Notices to Members

March 18, 2009

Proposed Amendments to NFA's Articles of Incorporation

INTRODUCTION

On February 19, 2009, NFA's Board of Directors ("Board") unanimously ratified proposals to amend NFA's Articles of Incorporation ("Articles") to revise the current structure of representation by Futures Commission Merchants ("FCMs") on NFA's Board and to revise NFA's Executive Committee's quorum requirement.

EXPLANATION

 FCM Representation on the Board

Article VII, Section 2 currently requires that NFA's Board be composed, in part, of eight FCM representatives. Four of these eight representatives are drawn from FCMs ranked in the top ten FCMs based on the total amount of segregated funds and secured amounts as of June 30th preceding the election, and four representatives are drawn from non-top ten FCMs. This structure has been in place since 2001 when the Board reduced its size to ensure that it accurately reflects NFA's membership and is properly structured to enable NFA to respond to a rapidly changing business environment.

Although the Board's structure regarding FCM representation has worked well during the past several years, the same driver of change as in 2001-a rapidly changing business environment-dictates that the current structure may be too rigid and some additional flexibility may be warranted with regard to FCM seats. In particular, due to industry consolidation and the U.S. financial crises, FCM rankings have not remained static from year to year, and if the recent past is any portent, change will continue among this group.

The Board therefore approved a more flexible approach to FCM representation. While the Board will continue to have eight FCM seats, several seats will be "at large" rather than four each being allocated to top ten and non-top ten FCMs. In particular, the Board approved a structure similar to today's structure but with increased flexibility-two top ten FCM seats, two non-top ten FCM seats, and four at-large seats.

 Executive Committee Quorum Rules

NFA's Executive Committee has a category-based quorum rule. In particular, Article VIII, Section 5 of NFA's Articles of Incorporation provides that a quorum of the Executive Committee consists of one contract market Committee member; one FCM, LTM or IB Committee member; and any three other Committee members. Yet the quorum requirements for the Board, except for emergency meetings, and the Appeals, Membership and Business Conduct Committees are strictly numerical, i.e., one-half of the Directors for the Board and a majority of members for the Committees.

The Board believes that the principles of good governance support the replacement of the Executive Committee's category-based quorum requirement with a simple majority of Executive Committee Members. This change will ensure that the Executive Committee's quorum rules are identical to the quorum rules for NFA's Membership, Appeals, and Business Conduct Committees.

PROPOSED ARTICLES AMENDMENTS

The proposed amendments to Article VII, Section 2, and Article VIII, Section 5, are set forth below and incorporate the changes approved by NFA's Board as discussed above. Amendments to NFA's Articles require the affirmative vote of a majority of those Members actually voting in each Member category - Contract Market, FCM/LTM/IB; and CPO/CTA.

Please use the enclosed ballot to vote and fax it to NFA by April 20, 2009.

Section 2: Composition of Board

(b) Futures Commission Merchant, Leverage Transaction Merchant and Introducing Broker Representatives.

(i) Ten (10) elected representatives of registered Futures Commission Merchant (hereinafter "FCM") Members, registered Leverage Transaction Merchant (hereinafter "LTM") Members, and registered Introducing Broker (hereinafter "IB") Members, divided as follows:
(A) Four (4) Eight (8) representatives of FCMs, including at least two (2) representatives of FCMs ranked in the top ten FCMs and at least two (2) representatives of FCMs and LTMs not ranked in the top ten FCMs based on the total of segregated funds and secured amounts, as those terms are defined in the applicable Commission regulations, held as of June 30 of the prior calendar year.

(B) Four (4) representatives of FCMs and LTMs not ranked in the top ten FCMs based on the total of segregated funds and secured amounts, as those terms are defined in the applicable Commission regulations, held as of June 30 of the prior calendar year.

(C) (B) One representative of IBs required to maintain minimum adjusted net capital.

(D) (C) One representative of IBs not required to maintain minimum adjusted net capital.

(ii) No FCM, LTM or IB shall have more than one representative on the Board at any one time. For purposes of this limitation, a person shall be deemed a representative of an FCM, LTM or IB Member if the person is an officer, director, partner, employee or beneficial owner of more than 10 percent of the equity stock of the FCM, LTM or IB, and the person is not a contract market representative.

Section 5: Voting; Quorum. Each member of the Executive Committee shall have one vote on Executive Committee matters. A quorum of the Committee shall consist of one contract market Member of the Committee, one FCM, LTM or IB member of the Committee, and any three other Committee members. A majority of the Executive Committee members shall constitute a quorum.

1) Amendments to the following NFA Articles of Incorporation relating to FCM representation on the Board to provide greater flexibility. This amendment will not change the overall number of FCM Directors (eight) but changes the current structure from four top ten FCM seats and four non-top ten FCM seats to two top ten FCM seats, two non-top ten FCM seats, and four at-large seats.

		Approve		Disapprove
Article VII: Board of Directors (Section 2)		_______		_______

2) Amendments to the following NFA Articles of Incorporation to replace the Executive Committee's category-based quorum requirement with a simple majority of Executive Committee members

		Approve		Disapprove
Article VIII: Executive Committee (Section 5)		_______		_______

YOU MUST CHECK A MEMBER CATEGORY:

_____ Contract Market Member

____ FCM/LTM/IB Member

____ CPO/CTA Member