the emergency; two additional such copies shall also be promptly furnished by the contract market to the regional office of the Commission having local jurisdiction over the contract market.

(3) A temporary emergency rule may provide for, or may authorize the contract market, or the governing board thereof or any committee thereof, to undertake actions necessary or appropriate to meet the emergency, including, but not limited to, such actions as:

(i) Limiting trading to liquidation only, in whole or in part, or limiting trading to liquidation only except for new sales by parties who have the commodity to deliver pursuant to such sales;

(ii) Extending or shortening the expiration date for trading in contracts; (iii) Extending the time of delivery; (iv) Changing delivery points; (v) Ordering the liquidation of contracts, the fixing of a settlement price or the reduction in positions;

(vi) Ordering the transfer of contracts, and the money, securities, and property securing such contracts, held on behalf of customers by a member of the contract market to another member, or other members, of the contract market willing to assume such contracts or obligated to do so;

(vii) Extending, limiting or changing hours of trading;

(viii) Suspending trading; and (ix) Modifying or suspending any provision of the rules of the contract market.

(g) Physical emergencies. In the event the physical functions of a contract market are, or are threatened to be, severely and adversely affected by a "physical emergency," such as fire or other casualty, bomb threats, substantial inclement weather, power failures, communications breakdowns, or transportation breakdowns, a contract market official, duly authorized to take such action for and on behalf of the contract market with respect to such a "physical emergency" pursuant to a reviewable rule of the contract market that has been approved by the Commission pursuant to section 5a (12) of the Act, may take any action authorized by such reviewable rule necessary or appropriate to deal with the emergency, including, but not limited to, suspending trading on the contract market. In no event, however, shall suspension of trading on the contract market by such a designated official continue in

effect for more than five (5) days. If so authorized by a reviewable rule of the contract market, such designated contract market 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. [41 FR 40098, Sept. 17, 1976]

§ 1.41a Delegation of authority to the Executive Director and the Director of the Division of Trading and Markets.

The Commission hereby delegates, until the Commission orders otherwise, the following authority to the Executive Director and the Director of the Division of Trading and Markets, to be exercised alternatively by either such Director or by such other employee or employees of the Commission under the supervision of either Director as may be designated from time to time by the Director responsible for the supervision of such other employee or employees:

(a) pursuant to § 1.41(c), to determine whether a proposed operational or administrative reviewable rule appears to require Commission review prior to its being placed into effect by the contract market or that such determination cannot be made within ten (10) days of the receipt of such rule by the Commission, and to so notify the contract market; and

(b) pursuant to § 1.41(d), to permit a contract market to furnish, less than ten (10) days prior to its proposed effective date, copies of any reviewable rule which the contract market proposes to place into effect without prior submission to the Commission pursuant to § 1.41(b), where such Director determines that such rule does not appear to require Commission review prior to its being placed into effect by the contract market.

[41 FR 40100, Sept. 17, 1976]

§ 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 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.

(Secs. 4g(1), 41, 5(b), 8a(5), Commodity Exchange Act 7 U.S.C. 6g(1), 61, 7(b), 12a(5) (Supp. V, 1975).) [41 FR 48112, Nov. 2, 1976, as amended at 42 FR 12375, Mar. 3, 1977] § 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 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 each 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.

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

§ 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 made on or sub

ject to the rules of such contract market:

(a) To keep records showing the stocks of each commodity traded in for future delivery 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 in for future delivery on such contract market about to be transferred or in 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; 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.

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

§ 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. 78)

§ 1.46 Application and closing out of offsetting long and short positions. (a) Application of purchases and sales. Any futures commission merchant who, on or subject to the rules of a contract market:

(1) Shall purchase any commodity for future delivery for the account of any customer (other than the "Customers' Account" of another futures commission merchant) 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, or

(2) Shall sell any commodity for future delivery for the account of any customer (other than the "Customers' Account" of another futures commission merchant) 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, shall on the same day apply such purchase or sale against such previously held short or long position, as the case may be, and shall promptly furnish such customer a purchase and sale statement, or account sale, showing the financial result of the transactions involved.

