Proposed Rule

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PROPOSED RULE AMENDMENTS

(additions are underscored and deletions are stricken through)

BYLAWS

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BYLAW 306. FOREX DEALER MEMBERS.

(a) Except as provided in section (b), Any Members of NFA are Forex Dealer Members of NFA that is if they are the counterparty or offers to be the counterparty to foreign currency futures and options transactions will also be subject to regulation as a Forex Dealer Member of NFA if thirty-five percent or more of its gross revenue from financial market transactions (acting as counterparty or agent) is generated from foreign currency futures and options activities that are offered to or entered into with persons that are not eligible contract participants as defined in Section 1a(112) of the Act and that are not executed on a contract market, a derivatives transaction execution facility, a national securities exchange registered pursuant to Section 6(a) of the Securities Exchange Act of 1934, or a foreign board of trade.

(b) The following Members are not Forex Dealer Members:

(i) Entities described in subsection (I) and subsections (IV) through (VI) of Section 2(c)(2)(B)(ii) of the Act;

(ii) Entities described in subsection (II) of Section 2(c)(2)(B)(ii) of the Act that are members of another futures association registered under Section 17 of the Act or of a national securities association registered under Section 15A(b) of the Securities Exchange Act of 1934; and

(iii) Entities described in subsection (III) of Section 2(c)(2)(B)(ii) of the Act based on their affiliation with an entity described in subsection (II) of Section 2(c)(2)(B)(ii) of the Act that is a member of another futures association registered under Section 17 of the Act or of a national securities association registered under Section 15A(b) of the Securities Exchange Act of 1934.

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BYLAW 1301. SCHEDULE OF DUES AND ASSESSMENTS.

Subject to the provisions of Article XII, dues and assessments of Members shall be as follows:

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(e) Forex Dealer Members

Each Forex Dealer Member shall pay to NFA annual dues in the amount provided under section (b)(ii) of this bylaw if its gross annual revenue from the activities described in Bylaw 306(a) is $100,000 or less, shall pay that amount plus $7,500 if its gross annual revenue from those activities is more than $100,000, and shall pay an additional $5,000 if its gross annual revenue from those activities is more than $1,500,000. These dues replace the dues that would otherwise be payable based on the Forex Dealer Member's registration category.

Subject to the two-thirds majority voting requirements contained in Article XI, Section 1, the Board may in its discretion waive or establish lower annual dues for particular Members.

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COMPLIANCE RULES

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Part 2 - RULES GOVERNING THE BUSINESS CONDUCT OF MEMBERS REGISTERED WITH THE COMMISSION

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RULE 2-36.REQUIREMENTS FOR FOREIGN CURRENCY FUTURES OR OPTIONS TRANSACTIONS

(a) General Prohibition

No Forex Dealer Member shall engage in any foreign currency futures or options transaction that is prohibited under the Commodity Exchange Act.

(b) Fraud and Related Matters

No Forex Dealer Member or Associate of a Forex Dealer Member engaging in any foreign currency futures or options transaction shall:

(1) Cheat, defraud or deceive, or attempt to cheat, defraud or deceive any other person;

(2) Willfully make or cause to be made a false report, or willfully to enter or cause to be entered a false record in or in connection with any foreign currency futures or options transaction;

(3) Disseminate, or cause to be disseminated, false or misleading information, or a knowingly inaccurate report, that affects or tends to affect the price of any foreign currency;

(4) Engage in manipulative acts or practices regarding the price of any foreign currency or a foreign currency futures or options contract;

(5) Willfully submit materially false or misleading information to NFA or its agents with respect to foreign currency futures or options transactions;

(6) Embezzle, steal or purloin or knowingly convert any money, securities or other property received or accruing to any person in or in connection with a foreign currency futures or options transaction.

(c) Just and Equitable Principles of Trade

Forex Dealer Members and their Associates shall observe high standards of commercial honor and just and equitable principles of trade in the conduct of their foreign currency futures and options business.

(d) Doing Business with Non-Members

A Forex Dealer Member that is the counterparty, or offers to be the counterparty, to foreign currency futures and options transactions for customers shall be subject to discipline for the activities of any person that solicits or introduces a customer to the Member or that manages such customer's accounts, unless such person is a Member or Associate of NFA, meets the criteria in Bylaw 306(b), or would be exempt from Commission registration if it were acting in the same capacity in connection with exchange-traded futures contracts.

