tract market, the designated official may also order restoration of trading on the contract market, or removal of other restrictions imposed by the official as permitted by this paragraph (g), in the absence of action by the governing board of the contract market, upon a determination by such official that the "physical emergency" has sufficiently abated to permit the physical functions of the contract market to continue in an orderly

manner.

(h) Stock index contracts. (1) Notwithstanding the provisions of paragraph (b) of this section, all changes in the composition, computation, or method of stock selection of a stock index in which a contract market is designated to trade futures contracts, or options on such futures contracts, shall be deemed approved by the Commission at the time such changes are adopted by a contract market if:

(i) The index is compiled for commercial purposes by an independent third party;

(ii) The change is consistent with a rule of the contract market which has been approved by the Commission for this purpose which specifically defines, or establishes standards governing, the composition of the stock index upon which the designated futures are authorized to trade; and

(iii) The contract market promptly provides the Commission with written notice of the change.

(2) The Commission will, within ten days after receipt by the Commission of notice of a change in the composition, computaton, or method of stock selection of a stock index, notify the contract market making that submission if it appears that the change is not consistent with the definition of the composition of, or standards governing, the stock index which has been approved by the Commission. (Approved by the Office of Management and Budget under control numbers 30380007 and 3038-0022)

[41 FR 40098, Sept. 17, 1976, as amended at 46 FR 54523, Nov. 3, 1981; 46 FR 63035, Dec. 30, 1981; 48 FR 4259, Jan. 28, 1983; 48 FR 49008, Oct. 24, 1983]

§ 1.41a Delegation of authority to the Directors of the Division of Trading and Markets and the Division of Economics and Education to process certain contract market rules.

(a) The Commission hereby delegates, until the Commission orders otherwise, the following authority to the Director of the Division of Trading and Markets and to the Director of the Division of Economics and Education, to be exercised by either of such Directors or by such other employee or employees of the Commission under the supervision of such Directors as may be designated from time to time by the Directors:

(1) Pursuant to § 1.41(b) or § 1.41(c), to determine whether to remit to a contract market and not accept for review any rule submitted pursuant to section 5a(12) of the Act and § 1.41(b) or § 1.41(c), where the Director determines that such rule submission does not comply with the form and content requirements set forth in § 1.41(b);

(2) Pursuant to § 1.41(b), to notify a contract market that a rule submitted pursuant to section 5a(12) of the Act and § 1.41(c) relates to terms and conditions, as defined in § 1.41(a)(2);

(3) Pursuant to § 1.41(c), to determine that rules submitted under § 1.41(c) do not require prior Commission approval under section 5a(12) of the Act and § 1.41(b) and that such rules may become effective prior to the expiration of the ten day period following the receipt of such rules by the Commission; and

(4) Pursuant to § 1.41(d), to determine whether to remit to a contract market any rule submitted pursuant to section 5a(1) of the Act and § 1.41(d), where the Director determines that such rule submission is not exempt from the provisions of section 5a(12) of the Act and § 1.41(b) or § 1.41(c).

(b) The Director of the Division of Trading and Markets or the Director of the Division of Economics and Education may submit to the Commission for its consideration any matter which has been delegated pursuant to paragraph (a) of this section.

(c) Nothing in this section shall be deemed to prohibit the Commission, at

its election, from exercising the authority delegated to the Director of the Division of Trading and Markets and the Director of the Division of Economics and Education under this section.

[48 FR 49009, Oct. 24, 1983]

§ 1.41b Delegation of Authority to the Director of the Division of Trading and Markets and Director of the Division of Economic Analysis.

