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March 19, 2002
Ms. Jean A. Webb
Commodity Futures Trading Commission
Three Lafayette Centre
1155 21st Street, N.W.
Washington, DC 20581
Re: National Futures Association: Proposed Amendments to Parts 100, 200, 300, 400, 600, 700 and 800 and Rule 509(b)(5) of NFA Registration Rules and NFA Bylaws 301(a), (c) and (f)
Dear Ms. Webb:
Pursuant to Section 17(j) of the Commodity Exchange Act, as amended, National Futures Association ("NFA") hereby submits to the Commodity Futures Trading Commission ("CFTC" or "Commission") proposed amendments to Parts 100, 200, 300, 400, 600, 700 and 800 and Rule 509(b)(5) of NFA Registration Rules ("Rules") and NFA Bylaws 301(a), (c) and (f). NFA's Board of Directors ("Board") unanimously approved the amendments on February 21, 2002. The Rules and Bylaws implement NFA's Online Registration System ("ORS") that firms and individuals will use beginning in June 2002 to electronically file virtually all registration forms.1 In addition, they implement the changes that the Commission made to its ethics training regulations in October 2001. NFA intends to make the amendments effective on the later of the date that the Commission approves the rules or May 17, 2002.
The transition from NFA's existing mainframe registration processing system ("MRRS") will require a period of about two weeks during which NFA cannot process registration filings. This "quiet period" will begin at the end of the business day on May 17th after which NFA will not accept any more hardcopy versions of forms that will be filed electronically in ORS. During the first part of the quiet period, NFA will enter the data from any remaining hardcopy applications that NFA received but did not have time to enter before the quiet period begins. Once that is completed, we will convert the data from MRRS to ORS. After testing the conversion to ensure that the data in ORS is correct, NFA will make the ORS system available for use.
Because NFA will not process filings during the quiet period, there are two situations in which applicants or registrants could be disadvantaged. First, firms could incur a late filing fee if the 20-day period during which they must file a Form 8-T expires during the quiet period. NFA proposes that the Commission allow NFA to waive the late filing fee for any late Form 8-T filed within the first 20 days that ORS is available. Although this could also benefit some firms in situations where the 20-day period expired before the quiet period, the benefit of cleaning up inaccurate records outweighs the cost NFA would need to incur to pinpoint only Form 8-Ts that are filed late because of the quiet period for relief.
Second, individuals who would be eligible for a special temporary license would lose that eligibility if the 60-day period within which they must file a new application after leaving their prior sponsor expires during the quiet period. To address this situation, NFA suggests that the Commission permit NFA to issue a special temporary license to eligible individuals during the quiet period. To obtain the temporary license, the sponsor must notify NFA that the individual has been employed as an AP and must file an electronic application for the individual within 20 days after ORS is available. Upon receipt of the notice, NFA will manually reflect the individual's temporary license in the registration information on BASIC. NFA will withdraw any temporary license if the sponsor does not timely file the electronic application after ORS becomes available.
As stated above, NFA intends to make the proposed amendments effective the later of the date that the Commission approves the rules or May 17, 2002. If you have any questions or we can provide any additional information, please communicate with Michael J. Crowley, Associate General Counsel. His email is firstname.lastname@example.org and his telephone number is (312) 781-1388.
Thomas W. Sexton
Vice President and General Counsel
cc: Chairman James E. Newsome
Commissioner Barbara Pedersen Holum
Commissioner Thomas J. Erickson
John C. Lawton, Esq.
Gregory Mocek, Esq.
Patrick J. McCarty, Esq.
Lawrence B. Patent, Esq.
1 Hardcopy versions of forms that have a low filing volume will continue to be filed when ORS is implemented. These include all filings for Agricultural Trade Option Merchants and the individuals affiliated with them; Notice Form 7-R for registered brokers and dealers seeking notice registrations as FCMs or IBs; Form 8-W and filings to transfer APs from a sponsor who has lost its registration to another sponsor. NFA currently plans to consider making each of these an electronic process as an enhancement in a future release of ORS.