(e) Supervision

Each Forex Dealer Member shall diligently supervise its employees and agents in the conduct of their foreign currency futures and options activities for or on behalf of the Forex Dealer Member. Each Associate of a Forex Dealer Member who has supervisory duties shall diligently exercise such duties in the conduct of that Associate's foreign currency futures and options activities for or on behalf of the Forex Dealer Member.

(f) Affiliates

Each Forex Dealer Member that has an affiliate that is authorized to engage in forex transactions solely by virtue of its affiliation with the Forex Dealer Member shall supervise its affiliate's foreign currency and options activities for compliance with the same requirements that apply to the Forex Dealer Member. The Forex Dealer Member shall make the affiliate's books and records available to NFA staff upon request and shall be subject to discipline for acts and omissions of the affiliate that violate the standards imposed by NFA requirements.

(g) Activities of Other Members and Associates

Unless the Member meets the criteria in Bylaw 306(b), Members and their Associates who solicit foreign currency futures and options transactions on behalf of, introduce customers to, or manage accounts for customers that enter into foreign currency futures and options transactions with a Forex Dealer Member shall comply with subsections (a), (b), (c), and (e) of this rule.

(h) Scope

This rule governs foreign currency futures and options transactions that:

(i) are between a Forex Dealer Member and a person that is not an eligible contract participant as defined in Section 1a(112) of the Act and

(ii) are not executed on a contract market, a derivatives transaction execution facility, a national securities exchange registered pursuant to Section 6(a) of the Securities Exchange Act of 1934, or a foreign board of trade.

(i) Definition of Customer

For purposes of this rule, the term "customer" means a counterparty that is not an eligible contract participant as defined in Section 1a(12) of the Act.

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CODE OF ARBITRATION

SECTION 1. DEFINITIONS

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(m) "Futures" - includes:

(1) futures and options contracts traded on a Commission-licensed exchange;

(2) options contracts granted by a person that has registered with the Commission under Section 4c(d) of the Act as a grantor of such option contracts or has notified the Commission under the Commission's Rules that it is qualified to grant such option contracts;

(3) foreign futures and foreign options transactions made or to be made on or subject to the rules of a foreign board of trade for or on behalf of foreign futures and foreign options customers as those terms are defined in the Commission's rules;

(4) leverage transactions as that term is defined in the Commission's Rules; and

(5) security futures products, as that term is defined in Section 1a(32) of the Act; and

(6) for purposes of jurisdiction under this Code, foreign currency futures and options transactions that are between a Forex Dealer Member and a person that is not an eligible contract participant as defined in Section 1a(12) of the Act, unless they are executed on a national securities exchange registered pursuant to Section 6(a) of the Exchange Act. Forex Dealer Members, their employees, and Members and Associates who solicit transactions on behalf of, introduce customers to, or manage accounts for customers that enter into transactions with a Forex Dealer Member are all subject to mandatory arbitration in connection with those transactions.

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FINANCIAL REQUIREMENTS

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SECTION 11. FOREX DEALER MEMBER FINANCIAL REQUIREMENTS

(a) Each Forex Dealer Member must maintain "Adjusted Net Capital" (as defined in CFTC Regulation 1.17) equal to or in excess of the greatest of:

(i) $250,000;

(ii) 1% of the total net aggregate notional value of all open foreign currency futures and options transactions in customer and non-customer (but not proprietary) accounts that are between the Forex Dealer Member and a person that is not an eligible contract participant as defined in Section 1a(12) of the Act and that are not executed on a contract market, a derivatives transaction execution facility, a national securities exchange registered pursuant to Section 6(a) of the Securities Exchange Act of 1934, or a foreign board of trade; or

(iii) Any other amount required by Section 1 of these Financial Requirements.

SECTION 12. SECURITY DEPOSITS FOR FOREX TRANSACTIONS WITH FOREX DEALER MEMBERS.

Each Forex Dealer Member shall collect and maintain the following minimum security deposit for each foreign currency futures and options transaction between the Forex Dealer Member and a person that is not an eligible contract participant as defined in Section 1a(12) of the Act and that are not executed on a contract market, a derivatives transaction execution facility, a national securities exchange registered pursuant to Section 6(a) of the Securities Exchange Act of 1934, or a foreign board of trade:

(i) 2% of the notional value of transactions in the British pound, the Swiss franc, the Canadian dollar, the Japanese yen, the Euro, the Australian dollar, the New Zealand dollar, the Swedish krona, the Norwegian krone, and the Danish krone;

(ii) 4% of the notional value of other transactions;

(iii) for short options, the above amount plus the premium received; and

(iv) for long options, the entire premium.

The Executive Committee may temporarily increase these requirements under extraordinary market conditions.

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