(a) The Commission hereby delegates, until the Commission orders otherwise, to the Director of the Division of Trading and Markets and the Director of the Division of Economic Analysis, with the concurrence of the General Counsel or his or her delegee, to be exercised by either of such Directors or by such other employee or employees of the Commission under the supervision of such Directors as may be designated from time to time by the Directors, the authority to approve, pursuant to Section 5a(12) of the Act and § 1.41(b), contract market rules that relate to terms and conditions and that:

(1) Do not materially change the quantity, quality, or other delivery specifications, procedures or obligations under a contract designated for trading by the Commission (such as, but not limited to, rules affecting procedures for inspecting, grading or weighing a commodity, the costs of such procedures, notice deadlines, payment procedures, the content of delivery forms and other similar procedures);

(2) Reflect routine modifications that are expressly required or anticipated by the specific terms of a contract market rule (such as the specification of delivery grades, growths or differentials, the listing of trading months or the modification of trading hours); or

(3) Authorize the listing, in accordance with rules of the contract market which have been approved by the Commission, of option contracts that expire after the termination of the designation of that board of trade as a contract market for the trading of commodity options.

(b) The Director of the Division of Trading and Markets or the Director

of the Division of Economic Analysis may submit to the Commission for its consideration any matter which has been delegated pursuant to paragraph (a) of this section.

(c) Nothing in this section shall be deemed to prohibit the Commission, at its election, from exercising the authority delegated to the Director of the Division of Trading and Markets and the Director of the Division of Economic Analysis under this section. [49 FR 25426, June 21, 1984]

§ 1.42 Delivery notice; filing of copy.

(a) Each contract market shall furnish or cause to be furnished promptly to the Commission a copy of each notice of delivery issued by any member thereof covering the delivery of any commodity on a futures contract or on a commodity option made on or subject to the rules of such contract market, and shall also furnish or cause to be furnished promptly to the Commission a record of all endorsements of the original notice of delivery shown in the order in which such endorsements were made.

(b) Any contract market may provide the required delivery notice information on compatible data processing punched cards, magnetic tapes, magnetic discs, computer printouts, or other means: Provided, That the format and coding structure and the nature of the information contained thereon have been approved in writing by the Commission. A complete and accurate computer listing of any information supplied via data processing media must also be provided by an officer of the contract market at the time information via data processing media is supplied.

(c) For the purposes of this section, the term "delivery" includes the exercise of a commodity option on a physical but does not include any futures contract or option on a physical which is settled in cash rather than by delivery of the underlying commodity or underlying physical.

(Approved by the Office of Management and Budget under control number 30380020)

(Secs. 4g(1), 4i, 5(b), 8a(5), Commodity Exchange Act 7 U.S.C. 6g(1), 6i, 7(b), 12a(5) Supp. V, 1975))

[41 FR 48112, Nov. 2, 1976, as amended at 42 FR 12375, Mar. 3, 1977; 46 FR 63035, Dec. 30, 1981; 47 FR 57009, Dec. 22, 1982]

§ 1.43 Information required concerning warehouses, depositories, and other similar entities.

Each contract market shall file with the Commission a list of all warehouses, depositories and other similar entities in which or out of which commodities are deliverable in satisfaction of futures contracts or options on physicals made on or subject to the rules of such contract market, which list shall show the name, location, and storage capacity of each such warehouse, depository or other similar entity, together with the name and business address of the operator thereof. The Commission shall be kept currently advised of all changes affecting such information. Each contract market shall require the operator of such warehouse, depository or other similar entity to furnish, upon call by the Commission, a schedule of storage charges, handling charges, and the annual fire insurance rate applicable to such warehouse, depository or other similar entity.

[47 FR 57009, Dec. 22, 1982]

§ 1.44 Records and reports of warehouses, depositories, and other similar entities; visitation of premises.