(b) Close-out against oldest open position. In all instances wherein the short or long position in such customers' 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: Except, that upon specific instructions from the customer the offsetting transaction shall be applied as specified by the 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 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 purchase and sale statement issued to the customer in connection with the transaction, that because of the specific instructions given or by on behalf of the 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 for whom such an 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 "inand-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) [Reserved]

(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.

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

§ 1.48

Hedging anticipated requirements for processing or manufacturing or livestock and poultry production under § 1.3 (z) (4) of the regulations under the Act.

(a) Form and manner of reporting. Any person who desires to avail himself of the provisions of § 1.3 (z) (4) of the regulations under the Act, and to acquire a long futures position in any commodity with respect to which trading and position limits established by the Commission, pursuant to section 4a of the Act, shall be then in effect, shall, at least ten days prior to acquiring any position in excess of any such limit, file with the Commission, a statement showing such person's unfilled anticipated requirements for processing or manufacturing or feeding for a specified operating period not in excess of one year. Such statement shall set forth in detail person's

unfilled anticipated requirements and explain the method or determination thereof, and shall include but not be limited to the following information:

(1) Annual requirements of such commodity for processing or manufacturing or feeding for the three fiscal years next preceding;

(2) Anticipated requirements of such commodity for processing or manufacturing or feeding for a specified operating period not in excess of one year;

(3) Inventory and forward purchases of such commodity, including any quantity in process of manufacture and finished goods and by-products of manufacture or processing (in terms of such commodity);

(4) Anticipated unfilled requirements of such commodity for processing or manufacturing or feeding for a specified period not in excess of one year.

Persons hedging unfilled anticipated requirements of flour, dry corn milling products, seed corn, or sweet corn, shall furnish this information both in terms of the actual commodity used for manufacturing or processing and in terms of the commodity to be purchased for future delivery, and provide the ratio of conversion from the amount of the actual commodity used for manufacturing or processing, to the amount of the commodity to be purchased for future delivery. In addition, seed corn and sweet corn processors shall report their cash positions in terms of bushel value equivalents. Persons feeding livestock and poultry shall provide the number of cattle, hogs, sheep, or poultry expected to be fed during the specified period, not to exceed one year, and the derivation of their annual requirements based upon these numbers.

(b) Supplemental reports. Whenever such person's anticipated requirements as set forth in item two of such statement or any statement supplemental thereto shall change, such person shall immediately file with the Commission a supplemental statement reporting and explaining such change. Such person shall also file with the Commission, at least once each year, a statement setting forth the information described in paragraph (a) of this section.

(c) Purchases and liquidation. All purchases of any commodity for future delivery pursuant to the provisions of § 1.3(z) (4) of these regulations shall be

made and liquidated in an orderly manner and in accordance with sound commercial practice. No such purchases shall be made or liquidated in a manner which could be expected to cause sudden or unreasonable fluctuations or unwarranted changes in the price of such commodity. § 1.50 Filing of information by contract markets.

(a) Each contract market shall file with the Commission, at least once every 5 years, a statement with supporting data showing the provisions that it has made to continue to comply with the conditions and requirements for designation as a contract market for a specified commodity. Such statement shall be responsive to the provisions of sections 5 and 5a of the Act. The supporting data shall include any information which will assist the Commission in evaluating the effectiveness of the provisions described in the statement.

(b) The contract market shall file the required information for each commodity at least once every 5 years but not less than 90 days after the effective date of this regulation, in accordance with a schedule showing dates of required filing established by the Commission and which will be provided by him to each contract market, and every 5 years after the date of the first filing: Provided, That a contract market need not file earlier than 5 years after the effective date of its designation, unless so requested upon special call by the Commission.

(c) The information required in paragraph (a) of this section also shall be filed within 90 days after a special call by the Commission.

(d) Any failure by a contract market to continue to comply with the conditions and requirements for designation as a contract market as set forth in sections 5 and 5a of the Act, and any failure or refusal to file the information required by this regulation shall be cause for action by the Commission under sections 5b, 6 (a), 6b, 6c or 8a(7) of the Act (7 U.S.C. 7b, 8(a), 13a, 13a-1, and 12a(7)).

