December 17, 2012

CFTC Approves Final Rule on Adaptation of Regulations to Incorporate Swaps – Records of Transactions

Washington, DC – The U.S. Commodity Futures Trading Commission (CFTC) today approved a final rule to enhance the Commission’s enforcement program for the futures market. The rule amends CFTC regulations 1.35(a) and 1.31 to conform them to recordkeeping requirements for swap dealers and major swap participants under the Dodd-Frank Wall Street Reform and Consumer Protection Act.

As proposed, the rule would have included oral communications that lead to the execution of a transaction in a commodity interest or a cash commodity. The Commission received many comments on the proposal regarding the effect of this requirement on members of the agricultural community. The Commission is adopting the proposal, with modifications, to preserve its purpose without adversely affecting the agricultural community.

Under the final rule, only those oral communications that lead to a transaction in a commodity interest will have to be recorded, and oral communications are required only from certain market participants who are registered or required to be registered with the CFTC. A commodity interest generally is a commodity futures contract, a commodity options contract, a retail foreign exchange transaction, or a swap. A commodity interest does not include a cash commodity transaction.

The final rule amends regulation 1.35(a) to require that futures commission merchants (FCMs), certain introducing brokers (IBs) (with aggregate gross revenue exceeding $5 million over the preceding three years), retail foreign exchange dealers (RFEDs) and certain members of designated contract markets (DCMs) or swap execution facilities (SEFs) record all oral communications. These market participants will be required to record quotes, solicitations, bids, offers, instructions, trading, and prices, that lead to the execution of a transaction in a commodity interest, whether communicated by telephone, voicemail, mobile device, or other digital or electronic media.

Regulation 1.31 is being amended to require that records of oral communications be kept for one year.

The rule will help the Commission preserve critical evidence in enforcement investigations that will help protect customers.

The Commission voted [5-to-0] via seriatim to approve the final rule, which will become effective 60 days after publication in the Federal Register.

Last Updated: December 17, 2012