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May 29, 2014

NFA Board approves a decrease to the FCM assessment fee

At its May 15 meeting in New York, NFA's Board of Directors made a couple of key financial decisions in regard to its Fiscal Year 2015 (FY15) budget. The highlight is a scheduled decrease to the futures commission merchant (FCM) assessment fee levied on futures contracts and options on futures contracts traded on behalf of public customers from $.02 to $.01 per side.

NFA's Board believes that, based on trading volume, revenue and expense projections, the decrease may be sustainable for a few years. NFA's budgeted revenue for the next fiscal year is approximately $85 million.

"Strong trading volume over the past two years has allowed us to decrease the assessment fee," says David Hawrysz, NFA's senior vice president, CFO and treasurer. "Similarly, it will be trading volume going forward that will influence the length of time we can sustain the $.01 per side fee."

Assuming this decrease is approved by the Commodity Futures Trading Commission (CFTC), the new rate is scheduled to take effect Oct. 1, 2014.

NFA's Board also approved an increased FY15 operating budget. This year's increase is due in large part to the continued growth of NFA's staff, which is attributable to the significant expansion of NFA's regulatory duties in recent years. As a result, NFA's budget for FY15, which begins July 1, 2014, will rise 19 percent. The Board approved a budget of $82 million for the coming fiscal year.

One of the reasons for the rise in spending is due to the registration and monitoring of new swap dealer (SD) and major swap participant (MSP) Members. In FY15, NFA's swaps regulatory program plans to increase its staffing by approximately 30 people. While most of the initial staffing in the swaps regulatory program focused on the registration process and the review of 4s submissions, recent hiring efforts have expanded to staffing and resources needed to monitor SDs and MSPs for compliance with NFA rules and CFTC regulations. Currently, there are 102 provisionally registered SDs and two provisionally registered MSPs.

"The expectations and goals of NFA's swaps regulatory program for the coming fiscal year revolve around a transition of focus from a single mandate to dual mandates," says Jamila Piracci, vice president, OTC derivatives. "First, we will continue to provide feedback and work with SD and MSP Members regarding their 4s filings and, secondly, we expect to launch our first examinations of SD and MSP Members based on NFA rules that incorporate CFTC regulations pursuant to 4s."

Another factor contributing to the budget increase is the expansion of the futures regulatory program. The impetus behind the expansion is to provide additional resources to monitor the significant influx of new commodity pool operator (CPO) Members after the CFTC eliminated numerous widely held CPO exemptions in 2012. These increased regulatory responsibilities have spurred the need for additional staffing.

NFA will continue to operate on the premise that each regulatory program (futures, swaps, off-exchange foreign currency and market regulation) should be financially self-sufficient, and that each program should generate enough revenue to recover the costs associated with operating their respective programs.

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