(e) Upon showing of good cause by a contract market, the Commission may extend for a reasonable time the filing date for, or may amend the schedule or sequence of, any report under this regulation.

(Secs. 5, 6, 8, 42 Stat. 1000, 1001, 1003, 7 U.S.C. 7, 8, 12)

§ 1.51

Contract Market Program for Enforcement.

(a) Each contract market shall use due diligence in maintaining a continuing affirmative action program to secure compliance with all of the provisions of Sections 5, 5a, 5b, 6(a), 6b, 8a(7), 8a (9) and 8c of the Act (7 U.S.C. 7, 7a, 7b, 8, 13a, 12a (7), 12a (9), and 12c) and with all of the contract market's bylaws, rules, regulations and resolutions which such contract market is required by the Act to enforce. Such program shall include:

(1) Surveillance of market activity for indication of possible congestion or other market situation conducive to possible price distortion;

(2) Surveillance of trading practices on the floor of such contract market;

(3) Examination of the books and records kept by contract market members relating to their business of dealing in commodity futures and cash commodities, insofar as such business relates to their dealing on such contract markets;

(4) Investigation of complaints received from customers concerning the handling of their accounts or orders;

(5) Investigation of all other alleged or apparent violation of such bylaws, rules, regulations and resolutions;

(6) Such other surveillance, record examination and investigation as is necessary to enforce such bylaws, rules, regulations and resolutions; and

(7) A procedure which results in the taking of prompt, effective disciplinary action for any violation which is found to have been committed.

(b) Each contract market shall keep full, complete, and systematic records which will clearly set forth all action taken as a part of, and as a result of, its program required under paragraph (a) of this section.

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

NOTE. The reporting requirements of this regulation have been approved by the Office of Management and Budget in accordance with the Federal Reports Act of 1942.

§ 1.53 Enforcement of contract market bylaws, rules, regulations, and resolutions.

Each contract market shall enforce each bylaw, rule, regulation, and resolution, made or issued by it or by the governing board thereof or any committee thereof, which is in effect as of July 18, 1975, and which relates to terms and conditions in contracts of sale to be exe

cuted on or subject to the rules of such contract market or relates to other trading requirements, unless such bylaw, rule, regulation, or resolution has been disapproved by the Commission pursuant to section 5a (12) of the Act, or the amendment or revocation of such bylaw, rule, regulation or resolution has been approved by the Commission pursuant to section 5a(12) of the Act.

(Secs. 5, 5a, 6, 6b; 42 Stat. 1000, 1001, 49 Stat. 1497, 1498, 82 Stat. 29, 30, 31, 88 Stat. 1392, 1400, 1401, 1402; 7 U.S.C. 7, 7a, 8, 13a) § 1.54

Contract market rules submitted to and approved or not disapproved by the Secretary of Agriculture. Notwithstanding any provision of these rules, any bylaw, rule, regulation, or resolution of a contract market that was submitted to the Secretary of Agriculture pursuant to §§ 1.10 (e), 1.17(b), 1.17(e), 1.38(a) or 1.39 (a) of these rules, and was either approved by the Secretary or not disapproved by him, as of April 21, 1975, shall continue in full force and effect unless and until disapproved, altered or supplemented by or with the approval of the Commission. The adoption of this rule does not constitute approval by the Commission of any contract market bylaw, rule, regulation or resolution. (Sec. 411, Pub. L. 93-463, 88 Stat. 1414; 7 U.S.C. 4a note)

§ 1.60 Pending legal proceedings.

(a) Every contract market shall submit to the Commission copies of the complaint and answer (whether or not formally characterized as such) and such further documents as the Commission may thereafter request, filed in any material legal proceedings to which the contract market is a party or its property or assets is subject.

(b) Every contract market shall submit to the Commission copies of the complaint and answer (whether or not formally characterized as such) and such further documents as the Commisison may thereafter request, filed in any material legal proceedings instituted against any officer, director, or other official of the contract market, arising from conduct in such person's capacity as a contract market official and alleging violations of (1) the Act or any rule, regulation, or order thereunder; (2) the constitution, bylaws or rules of the contract market; or (3) the applicable provisions of state law relating to the duties of of