Member Newsletter

NFA shares expertise at industry conferences
OSeveral NFA staff members have spent the last few months participating in conferences held around the world to address a variety of issues facing the futures industry. In April, Karen Wuertz, senior vice-president of strategic planning, participated in a panel discussion on "Market Integrity in an Electronic Trading Environment" at the Cutting Edge Derivatives Trading Conference in Chicago. At the same conference, NFA General Counsel Tom Sexton moderated a panel discussion on security futures regulation. Kathryn Camp, associate general counsel, and Regina Thoele, director of compliance, also participated in the discussion.

Mr. Sexton also participated in a panel discussion regarding security futures at the annual Public Policy Conference of the North American Securities Administrators Association (NASAA) in Washington, D.C. Dan Driscoll, NFA's executive vice-president and chief compliance officer, participated in a panel discussion titled, "Ask Your Regulator" at the Futures Industry Association's (FIA) OpTech 2002 Conference in New York.

In May, NFA staff sat on several panels at the 24th Annual FIA Law and Compliance Workshop in Baltimore. Also in May, NFA President Robert Wilmouth and Karen Wuertz attended the annual IOSCO conference in Istanbul, Turkey. Mr. Wilmouth participated in a panel discussion regarding "Regulation and Supervision in the Context of a Global Financial Environment."

In June, NFA sponsored information booths at both the Managed Account Reports Mid-Year Conference on Alternative Investments and the annual conference of the National Introducing Brokers Association (NIBA). Tom Sexton also spoke on security futures regulation at the NIBA event.

NFA completes pilot program for educational visits to new Members
In May, NFA's New York office completed its pilot program for educational visits to new NFA Members. The program allowed new Members to obtain a thorough understanding of the rules and regulations at the start of their operations. Approximately 20 visits were conducted over the course of 15 months. The program has now been implemented in both New York and Chicago.

The educational visits take place during the first six months of a firm's membership and are done at the firm's request. During the visit, NFA staff review some of the firm's books and records and discuss CFTC regulations and NFA rules. NFA staff also explain the audit process to the firm, discuss NFA's initiatives and services, and provide the firm with resources relevant to the type of business it is operating.

CFTC approves new NFA Bylaw and Compliance Rule
On June 26, the CFTC approved NFA's submission for the adoption of Bylaw 306 and Compliance Rule 2-36. New Bylaw 306 creates a separate NFA membership category for FOREX dealers. New Compliance Rule 2-36 prohibits FOREX Dealer Members from engaging in fraudulent activities involving FOREX transactions. Both the new Bylaw and Compliance Rule became effective on June 26, 2002.

The Commodity Futures Modernization Act of 2000 (CFMA) amended the Commodity Exchange Act to make it clear that it is unlawful to offer FOREX contracts to retail customers unless the offeror is an "enumerated regulated financial entity," including a Futures Commission Merchant or its affiliate. NFA's primary purpose in developing the new Bylaw and Compliance Rule is to prohibit fraudulent actions by entities that register as FCMs for the purpose of qualifying under the CFMA to engage in FOREX transactions with retail customers.

Bylaw 306 provides that any NFA Member that is the counterparty to foreign currency futures and options transactions that are offered to or entered into with persons that are not eligible contract participants will also be subject to regulation as a FOREX Dealer Member if 35 percent or more of its gross revenue from financial market transactions is generated from FOREX activities. This new category of membership will allow NFA to exercise appropriate regulatory authority over firms that primarily engage in FOREX business without imposing additional regulation on Members that are otherwise highly regulated and offer FOREX as a limited portion of their business.