Proposed Rule

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Under NFA's Code of Arbitration ("Code"), all cases with claim amounts under $25,000 are administered by a summary proceeding where one arbitrator decides the case based on the parties' written submissions. Claims under $25,000 are typically less complicated than higher dollar amount claims and are well-suited for a summary proceeding. Last year, NFA processed summary proceedings approximately four months faster than cases requiring an oral hearing. This faster processing time not only saves NFA significant resources but also benefits the parties because the matters are resolved sooner, the fees are relatively low and the parties incur less costs (e.g., travel).

Although the Code provides that claims under $25,000 are administered by a summary proceeding, the Code also provides that any party may request an oral hearing for claims between $5,000 and $25,000.1 In 1992, NFA added this hearing request provision to the Code for claims from $5,000 to $10,000 when the monetary ceiling for summary proceedings was increased to $10,000. At the time, NFA sought to protect the procedural rights of customers and CFTC Regulations required that an oral hearing be an option for claims above $5,000. In 2001, after the CFTC eliminated altogether its requirement that an oral hearing be an option for claims of any level, NFA again increased the summary proceeding ceiling from $10,000 to its current level of $25,000.

Customers rarely request an oral hearing for claims from $5,000 to $25,000. In fact, in the past three years, Members have made almost 90% of all oral hearing requests for claims between these amounts. These requests substantially increase the processing time for these cases, which is a detriment to both customers and Members, and increases the resources NFA devotes to the matter. They do not affect the outcome of adjudicated cases, however. Over the past three years, the recovery rate is approximately the same for cases either decided via a summary proceeding or in which an oral hearing is actually held.

After reviewing this information with the Advisory Committees, staff proposed increasing the level at which parties can request an oral hearing in summary proceedings to $15,000. Based on the statistics from the last several years, this increase is likely to reduce the number of cases where a party may request an oral hearing by 20%.

1 The Member Rules have a similar provision for cases between $10,000 and $50,000. However, an oral hearing is rarely requested.

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