CME Group updated its guidance related to Tag 50 IDs – identifiers that are used to identify natural persons placing messages (including orders) onto Globex – in order to clarify the responsibilities of clearing members and message placers. Among other things, CME Group reiterated that clearing members are responsible to ensure that all Tag 50 IDs utilized by its customers are unique at the clearing member level, and that all non-administrative messages, including orders, include the correct Tag 50 IDs. CME Group also reconfirmed that registration of Tag 50 IDs through its Exchange Fee System is mandatory for certain persons affiliated with members (including clearing members), as well as all other persons that receive preferential fees from any of the CME Group’s exchanges. CME Group said it is the obligation of clearing members to ensure that all Tag 50 IDs required to be registered are, in fact, registered and updated promptly, as necessary. CME Group indicated that, although not required, clearing members may register the Tag 50 IDs of other individuals or teams. CME Group also said that, in connection with omnibus accounts, clearing members must be able to provide the identity (or to require the relevant omnibus account to obtain and provide the identity) of any individual or team assigned within the omnibus account “promptly upon request by Market Regulation.” Additionally, CME Group's guidance describes the circumstances when a Tag 50 ID should reflect an individual (e.g., a single person who physically submits messages into Globex or is solely responsible for an automated trading system (ATS) at the relevant time) or a team (e.g., a group of persons who are responsible for the administration, operation and monitoring of an ATS at the relevant time).
Compliance Weeds: Each person entering non-administrative messages (including orders) manually or automatically into CME Globex must ensure that the order is accompanied by an operator identification known as a Tag 50 ID. This identification must be unique to the individual entering the order or, in the case of an automated trading system, unique to the person responsible for operating and monitoring the ATS at the time any messages are sent to Globex, or the team of persons on the same shift responsible for the ATS’s operation and monitoring. All Tag 50s must also be unique at the level of the clearing member firm. Individuals and team members may not permit their unique Tag 50s to be used by other persons. Other exchanges have equivalent requirements (e.g., ICE Futures U.S.; click here to access IFUS Rule 27.12(f)). Beginning September 29, 2016, future commission merchants must, under certain circumstances, report to the Commodity Futures Trading Commission on Form 102A or 102B the trading account controllers of their futures trading accounts exceeding reportable position or trading level thresholds (“reportable accounts”). These persons are defined as natural persons who by power or attorney or otherwise actually direct the trading of a trading account. (Click here to access CFTC Regulation 15.00(bb).) However, CFTC staff recently issued a guidance stating that a person “directing trading” is not only a person who provides trading instructions, but a person who implements those instructions. (Click here to access Division of Market Oversight Guidance Regarding the Term “Owner” and “Controller” in the Ownership and Control Reporting (OCR) Final Rule” dated April 8, 2016.) Clients holding reportable accounts are obligated to provide information regarding their account controllers to their FCMs and to amend such information timely, practically on the same day as any change. Firms trading electronically should be mindful of the potential overlap of individuals required to obtain unique identification tags and to be identified to their FCMs as account controllers, and should consider whether it might be helpful to better coordinate the identification of all such relevant persons. (Click here for background on the CFTC’s imminent OCR requirements in the article, “CFTC Again Extends Deadlines for New OCR Compliance; Puts Pressure on FCM Clients Who Will Not Provide Adequate Information Regarding Trading Control” in the April 10, 2016 edition of Bridging the Week.)