NASDAQ Futures Inc. issued a revised Futures Regulatory Alert reminding participants of their requirement to maintain or cause to be maintained an audit trail for all orders entered into the exchange’s trading system. Participants must produce such audit trails upon request by NFX or the National Futures Association, which provides regulatory services for NFX. In addition, NFX amended some fields that must be included in the required audit trail. The new requirements are effective July 3.
Legal Weeds: There is a tension between typical language in designated contract rules that require sponsoring clearing members to maintain or cause to be maintained required audit trails for their customers’ electronic orders. (Click here to access Ch. 5, Sec. 1(f)(v) of NFX Rules) and the relevant records rule of the Commodity Futures Trading Commission, which speaks in terms of the need to “keep” such records (emphasis added). Click here to access and contrast CFTC Rule 1.35(a)(1).) This potential conflict was highlighted in 2015 when CME Group amended its audit trail retention requirements and added the following caveat: “Nothing herein relieves any of the above-referenced firms from compliance with the applicable recordkeeping provisions of CFTC Regulations.” (Click here to access CME Group Market Regulation Advisory Notice: Order Routing/Front-End Audit Trail Requirements (December 14, 2015).)