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NFA adjusts assessment fees, membership dues and registration fees

From its inception, NFA has relied on the assessment fee as its primary funding mechanism, accounting for 80 to 85 percent of total revenue every year. However, while the current revenue structure has been reliable and effective so far, certain changes in the industry, centered around the recent arrival of electronic exchanges into the futures arena, could have a dramatic impact on NFA's assessment fee structure.

Therefore, as part of a strategic objective to lessen reliance on the assessment fee as a revenue source, NFA's Executive Committee approved a reduction in the fee at a meeting in New York on May 17, 2001. The change became effective July 1, 2001.

Two major changes occurring in the industry head the list of reasons behind NFA's objective. For one, electronic trading may radically change the nature of exchange "membership". Presumably, in an electronic environment, exchanges can prosper most by providing the widest possible direct access to their markets, and could offer subscriptions or "memberships" at a nominal cost. It's possible that current users of the markets who do not trade in sufficient volume to currently warrant the investment in an exchange membership will become "members" of an electronic exchange, and their trades would, therefore, be exempt from the fee.

The second force of change focuses upon the impact of electronic trading on fees in general. One of the current virtues of the assessment fee is that it has been relatively small and inconspicuous compared to exchange fees. That may remain true in the near term, since most exchanges have not reduced fees and, in some cases, have increased them. However, NFA's Executive Committee, in deciding to change the fee structure, felt that the trend toward increased fees may not continue in the future as trading continues to migrate to an electronic platform.

The assessment fee will be set at $.14 per round-turn futures contract and $.07 per options fee transaction. Assessment fee levels for mini-contracts will remain at $.04 per round-turn futures contract and $.02 per options fee transaction. These fees will equal the previous all-time low levels established in 1992.

While the Board felt the assessment fee reduction was appropriate, it also didn't want to take any action that might impair NFA's ability to operate effectively. Therefore, in order to partially offset the decrease in assessment fee revenue, the Board approved increases to NFA's membership dues and registration fees.

"This decision to increase dues and fees was taken after a lengthy process that included a thorough review of all relevant issues not only by NFA's Board and Executive Committee, but also by the Finance Committee and NFA's three Advisory Committees," says NFA Senior Executive Vice President Dan Roth. "The new levels are similar to the dues and fees currently being imposed by other self-regulatory bodies in the futures and securities industries."

The Board adjusted NFA's annual membership dues, which haven't had an increase since 1992, as follows: Futures Commission Merchant (FCM) for which NFA is not the DSRO to $2,000 and FCM for whom NFA is the DSRO to $7,500; Guaranteed Introducing Broker (GIB) and Independent Introducing Broker (IBI), $1,000; and Commodity Pool Operator (CPO) and Commodity Trading Advisor (CTA) to $1,000.

Registration fees (which also haven't increased since 1992) are as follows: FCM, $500; IB, CPO and CTA, $200. For individual applications: Associated Person (AP), Floor Broker (FB) and Floor Trader (FT), and Principle, $85.

"NFA recognizes that the fee adjustments as a whole slightly shift NFA's revenue source more towards NFA's Member firms and away from public customers," says Roth. "However, NFA believes that both Member firms and public customers benefit from NFA's regulatory services. NFA also firmly believes that the increase to membership dues and registration fees do not erect a barrier to either entering or remaining in the 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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