[Code of Federal Regulations]
[Title 17, Volume 1]
[Revised as of April 1, 2006]
From the U.S. Government Printing Office via GPO Access
[CITE: 17CFR1.35]

[Page 79-87]
 
              TITLE 17--COMMODITY AND SECURITIES EXCHANGES
 
             CHAPTER I--COMMODITY FUTURES TRADING COMMISSION
 
PART 1_GENERAL REGULATIONS UNDER THE COMMODITY EXCHANGE ACT--Table 
of Contents
 
Sec.  1.35  Records of cash commodity, futures, and option transactions.

    (a) Futures commission merchants, introducing brokers, and members 
of contract markets. Each futures commission merchant, introducing 
broker, and member of a contract market shall keep full, complete, and 
systematic records, together with all pertinent

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data and memoranda, of all transactions relating to its business of 
dealing in commodity futures, commodity options, and cash commodities. 
Each futures commission merchant, introducing broker, and member of a 
contract market shall retain the required records, data, and memoranda 
in accordance with the requirements of Sec.  1.31, and produce them for 
inspection and furnish true and correct information and reports as to 
the contents or the meaning thereof, when and as requested by an 
authorized representative of the Commission or the United States 
Department of Justice. Included among such records shall be all orders 
(filled, unfilled, or canceled), trading cards, signature cards, street 
books, journals, ledgers, canceled checks, copies of confirmations, 
copies of statements of purchase and sale, and all other records, data 
and memoranda, which have been prepared in the course of its business of 
dealing in commodity futures, commodity options, and cash commodities. 
Among such records each member of a contract market must retain and 
produce for inspection are all documents on which trade information is 
originally recorded, whether or not such documents must be prepared 
pursuant to the rules or regulations of either the Commission or the 
contract market. For purposes of this section, such documents are 
referred to as ``original source documents.''
    (a-1) Futures commission merchants, introducing brokers, and members 
of contract markets: Recording of customers' and option customers' 
orders. (1) Each futures commission merchant and each introducing broker 
receiving a customer's or option customer's order shall immediately upon 
receipt thereof prepare a written record of the order including the 
account identification, except as provided in paragraph (a-1)(5) of this 
section, and order number, and shall record thereon, by timestamp or 
other timing device, the date and time, to the nearest minute, the order 
is received, and in addition, for option customers' orders, the time, to 
the nearest minute, the order is transmitted for execution.
    (2)(i) Each member of a contract market who on the floor of such 
contract market receives a customer's or option customer's order which 
is not in the form of a written record including the account 
identification, order number, and the date and time, to the nearest 
minute, the order was transmitted or received on the floor of such 
contract market, shall immediately upon receipt thereof prepare a 
written record of the order in nonerasable ink, including the account 
identification, except as provided in paragraph (a-1)(5) of this section 
or appendix C to this part, and order number and shall record thereon, 
by timestamp or other timing device, the date and time, to the nearest 
minute, the order is received.
    (ii) Except as provided in paragraph (a-1)(3) of this section:
    (A) Each contract market member who on the floor of such contract 
market receives an order from another member present on the floor which 
is not in the form of a written record shall, immediately upon receipt 
of such order, prepare a written record of the order or obtain from the 
member who placed the order a written record of the order, in non-
erasable ink including the account identification and order number and 
shall record thereon, by time-stamp or other timing device, the date and 
time, to the nearest minute, the order is received; or
    (B) When a contract market member present on the floor places an 
order, which is not in the form of a written record, for his own account 
or an account over which he has control, with another member of such 
contract market for execution:
    (1) The member placing such order immediately upon placement of the 
order shall record the order and time of placement to the nearest minute 
on a sequentially-numbered trading card maintained in accordance with 
the requirements of paragraph (d) of this section;
    (2) The member receiving and executing such order immediately upon 
execution of the order shall record the time of execution to the nearest 
minute on a trading card or other record maintained pursuant to the 
requirements of paragraph (d) of this section; and

[[Page 81]]

