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Notice I-11-11

June 20, 2011

Applicability of NFA's Assessment Fee to a Commodity Pool Operated by NFA CPO Members when the Pool is also an Exchange Member

NFA staff has recently noted during examinations of Member FCMs that some firms are failing to properly remit the NFA assessment fee for commodity pools operated by NFA Member Commodity Pool Operators ("CPOs") when the pool is also an exchange member. NFA is issuing this Notice to remind Members that in August 2004 the Board approved an amendment to NFA Bylaw 1301 regarding the application of NFA's assessment fee to a pool operated by an NFA Member CPO where the pool itself is also an exchange member. Under Bylaw 1301, a person with "privileges of membership" is exempt from paying NFA's assessment fee for trades occurring on the exchange where the person is a member. The Board's August 2004 amendment to NFA Bylaw 1301(b), which became effective on January 1, 2005, excludes from Bylaw 1301(b)'s "privileges of membership" exemption those contracts traded by a commodity pool operated by an NFA Member CPO.

In adopting this amendment, the Board recognized that NFA expends a significant amount of resources in regulating CPO Members and their pools. Exchange membership does not reduce the amount of resources that NFA expends since NFA remains responsible for examining CPO Members after they become exchange members. As a result, the Board believed that it would create an unfair situation if pools for certain NFA Members were exempt from NFA's assessment fee because they have "privileges of membership" at an exchange. Since NFA has regulatory responsibilities for CPO Members regardless of the status of the pools they operate, both exempt and non-exempt pools operated by those CPOs must pay the assessment fee.

NFA strongly encourages its Member FCMs to review their assessment fee remittance policies to ensure that they are paying NFA's assessment fees consistent with this Notice. If you have any questions regarding the material discussed in this Notice, please contact David Hawrysz (312-781-1385 or dhawrysz@nfa.futures.org) or Michael Saturley (312-781-1386 or msaturley@nfa.futures.org).

NFA is the premier independent provider of efficient and innovative regulatory programs that safeguard the integrity of the futures markets.
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