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Proposed Rule

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EXPLANATION OF PROPOSED AMENDMENTS

On February 13, 2007, the CFTC approved amendments to NFA's forex requirements that respond to the Seventh Circuit's decision in CFTC v. Zelener. The amendments ensure that NFA has jurisdiction over Zelener-type contracts by defining "forex" to include all leveraged off-exchange retail foreign currency transactions except 1) those resulting in actual delivery within two days and 2) bona fide hedging transactions. The amendments also incorporated this definition into NFA's other forex requirements by reference and eliminated language made superfluous by the new definition.

Between the time those amendments were adopted and the time they were approved, NFA's Board adopted several other changes to the forex requirements. Since the new definition had not yet been approved, these changes did not include it. The current amendments incorporate the new forex definition. Additionally, a technical amendment to Compliance Rule 2-6 ensures that Members are subject to the same restrictions on forex business activities with a suspended or expelled Member or Associate that they are currently subject to for on-exchange business activities, and a technical amendment to the Interpretive Notice clarifies that Members and Associates who introduce or manage customer accounts must ensure that their customers have received adequate information regarding the characteristics and risks of forex trading.

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