least the nearest minute on the contract market, that the plan submitted by the contract market for the implementation of such timing of executions or such superior time sequence indicia as may otherwise be authorized by the Commission provides for the development of such a record within a time period acceptable to the Commission or that the contract market is currently unable to submit such a plan, and that the interim plan submitted by the contract market represents substantial progress toward an accurate record of the time and sequence of execution of each futures trade on the contract market. The Commission may grant an extension of time to comply with the requirements of paragraph (g)(1) of this section for a period not to exceed one year, but may renew such extension for additional periods not to exceed one year upon subsequent petition by the contract market. Such subsequent petition must be made at least 60 days prior to the expiration of the current extension.

(h) Contract Market Price Change Register. Each contract market shall establish and maintain a record of all changes in the price of futures transactions executed on the floor of the contract market. This record shall include the time of all changes in price to the nearest ten seconds.

(Sec. 4g, 4j; 49 Stat. 1496, sec. 5, 42 Stat. 1000, as amended; 7 U.S.C. 6g, 6j, 7; sec. 4f, as added by sec. 5, 49 Stat. 1495, and amended by sec. 7, 82 Stat. 28, sec. 8a, as added by sec. 10, 49 Stat. 1500, and amended, 69 Stat. 535, sec. 18, 82 Stat. 31; 7 U.S.C. 6f, 12a)

[41 FR 3194, Jan. 21, 1976, as amended by 41 FR 56143, Dec. 23, 1976)

§ 1.36 Record of securities and property received from customers.

(a) Each futures commission merchant shall maintain, as provided in § 1.31, a record of all securities and property received from customers in lieu of money to margin, guarantee, or secure the commodity trades and contracts of such customers. Such record shall show separately for each customer, a description of the securities or property received, the name and address of such customer, the dates

when the securities or property were received, the identity of the depositories or other places where such securities or property are segregated, the dates of deposits and withdrawals from such depositories, and the dates of return of such securities or property to such customer, or other disposition thereof, together with the facts and circumstances of such other disposition. In the event any futures commission merchant deposits with the clearing organization of a contract market, directly or with a bank or trust company acting as custodian for such clearing organization, securities and/or property which belong to a particular customer, such futures commission merchant shall obtain written acknowledgment from such clearing organization that it was informed that such securities or property belong to a particular customer. Such acknowledgment shall be retained as provided in § 1.31.

(b) Each clearing organization of a contract market which receives from members securities or property belonging to particular customers of such members, in lieu of money to margin, guarantee, or secure the commodity trades and contracts of such customers, or receives notice that any such securities or property have been received by a bank or trust company acting as custodian for such clearing organizations, shall maintain, as provided in § 1.31, a record which will show separately for each member, the dates when such securities or property were received, the identity of the depositories or other places where such securities or property are segregated, the dates such securities or property were returned to the member, or otherwise disposed of, together with the facts and circumstances of such other disposition including the authorization therefor.

§ 1.37 Customer's name, address, and occupation recorded; record of guarantor or controller of account.

Each futures commission merchant and each member of a contract market shall keep a record in permanent form which shall show for each commodity futures account carried by him the

true name and address of the person for whom such account is carried and the principal occupation or business of such person as well as the name of any other person guaranteeing such account or exercising any trading control with respect to such account. Such record shall be open to inspection by any authorized representative of the Commission.

(Secs. 4, 4g, 5, 42 Stat. 999, 1000, 49 Stat. 1496; 7 U.S.C. 6, 6g, 7)

§1.38 Execution of transactions.

(a) Competitive execution required; exceptions. All purchases and sales of any commodity for future delivery on or subject to the rules of a contract market shall be executed openly and competitively by open outcry or posting of bids and offers or by other equally open and competitive methods, in the trading pit or ring or similar place provided by the contract market, during the regular hours prescribed by the contract market for trading in such commodity: Provided, however, That this requirement shall not apply to such transactions as are executed noncompetitively in accordance with written rules of the contract market which have been submitted to and approved by the Commission, specifically providing for the noncompetitive execution of such transactions.

(b) Noncompetitive trades; exchange of futures, etc.; requirements. Every person handling, executing, clearing, or carrying trades or contracts which are not competitively executed, including transfer trades or office trades, or trades involving the exchange of futures for cash commodities or the exchange of futures in connection with cash commodity transactions, shall identify and mark by appropriate symbol or designation all such transactions or contracts and all orders, records, and memoranda pertaining thereto.

(Secs. 4b, 5a(12), 49 Stat. 1493, 82 Stat. 27, 88 Stat. 1392, 1401, 1402, 1413; 7 U.S.C. 6b, 7a(12))

§ 1.39 Simultaneous buying and selling orders of different principals; execution of, for and between principals. (a) Conditions and requirements. A member of a contract market who shall have in hand at the same time both buying and selling orders of different principals for the same commodity for future delivery in the same delivery month may execute such orders for and directly between such principals at the market price, if, in conformity with written rules of such contract market which have been approved by the Commission.

