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Proposed Rule

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EXPLANATION OF PROPOSED AMENDMENTS

NFA's Code of Arbitration ("Code") provides that all cases with claim amounts of $25,000 or under are administered by a summary proceeding where one arbitrator decides the case based on the parties' written submissions. Prior to October 15, 2007, the Code also provided that any party could request an oral hearing for claims between $5,000 and $25,000. Although few parties request an oral hearing, when oral hearings are requested,1 the processing time increases substantially. This increases the resources NFA devotes to the matter and is detrimental to both customers and Members. Last year, for example, NFA's processing of cases with an oral hearing request took four months longer than those disposed of via summary proceedings.

Effective October 15, 2007, NFA increased the level at which parties can request an oral hearing in summary proceedings to $15,000. Therefore, for claims greater than $15,000 but less than $25,000 filed as summary proceedings, any party can currently request an oral hearing.

Given the increases in the processing time and the resources NFA devotes to matters in which an oral hearing is requested, NFA's Advisory Committees recommended that staff review the current arbitration fee structure related to these claims. Based on this review, all of the Advisory Committees supported NFA imposing a $525 fee upon the party requesting an oral hearing in a case originally filed as a summary proceeding. This fee represents the additional fees NFA would have collected had the matter fallen in the oral hearing category at the time it was filed. Although these fees would have been divided between the claimant and the respondent if the matter had been initially filed as an oral hearing (the claimant would have paid an additional $250 and the respondent an additional $275), NFA believes it is appropriate to assess the entire fee against the party requesting an oral hearing since it is seeking to change the way the matter is administered.2


1 In the past three years, Members made almost 90% of all oral hearing requests for claims between $5,000 and $25,000. Almost all of these requests were made by one Member firm and one law firm that regularly represents Members in arbitration.

2 This additional fee is strictly designed to recoup some of the additional expenses associated with accommodating oral hearing requests in cases that should in all likelihood be administered as summary proceedings.

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