Proposed Rule

Last year NFA's Board adopted a $5,000,000 minimum capital requirement for FCMs who act as forex options dealers and a $7,500,000 minimum capital requirement for FCMs with an affiliate described in Section 2(c)(2)(B)(ii)(III) of the Act that engages in off-exchange forex transactions with retail customers. These amendments to Financial Requirements Section 1 were recently approved by the Commission and will be effective on July 31, 2006.

To keep the language in Section 1 from becoming unwieldy, these new requirements reference the definition of forex transaction found in Compliance Rule 2-36(h). While these requirements are not limited to Forex Dealer Members ("FDMs"), Subsection (h)(i) does refer to transactions with FDMs, and an FCM might argue that the requirements only apply to FDMs. Since the relevant definition is actually in Subsection (h)(ii), this amendment clarifies the requirements by narrowing the reference for each of the two minimum financial requirements.

As mentioned earlier, NFA is invoking the "ten-day" provision of Section 17(j) of the Commodity Exchange Act. NFA intends to make the amendments to Section 1 of NFA's Financial Requirements regarding capital requirements for forex options dealers and FCMs with forex affiliates effective on July 31, 2006, unless the Commission notifies NFA that the Commission has determined to review the proposal for approval.