Each contract market shall require the operators of warehouses, depositories and other similar entities whose receipts are deliverable in satisfaction of commodity futures contracts or options on physicals made on or subject to the rules of such contract market:

(a) To keep records showing the stocks of each commodity traded for future delivery or upon which option contracts are traded on such contract market in store in such warehouses, depositories and other similar entities by kinds, by classes, and by grades, if stored under conditions requiring such designation or identification, and including also lots and parcels stored specially or separately or in specially leased space of the warehouse, depository or other similar entity;

(b) Upon call from the Commission, to report the stocks of commodities in such warehouses, depositories and other similar entities and to furnish information concerning stocks of each commodity traded for future delivery or upon which option contracts are traded on such contract market about to be transferred or in the process of being transferred or otherwise moved into or out of such warehouses, depositories and other similar entities, as well as any other information concerning commodities stored in such warehouse, depositories and other similar entities and which are or may be available for delivery on futures contracts or options on physicals; and

(c) To permit visitation of the premises and inspection of the books and records of such warehouses, depositories and other similar entities by duly authorized representatives of the Commission or the Department of Justice, and to keep all books, records, papers, and memoranda relating to the storage and warehousing of commodities in such warehouse, depository or other similar entity for a period of 5 years from the date thereof.

(Approved by the Office of Management and Budget under control number 30380019)

(Sec. 5a, 49 Stat. 1497; 7 U.S.C. 7a)

[41 FR 3194, Jan. 21, 1976, as amended at 46 FR 63035, Dec. 30, 1981; 47 FR 57009, Dec. 22, 1982]

§ 1.45 Delivery of commodities conforming to United States standards.

Each contract market shall require that all contracts of sale of any commodity for future delivery on or subject to the rules of such contract market shall provide for the delivery thereunder of commodities of grades conforming to United States standards if such standards shall have been officially promulgated and adopted by the Commission. In the event of a change in United States standards, all contracts made on and after the effective date of the adoption of the revised standard by the Commission shall be made on the basis of the standards as changed: Provided, That this shall not be construed to prevent the closing of

trades made prior to the effective date of such adoption by the Commission.

(Sec. 5a, 49 Stat. 1498; 7 U.S.C. 7a)

§1.46 Application and closing out of offsetting long and short positions.

(a) Application of purchases and sales. Except with respect to purchases or sales which are for omnibus accounts, any futures commission merchant who, on or subject to the rules of a contract market:

(1) Purchases any commodity for future delivery for the account of any customer when the account of such customer at the time of such purchase has a short position in the same future of the same commodity on the same market;

(2) Sells any commodity for future delivery for the account of any customer when the account of such customer at the time of such sale has a long position in the same future of the same commodity on the same market;

(3) Purchases a put or call option for the account of any option customer when the account of such option customer at the time of such purchase has a short put or call option position with the same underlying futures contract or same underlying physical, strike price, expiration date and contract market as that purchased; or

(4) Sells a put or call option for the account of any option customerr when the account of such option customer at the time of such sale has a long put or call option position with the same underlying futures contract or same underlying physical, strike price, expiration date and contract market as that sold

shall on the same day apply such purchase or sale against such previously held short or long futures or option position, as the case may be, and shall, for futures transactions, promptly furnish such customer a statement showing the financial result of the transactions involved and, if applicable, that the account was introduced to the futures commission merchant by an introducing broker and the names of the futures commission merchant and introducing broker.

(b) Close-out against oldest open position. In all instances wherein the

short or long futures or option position in such customer's or option customer's account immediately prior to such offsetting purchase or sale is greater than the quantity purchased or sold, the futures commission merchant shall apply such offsetting purchase or sale to the oldest portion of the previously held short or long position: Provided, That upon specific instructions from the customer or option customer the offsetting transaction shall be applied as specified by the customer or option customer without regard to the date of acquisition of the previously held position. Such instructions may also be accepted from any person who, by power of attorney or otherwise, actually directs trading in the customer's or option customer's account unless the person directing the trading is the futures commission merchant (including any partner thereof), or is an officer, employee, or agent of the futures commission merchant. With respect to every such offsetting transaction that, in accordance with such specific instructions, is not applied to the oldest portion of the previously held position, the futures commission merchant shall clearly show on the statement issued to the customer or option customer in connection with the transaction, that because of the specific instructions given by or on behalf of the customer or option customer the transaction was not applied in the usual manner, i.e., against the oldest portion of the previously held position. However, no such showing need be made if the futures commission merchant has received such specific instructions in writing from the customer or option customer for whom such account is carried.