    (3) The member receiving and executing the order shall return such 
trading card or other record to the member placing the order. The member 
placing the order then must submit together both of the trading cards or 
other records documenting such trade to contract market personnel or the 
clearing member, in accordance with contract market rules adopted 
pursuant to paragraph (j)(1) of this section.
    (iii) Each contract market may adopt rules, which must be submitted 
to the Commission pursuant to section 5a(a)(12)(A) of the Act and 
Commission Regulation 1.41, that provide alternative requirements to 
those contained in paragraph (a-1)(2)(ii) of this section. Such rules 
shall, at a minimum, require that the contemporaneous written records:
    (A) Contain the terms of the order;
    (B) Include reliable timing data for the initiation and execution of 
the order which would permit complete and effective reconstruction of 
the order placement and execution; and
    (C) Be submitted to contract market personnel or clearing members in 
accordance with contract market rules adopted pursuant to paragraph 
(j)(1) of this section.
    (3)(i) The requirements of paragraph (a-1)(2)(ii) of this section 
will not apply if a contract market maintains in effect rules which have 
been submitted to the Commission pursuant to section 5a(a)(12)(A) of the 
Act and Commission Regulation 1.41, which provide for an exemption 
where:
    (A) A contract market member places with another member of such 
contract market an order that is part of a spread transaction;
    (B) The member placing the order personally executes one or more 
legs of the spread; and
    (C) The member receiving and executing such order immediately upon 
execution of the order records the time of execution to the nearest 
minute on his trading card or other record maintained in accordance with 
the requirements of paragraph (d) of this section.
    (ii) Each contract market shall, as part of its trade practice 
surveillance program, conduct surveillance for compliance with the 
recordkeeping and other requirements under paragraphs (a-1) (2) and (3) 
of this section, and for trading abuses related to the execution of 
orders for members present on the floor of the contract market.
    (4) Each member of a contract market reporting the execution from 
the floor of the contract market of a customer's or option customer's 
order or the order of another member of the contract market received in 
accordance with paragraphs (a-1)(2)(i) or (a-1)(2)(ii)(A) of this 
section, shall record on a written record of the order, including the 
account identification, except as provided in paragraph (a-1)(5) of this 
section, and order number, by timestamp or other timing device, the date 
and time to the nearest minute such report of execution is made. Each 
member of a contract market shall submit the written records of customer 
orders or orders from other contract market members to contract market 
personnel or to the clearing member responsible for the collection of 
orders prepared pursuant to this paragraph as required by contract 
market rules adopted in accordance with paragraph (j)(1) of this 
section. The execution price and other information reported on the order 
tickets must be written in nonerasable ink.
    (5) Post-execution allocation of bunched orders. Specific customer 
account identifiers for accounts included in bunched orders need not be 
recorded at time of order placement or upon report of execution if the 
requirements of paragraphs (a-1)(5)(i)-(iv) of this section are met.
    (i) Eligible account managers. The person placing and directing the 
allocation of an order eligible for post-execution allocation must have 
been granted written investment discretion with regard to participating 
customer accounts. The following persons shall qualify as eligible 
account managers:
    (A) A commodity trading advisor registered with the Commission 
pursuant to the Act or excluded or exempt from registration under the 
Act or the Commission's rules, except for entities exempt under Sec.  
4.14(a)(3) or Sec.  4.14(a)(6) of this chapter;
    (B) An investment adviser registered with the Securities and 
Exchange
    Commission pursuant to the Investment Advisers Act of 1940 or with a

[[Page 82]]