(1) When trading is conducted in a trading pit or ring, such orders are first offered openly and competitively by open outcry in such trading pit or ring (i) by both bidding and offering at the same price, and neither such bid nor offer is accepted, or (ii) by bidding and offering to a point where such offer is higher than such bid by not more than the minimum permissible price fluctuation applicable to such commodity on such contract market, and neither such bid nor offer is accepted; or

(2) When in nonpit trading; bids and offers are posted on a board, such member (i) pursuant to such buying order posts a bid on the board and, incident to the execution of such selling order, accepts such bid and all other bids posted at prices equal to or higher than the bid posted by him, or (ii) pursuant to such selling order posts an offer on the board and, incident to the execution of such buying order, accepts such offer and all other offers posted at prices equal to or lower than the offer posted by him;

(3) Such member executes such orders in the presence of an official representative of such contract market designated to observe such transactions and, by appropriate descriptive words or symbol, clearly identifies all such transactions on his trading card or other similar record, made at the time of execution, and notes thereon the exact time of execution and promptly presents said record to such official representative for verification and initialing;

(4) Such contract market keeps a record in permanent form of each

such transaction showing the date, price, quantity, kind of commodity, delivery month, by whom executed, and the exact time of execution; and

(5) Neither the futures commission merchant receiving nor the member executing such orders has any interest therein, directly or indirectly, except as a fiduciary.

(b) Not deemed filling orders by offset nor cross trades. The execution of orders in compliance with the conditions herein set forth will not be deemed to constitute the filling of orders by offset within the meaning of paragraph (D) of section 4b, nor to constitute cross trades within the meaning of paragraph (A) of section 4c, of the Act.

(Secs. 4b, 4c, 5a(12), 49 Stat. 1493, 1494, 82 Stat. 27, 88 Stat. 1392, 1401, 1402; 7 U.S.C. 6b, 6c, 7a(12))

[41 FR 3194, Jan. 21, 1976; 41 FR 4256, Jan. 29, 1976]

MISCELLANEOUS

§ 1.40 Crop, market information letters, reports; copies required.

Each futures commission merchant and each member of a contract market shall, upon request, furnish or cause to be furnished to the Commission a true copy of any letter, circular, telegram, or report published or given general circulation by such futures commission merchant or member which concerns crop or market information or conditions that affect or tend to affect the price of any commodity, and the true source of or authority for the information contained therein.

§ 1.41 Contract market rules, submission of rules to Commission, exemption of temporary emergency rules and certain operational and administrative rules, emergencies.

(a) Definitions. For purposes of this section:

(1) The term "rule" of a contract market means any constitutional provision, article of incorporation, bylaw, rule, regulation, resolution, interpretation, stated policy, or instrument corresponding thereto, in whatever form adopted, and any amendment or addi

tion thereto or repeal thereof, made or issued by a contract market, or by the governing board thereof or any committee thereof.

(2) The term "reviewable rule" of a contract market means any rule of a contract market which relates to terms and conditions in contracts of sale to be executed on or subject to the rules of such contract market or relates to other trading requirements except those relating to the setting of levels of margin.

(3) The term "contract market" includes a clearing organization that clears trades for the contract market. (4) The term "emergency" means:

(i) Any occurrence or circumstance specifically defined as an “emergency” by the reviewable rules of a contract market which have been previously approved by the Commission pursuant to section 5a(12) of the Act; and

(ii) Any other occurrence or circumstance which, in the opinion of the governing board of the contract market, requires immediate action and threatens or may threaten such things as the fair and orderly trading in, or the liquidation of or delivery pursuant to, any contract for the future delivery of a commodity on such contract market. Occurrences and circumstances which a governing board of a contract market may deem emergencies include, but are not limited to: (A) Any manipulative activity or attempted manipulative activity;

(B) Any actual, attempted, or threatened corner, squeeze, congestion, or undue concentration of positions;

(C) Any circumstance which may materially affect the performance of contracts traded on the contract market;

(D) Any action taken by the United States or any foreign government or any state or local governmental body, any other contract market, board of trade, or any other exchange or trade association (foreign or domestic), which may have a direct impact on trading on the contract market;

(E) Any circumstance which may have a severe, adverse effect upon the physical functions of a contract market including, for example, fire or other casualty, bomb threats, substan

tial inclement weather, power failures, communications breakdowns, and transportation breakdowns;

(F) The bankruptcy or insolvency of any member or member firm of the contract market or the imposition of any injunction or other restraint by any government agency, court or arbitrator upon a member of the contract market which may affect the ability of that member to perform on its contracts;

(G) Any circumstance in which it appears that a member or any other person has failed to perform contracts, is insolvent, or is in such financial or operational condition or is conducting business in such a manner that such person cannot be permitted to continue in business without jeopardizing the safety of customers' funds, members of the contract market, or the contract market; and

(H) Any other unusual, unforeseeable and adverse circumstance with respect to which it is impracticable for the contract market to submit, in a timely fashion, a reviewable rule to the Commission for prior approval.

(5) The term “governing board" of a contract market means the board of directors, the board of governors, the board of managers or any other similar body of the contract market or any committee duly authorized, pursuant to a reviewable rule of the contract market that has been approved by the Commission pursuant to section 5a(12) of the Act, to take action for and on behalf of the contract market with respect to an emergency.