(c) In-and-out trades; day trades. Notwithstanding the provisions of paragraphs (a) and (b) of this section shall not be deemed to require the application of purchases or sales closed out during the same day (commonly known as "in-and-out trades" or "day trades") against short or long positions carried forward from a prior date.

(d) Exceptions. The provisions of this section shall not apply to:

(1) Purchases or sales of commodity options held by commercial interests

in the underlying commodity, where such purchases or sales are determined by the contract market to be economically appropriate to the reduction of risks in the conduct and management of a commercial enterprise pursuant to rules of the contract market which have been adopted in accordance with the requirements of § 1.61(b) and approved by the Commission pursuant to section 5a(12) of the Act; Provided, that no contract market or futures commission merchant shall permit such option positions to be offset other than by open and competitive execution in the trading pit or ring provided by the contract market, during the regular hours prescribed by the contract market for trading in such commodity option.

(2) Purchases or sales constituting "bona fide hedging transactions" as defined in § 1.3(z); nor

(3) Sales during a delivery period for the purpose of making delivery during such delivery period if such sales are accompanied by instructions to make delivery thereon, together with warehouse receipts or other documents necessary to effectuate such delivery.

(4) Purchases or sales made in separate accounts of a commodity pool, Provided that:

(i) The trading for such pool is directed by two or more unaffiliated commodity trading advisors acting independently, each of which is directing the trading of a separate account;

(ii) The commodity pool operator maintains only such minimum control over the trading for such pool as is necessary to fulfill its duty to supervise diligently the trading for such pool;

(iii) Each trading decision made by a commodity trading advisor for such pool is determined independently of all trading decisions made by any other commodity trading advisor for such pool;

(iv) The purchases and sales for such pool directed by different commodity trading advisors acting independently are executed by open and competitive means on or subject to the rules of a contract market; and

(v) No position held for or on behalf of separate pool accounts traded in accordance with paragraphs (d)(4) (i),

(ii), (iii) and (iv) of this section may be closed out by transferring such an open position from one of the separate accounts to another account of the pool.

(5) Purchases or sales made by a leverage transaction merchant constituting cover of its obligations to leverage customers and made in accordance with §§ 31.8(a) and 31.12(b) of this chapter.

(Approved by the Office of Management and Budget under control number 30380007)

(Secs. 4g, 5, 42 Stat. 1000, 49 Stat. 1496; 7 U.S.C. 6g, 7; secs. 4g, 5, 8a; 7 U.S.C. 6g, 7, 12a)

[41 FR 3194, Jan. 21, 1976, as amended at 46 FR 54524, Nov. 3, 1981; 46 FR 63035, Dec. 30, 1981; 47 FR 57009, Dec. 22, 1982; 48 FR 35289, Aug. 3, 1983; 49 FR 19972, May 11, 1984; 50 FR 26, Jan. 2, 1985]

§ 1.47 Requirements for classification of purchases or sales of contracts for future delivery as bona fide hedging under § 1.3(z)(3) of the regulations.

(a) Any person who wishes to avail himself of the provisions of § 1.3(z)(3) of the regulations and to make purchases or sales of any commodity for future delivery in any commodity in excess of trading and position limits then in effect pursuant to section 4a of the Act shall file statement with the Commission in conformity with the requirements of this section. All or a specified portion of the transactions and positions described in these statements shall not be considered as bona fide hedging if such person is so notified by the Commission:

(1) Within 30 days after the Commission is furnished the information required under paragraph (b) of this section, or

(2) Within 10 days after the Commission is furnished with the information required under paragraph (c) of this section.

The Commission may request the person notified to file specific additional information with the Commission to support a determination that all, or the specified portion, of the transactions and positions be considered as bona fide hedging transactions and positions. In such cases, the Com