state pursuant to applicable state law or excluded or exempt from 
registration under such Act or applicable state law or rule;
    (C) A bank, insurance company, trust company, or savings and loan 
association subject to federal or state regulation; or
    (D) A foreign adviser that exercises discretionary trading authority 
solely over the accounts of non-U.S. persons, as defined in Sec.  
4.7(a)(1)(iv) of this chapter.
    (ii) Information. Eligible account managers shall make the following 
information available to customers upon request:
    (A) The general nature of the allocation methodology the account 
manager will use;
    (B) Whether accounts in which the account manager may have any 
interest may be included with customer accounts in bunched orders 
eligible for post-execution allocation; and
    (C) Summary or composite data sufficient for that customer to 
compare its results with those of other comparable customers and, if 
applicable, any account in which the account manager has an interest.
    (iii) Allocation. Orders eligible for post-execution allocation must 
be allocated by an eligible account manager in accordance with the 
following:
    (A) Allocations must be made as soon as practicable after the entire 
transaction is executed, but in any event account managers must provide 
allocation information to futures commission merchants no later than a 
time sufficiently before the end of the day the order is executed to 
ensure that clearing records identify the ultimate customer for each 
trade.
    (B) Allocations must be fair and equitable. No account or group of 
accounts may receive consistently favorable or unfavorable treatment.
    (C) The allocation methodology must be sufficiently objective and 
specific to permit independent verification of the fairness of the 
allocations using that methodology by appropriate regulatory and self-
regulatory authorities and by outside auditors.
    (iv) Records. (A) Eligible account managers shall keep and must make 
available upon request of any representative of the Commission, the 
United States Department of Justice, or other appropriate regulatory 
agency, the information specified in paragraph (a-1)(5)(ii) of this 
section.
    (B) Eligible account managers shall keep and must make available 
upon request of any representative of the Commission, the United States 
Department of Justice, or other appropriate regulatory agency, records 
sufficient to demonstrate that all allocations meet the standards of 
paragraph (a-1)(5)(iii) of this section and to permit the reconstruction 
of the handling of the order from the time of placement by the account 
manager to the allocation to individual accounts.
    (C) Futures commission merchants that execute orders or that carry 
accounts eligible for post-execution allocation, and members of contract 
markets that execute such orders, must maintain records that, as 
applicable, identify each order subject to post-execution allocation and 
the accounts to which contracts executed for such order are allocated.
    (D) In addition to any other remedies that may be available under 
the Act or otherwise, if the Commission has reason to believe that an 
account manager has failed to provide information requested pursuant to 
paragraph (a-1)(5)(iv)(A) or (a-1)(5)(iv)(B) of this section, the 
Commission may inform in writing any designated contract market or 
derivatives transaction execution facility and that designated contract 
market or derivatives transaction execution facility shall prohibit the 
account manager from submitting orders for execution except for 
liquidation of open positions and no futures commission merchants shall 
accept orders for execution on any designated contract market or 
derivatives transaction execution facility from the account manager 
except for liquidation of open positions.
    (E) Any account manager that believes he or she is or may be 
adversely affected or aggrieved by action taken by the Commission under 
paragraph (a-1)(5)(iv)(D) of this section shall have the opportunity for 
a prompt hearing in accordance with the provisions of Sec.  21.03(g) of 
this chapter.

[[Page 83]]

    (a-2)(1) Futures commission merchants, introducing brokers, and 
members of contract markets. Upon request of the contract market, the 
Commission, or the United States Department of Justice, each futures 
commission merchant, introducing broker, and member of a contract market 
shall request from its customers and, upon receipt thereof, provide to 
the requesting body documentation of cash transactions underlying 
exchanges of futures for cash commodities or exchanges of futures in 
connection with cash commodity transactions.
    (2) Customers. Each customer of a futures commission merchant, 
introducing broker, or member of a contract market shall create, retain, 
and produce upon request of the contract market, the Commission, or the 
United States Department of Justice documentation of cash transactions 
underlying exchanges of futures for cash commodities or exchanges of 
futures in connection with cash commodity transactions.
    (3) Contract markets. Every contract market shall adopt rules which 
require its members to provide documentation of cash transactions 
underlying exchanges of futures for cash commodities or exchanges of 
futures in connection with cash commodity transactions upon request of 
the contract market.
    (4) Documentation. For the purposes of this paragraph, documentation 
means those documents customarily generated in accordance with cash 
market practices which demonstrate the existence and nature of the 
underlying cash transactions, including, but not limited to, contracts, 
confirmation statements, telex printouts, invoices, and warehouse 
receipts or other documents of title.
    (b) Futures commission merchants, introducing brokers, and clearing 
members of contract markets. Each futures commission merchant and each 
clearing member of a contract market and, for purposes of paragraph 
(b)(3) of this section, each introducing broker, shall, as a minimum 
requirement, prepare regularly and promptly, and keep systematically and 
in permanent form, the following:
    (1) A financial ledger record which will show separately for each 
customer or option customer all charges against and credits to such 
customer's or option customer's account, including but not limited to 
customer funds deposited, withdrawn, or transferred, and charges or 
credits resulting from losses or gains on closed transactions;
    (2) A record of transactions which will show separately for each 
account (including proprietary accounts):
    (i) All commodity futures transactions executed for such account, 
including the date, price, quantity, market, commodity and future; and
    (ii) All commodity option transactions executed for such account, 
including the date, whether the transaction involved a put or call, 
expiration date, quantity, underlying contract for future delivery or 
underlying physical, strike price, and details of the purchase price of 
the option, including premium, mark-up, commission and fees; and
    (3) A record or journal which will separately show for each business 
day complete details of:
    (i) All commodity futures transactions executed on that day, 
including the date, price, quantity, market, commodity, future and the 
person for whom such transaction was made;
    (ii) All commodity option transactions executed on that day, 
including the date, whether the transaction involved a put or call, the 
expiration date, quantity, underlying contract for future delivery, or 
underlying physical, strike price, details of the purchase price of the 
option, including premium, mark-up, commission and fees and the person 
for whom the transaction was made; and
    (iii) In the case of an introducing broker, the record or journal 
required by this paragraph (b)(3) shall also include the futures 
commission merchant carrying the account for which each commodity 
futures and commodity option transaction was executed on that day. 
Provided, however, that where reproductions on microfilm, microfiche or 
optical disk are substituted for hard copy in accordance with the 
provisions of Sec.  1.31(b) of this part, the requirements of paragraphs 
(b)(1) and (b)(2) of this section will be considered met if the person 
required to keep such records is ready at all times to provide,