(6) The term "two-thirds vote" of a governing board of a contract market means the affirmative vote of two or more persons constituting not less than two-thirds of the members of such governing board either (i) physically present and voting at a meeting of such governing board at which a quorum of at least one-third of the members is physically in attendance or (ii) voting in any manner other than at a meeting of such board at which a quorum of at least one-third of the members is physically in attendance as permitted by applicable state corporation law.

(7) The term "temporary emergency rule" means a reviewable rule adopted by a "two-thirds vote" of the governing board of a contract market to meet an emergency.

(b) Submission of reviewable rules to Commission. Except as provided in paragraphs (c) and (f) of this section, all proposed reviewable rules must be submitted to the Commission for approval pursuant to section 5a(12) of the Act at least 30 days prior to their proposed effective dates or within such shorter period of time as the Commission may permit. Three copies of each such rule shall be furnished to the Commission at its Washington, D.C., headquarters, and two copies shall be furnished to the regional office of the Commission having local jurisdiction over the contract market. Each such submission shall, in the following order:

(1) Set forth the text of the proposed reviewable rule (in the case of any change in, addition to, or deletion from any existing rule of the contract market, the existing rule shall be set forth, with brackets used to indicate words to be deleted and underscoring used to indicate words to be added);

(2) Describe the action taken or anticipated to be taken to adopt the proposed reviewable rule by the contract market, or by the governing board thereof or any committee thereof (in this regard, cite the rules of the contract market which authorize the contract market, or the governing board thereof or the committee thereof, to adopt the proposed reviewable rule);

(3) Set forth an explanation of the proposed reviewable rule, including its anticipated effective date and purpose, a description of any action taken or anticipated to be taken as a result of or pursuant to the proposed reviewable rule, how the rule fits into the contract market's scheme of self-regulation, how the rule furthers the purposes of the Act, and any other information which may be beneficial to the Commission in analyzing the proposed reviewable rule (if a proposed reviewable rule affects, directly or indirectly, the application of any other rule of the contract market, set forth the pertinent portion of the text of any such

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rule and describe the anticipated effect of the proposed reviewable rule on the application thereof); and

(4) Note and briefly describe any substantive opposing views expressed by the members of the contract market or others with respect to the proposed reviewable rule which were not incorporated into the proposed reviewable rule prior to its submission to the Commission.

(c) Operational and Administrative Exemption. A proposed reviewable rule is not subject to the requirements of paragraph (b) of this section, and is exempt from the requirement of section 5a(12) of the Act that it be submitted and approved by the Commission prior to being placed into effect by the contract market, where such rule is operational or administrative in nature and pertains to such matters

as:

(1) Government, organization, and administration of the contract market, including the qualification, nomination, election, appointment, tenure, compensation, powers, duties, responsibilities, activities, indemnification, or meetings of officers, directors, governing boards, or committees of the contract market, but excluding any authorization to take action for or on behalf of the contract market with respect to an emergency;

(2) Membership, including applications, purchases and sales, transfers, membership fees and assessments, dues, and corporate and partnership privileges, but excluding qualifications, selection, training, arbitration, or suspension, expulsion, denial of access to the contract market, or any other disciplinary action;

(3) Meetings of members, both regular and special, including notice and quorum requirements, voting, proxies, rules of order, minutes, reports and procedural resolutions;

(4) Hours of trading;

(5) Declaration of holidays and other similar suspensions of trading;

(6) Changes in references to the Secretary of Agriculture to references to the Commission or the Department of Justice necessitated by the Commodity Futures Trading Commission Act of 1974 and all similar changes;

(7) Correction of mechanical errors in rules;

(8) Use of and payment for facilities by members;

(9) Facilities housing the contract market, physical changes in the trad ing floor or trading area, and all similar matters;

(10) The registration of agents, employees, and branch offices of members, but not the testing or qualifications of such agents and employees;

(11) Gratuity and similar funds; but not guaranty, reserve, or similar funds;

(12) Forms such as notices of delivery, transfer sheets, warehouse receipts, inspections, certificates of grade or quality, and assay certificates;

(13) Records, reports, and confirmations provided to customers by members; or

(14) Decorum, attire, admission to floor, badges, visitors, and all similar matters;

Provided, however, That the exemption set forth in this paragraph shall not apply to any proposed reviewable rule with respect to which the contract market is notified by the Commission, within ten (10) days after copies of such rule are furnished to the Commission pursuant to paragraph (d) of this section, that the Commission has determined:

(i) That the purposes of the Act appear to necessitate Commission review of the proposed rule prior to its being placed into effect by the contract market, or

(ii) That the Commission is unable to make the determination described in paragraph (c)(14)(i) of this section within such ten (10) day period, and with respect to which the contract market is not subsequently notified by the Commission of its further determination that the purposes of the Act do not appear to necessitate Commission review of the proposed rule prior to its being placed into effect by the contract market.

(d) Rules placed into effect without prior Commission review. Except as provided in paragraph (f) of this section (temporary emergency rules), two copies of any reviewable rule which a contract market proposes to place into