CFTC Issues No-Action Relief to Two FCMs with Regard to Oral Recording Requirements (CFTC Letter 13-72) (with Lofchie Comment)

The CFTC Division of Swap Dealer and Intermediary Oversight ("DSIO") issued a no-action relief to two futures commission merchants ("FCMs") from the oral recordkeeping requirements of CFTC Rule 1.35(a)(1) ("Records of Commodity, Interest and Related Cash or Forward Transactions").

CFTC Rule 1.35(a)(1) requires FCMs to record all oral communications "provided or received concerning quotes, solicitations, bids, offers, instructions, trading, and prices that lead to the execution of a transaction in a commodity interest." In response to comments asserting that the cost of implementing and maintaining an oral communication recording system would be burdensome for small entities, the CFTC excluded small introducing brokers ("IB") from this requirements. The CFTC granted no-action relief from Rule 1.35(a)(1) to CHS and MID-CO where the aggregate gross revenues from their activities fall within the Small IB exclusion, provided certain conditions are listed in the letter.

Attempting to comply with the CFTC's rule as to the keeping of records of oral communications is proving a massive burden to many firms. Accordingly, other firms should consider seekingsimilar relief.

See: CFTC No-Action Letter 13-72.