[[Page 84]]

and immediately provides in the same city as that in which such person's 
commodity or commodity option books and records are maintained, at the 
expense of such person, reproduced copies which show the records as 
specified in paragraphs (b)(1) and (b)(2) of this section, on request of 
any representatives of the Commission or the U.S. Department of Justice.
    (c) Clearing members of contract markets. In the daily record or 
journal required to be kept under paragraph (b)(3) of this section, each 
clearing member of a contract market shall also show the floor broker or 
floor trader executing each transaction, the opposite floor broker or 
floor trader, and the opposite clearing member with whom it was made.
    (d) Members of contract markets. (1) Each member of a contract 
market who, in the place provided by the contract market for the meeting 
of persons similarly engaged, executes purchases or sales of any 
commodity for future delivery or commodity option on or subject to the 
rules of such contract market, shall prepare regularly and promptly a 
trading card or other record showing such purchases and sales. Such 
trading card or record shall show the member's name, the name of the 
clearing member, transaction date, time (as specified in rules of the 
contract market which comply with the requirements of this section), 
quantity, and, as applicable, underlying commodity, contract for future 
delivery or physical, price or premium, delivery month or expiration 
date, whether the transaction involved a put or a call and strike price. 
Such trading card or other record shall also clearly identify the 
opposite floor broker or floor trader with whom the transaction was 
executed, and the opposite clearing member (if, in accordance with the 
rules or practice of the contract market, such opposite clearing member 
is made known to the member).
    (2) Each member of a contract market recording purchases and sales 
on trading cards must record such purchases and sales in exact 
chronological order of execution on sequential lines of the trading card 
without skipping lines between trades; Provided, however; That if lines 
remain after the last execution recorded on a trading card, the 
remaining lines must be marked through.
    (3) Each member of a contract market must identify on his trading 
cards in the manner prescribed by the rules of the contract market the 
purchases and sales executed during the opening and closing periods 
designated by the contract market pursuant to paragraph (j)(7) of this 
section.
    (4) Trading cards prepared by a member of a contract market pursuant 
to contract market rules must contain:
    (i) Pre-printed member identification or other unique identifying 
information which would permit the trading cards of one member to be 
distinguished from those of all other members;
    (ii) Pre-printed sequence numbers to permit the intra-day sequencing 
of the cards; and
    (iii) Unique and pre-printed identifying information which would 
distinguish each of the trading cards prepared by the member from other 
such trading cards for no less than a one-week period.
    (5) Trading cards prepared by a member of a contract market and 
collected pursuant to paragraph (j)(1) of this section must be 
timestamped promptly to the nearest minute upon collection by either the 
contract market or the relevant clearing member.
    (6) Each member of a contract market shall be accountable for all 
trading cards prepared pursuant to contract market rules in exact 
numerical sequence, whether or not such trading cards are relied on as 
original source documents.
    (7) Trading records prepared by a member of a contract market 
pursuant to contract market rules must:
    (i) Be submitted in accordance with contract market rules adopted 
pursuant to paragraph (j)(1) of this section; and
    (ii) Be completed in non-erasable ink. A member may correct any 
errors by crossing out erroneous information without obliterating or 
otherwise making illegible any of the originally recorded information. 
With regard to

