(dd) above, dealer does not include a bank or trust company regulated in a money center country which has in excess of $1 billion in regulatory capital.

 
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