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trading cards only, a member may correct erroneous information by 
rewriting the trading card; provided, however, that the member must 
submit a ply of the trading card, or in the absence of plies the 
original trading card, that is subsequently rewritten in accordance with 
contract market rules which set forth the required collection schedule 
for trading cards and provided further that the member is accountable 
for any trading card that subsequently is rewritten pursuant to 
paragraph (d)(6) of this section.
    (8) Each member of a contract market must use a new trading card at 
the beginning of each designated 30-minute interval required by 
paragraph (j)(1) of this section (or such lesser interval as may be 
determined appropriate by the applicable contract market) or as may be 
required pursuant hereto.
    (e) Contract markets. Each contract market shall maintain or cause 
to be maintained by its clearing organization a single record which 
shall show for each futures or option trade: the transaction date, time 
(as described in paragraph (g) of this section), quantity, and, as 
applicable, underlying commodity, contract for future delivery or 
physical, price or premium, delivery month or expiration date, whether 
the transaction involved a put or a call, strike price, floor broker or 
floor trader buying, clearing member buying, floor broker or floor 
trader selling, clearing member selling, and symbols indicating the 
buying and selling customer or option customer types. The customer and 
option customer type indicators shall show, with respect to each person 
executing the trade, whether such person:
    (1) Was trading for his own account, or an account for which he has 
discretion;
    (2) Was trading for his clearing member's house account;
    (3) Was trading for another member present on the exchange floor, or 
an account controlled by such other member; or
    (4) Was trading for any other type of customer or option customer. 
The record required by this paragraph (e) shall also show, by 
appropriate and uniform symbols, any transaction which is made non-
competitively in accordance with written rules of the contract market 
which have been submitted to and approved by the Commission in 
accordance with the provisions of Sec.  1.38, and trades cleared on 
dates other than the date of execution. Except as otherwise approved by 
the Commission for good cause shown, the record required by this 
paragraph (e) shall be maintained in a format and coding structure 
approved by the Commission (i) in hard copy or on microfilm as specified 
in Sec.  1.31 and (ii) for 60 days in computer-readable form on 
compatible magnetic tapes or discs.
    (f) Each contract market shall provide for the identification of 
floor brokers, floor traders, and clearing members, in the records 
required to be kept under paragraphs (c), (d), and (e) of this section, 
by the use of a distinctive, nonvariable designation for each such floor 
broker, floor trader, and clearing member.
    (g) Time of trade execution. For purposes of paragraph (e) of this 
section: (1) The actual time of the execution of each side of a 
transaction must be obtained, or (2) if a contract market identifies and 
records the time of a transaction, a single actual time of execution for 
both sides of the transaction may be obtained. Actual times of execution 
shall be stated in increments of no more than one minute in length. If a 
contract market submits rules to the Commission, in accordance with the 
provisions of section 5a(a)(12)(A) of the Act and Sec.  1.41, defining 
and separately identifying opening and closing time periods, the 
contract market may, for purposes of paragraph (e) of this section, use 
those time periods for trades occurring during the opening and closing 
periods. Contract market rules in effect prior to the effective date of 
this paragraph (g) upon which a contract market intends to rely in 
complying herewith must be submitted for this purpose to the Commission 
in accordance with the provisions of section 5a(a)(12)(A) of the Act and 
Sec.  1.41.
    (h) Contract market price change register. Each contract market 
shall establish and maintain a record of all changes in the price of 
futures or option transactions executed on the floor of the contract 
market. This record

[[Page 86]]

shall include the time of all changes in price to the nearest ten 
seconds.
    (i) Contract markets. A contract market, in order to demonstrate 
that it is exercising due diligence in maintaining the continuing 
affirmative action program required by the Act and Sec.  1.51, shall, at 
a minimum:
    (1) Demonstrate effective use in its continuing affirmative action 
program of the information required to be obtained by paragraph (e) of 
this section to reconstruct rapidly and accurately transactions executed 
on or subject to the rules of such contract market; and
    (2) Submit to the Commission such reports as the Commission or the 
Director of the Division of Trading and Markets, or such persons under 
the supervision of the Director as may be specified from time to time, 
may require concerning the accuracy of all information recorded under 
paragraph (e) of this section and the use of such information in the 
contract market's affirmative action program.
    (j) Contract markets. Each contract market must maintain in effect 
rules which require that:
    (1) Trading records prepared by a member of the contract market 
pursuant to paragraphs (a-1) and (d) of this section be submitted to 
contract market personnel or the clearing member within 15 minutes of 
designated intervals not to exceed 30 minutes, commencing with the 
beginning of each trading session. The time period permitted for the 
submission of trading records after the close of trading in each market 
shall not exceed 15 minutes from the close. Such documents should 
nevertheless be collected as often as is practicable by the contract 
market or relevant clearing member. Such contract market rules need not, 
however, require that those original source documents which cannot be 
relied upon by the contract market or clearing member for clearing 
purposes be submitted pursuant to this paragraph. Each contract market 
shall submit a written report to the Commission no later than nine 
months after the effective date of this paragraph describing with 
particularity the contract market's system(s) in place to comply with 
this paragraph and the level of compliance achieved to date.
    (2) Trading cards collected pursuant to this paragraph must be 
timestamped promptly to the nearest minute upon collection by either the 
contract market or relevant clearing member.
    (3) A member of the contract market must use a new trading card at 
the beginning of each designated 30-minute interval required by 
paragraph (j)(1) of this section.
    (4) A member of the contract market must record trades in the manner 
prescribed by paragraph (d)(2) of this section.
    (5) Trading cards prepared by a member of the contract market must 
contain the identifying information prescribed by paragraph (d)(4) of 
this section.
    (6) A member of the contract market must be accountable for all 
trading cards prepared pursuant to contract market rules in exact 
numerical sequence, whether or not such trading cards are relied on as 
original source documents.
    (7) A member of the contract market must identify on his trading 
cards trades executed during opening and closing periods either by 
drawing a line on the trading card to separate those trades from others 
recorded thereon or by some other method. Each contract market must 
designate as opening and closing periods for this purpose those periods 
upon which the opening and closing trading ranges are based for each of 
its markets.
    (8) A member of the contract market must complete trades in non-
erasable ink in the manner prescribed by paragraph (d)(7)(ii) of this 
section.
    (k) Collection of trading cards in intervals not to exceed 15 
minutes. The Commission, in its discretion, may publish a schedule in 
the Federal Register no earlier than 11 months after paragraph (j)(1) of 
this section becomes effective, indicating when the records required to 
be submitted pursuant to that paragraph must be submitted to contract 
market personnel or the clearing member within 15 minutes of designated 
intervals not to exceed 15 minutes, commencing with the beginning of 
each trading session.
    (l) A contract market which can demonstrate that it currently has 
available hand-held terminals or such other

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automated means for the recordation of trades which can eliminate the 
opportunity for improper alteration or fabrication of trading records, 
may petition the Commission for an exemption from Regulations 1.35(a-1) 
(2) and (4), (d), (j) or (k), as appropriate.

(Approved by the Office of Management and Budget under control numbers 
3038-0007 and 3038-0022)

[41 FR 3194, Jan. 21, 1976, as amended by 46 FR 54521, Nov. 3, 1981; 46 
FR 55925, Nov. 13, 1981; 46 FR 63035, Dec. 30, 1981; 47 FR 57008, Dec. 
22, 1982; 48 FR 35389, Aug. 3, 1983; 51 FR 2691, Jan. 21, 1986; 54 FR 
33881, Aug. 17, 1989; 55 FR 8137, Mar. 7, 1990; 58 FR 27465, May 10, 
1993; 58 FR 31166, June 1, 1993; 58 FR 40348, July 28, 1993; 59 FR 5525, 
Feb. 7, 1994; 61 FR 43001, Aug. 20, 1996; 63 FR 45709, Aug. 27, 1998; 63 
FR 49955, Sept. 18, 1998; 68 FR 34794, June 11, 2003]