The Division of Market Oversight (“Division”) recently issued an advisory to clarify that the recordkeeping requirements under both the Commodity Exchange Act (CEA) and the Commodity Futures Trading Commission’s (CFTC or “Commission”) regulations require futures commission merchants (FCMs), introducing brokers (IBs) and members of designated contract markets (“Members”) to retain all electronic forms of communications, including emails and instant messages, for all trading.
What Was the Impetus for the Division’s Advisory?
On January 27, 2009, the New York Mercantile Exchange (NYMEX) certified to the Commission a rule amendment removing the explicit requirement that members retain copies of electronically conveyed trading floor messages. The Division issued the advisory to clarify what the Division feared was an industry-wide misunderstanding relating to the requirements to retain emails, instant messages and other electronic communications. What Are the Commission’s Recordkeeping Requirements?
The CEA and Commission regulations impose recordkeeping requirements relating to the business of all FCMs, IBs and Members. Specifically, FCMs, IBs and Members must keep full records, as well as all pertinent data and memoranda, of all transactions relating to their dealings in commodity futures, commodity options and cash commodities. These records should include trading cards, signatures cards, street books, journals, ledgers, canceled checks, copies of confirmations, data, memoranda and all other documents on which trade information is originally recorded. These records must be retained for five years and be readily accessible during the first two years of this five-year period. If stored in electronic form, the records must be accurate and readily accessible.
The recordkeeping regulations do not distinguish between the types of medium used to record the information. All information that the Commission may need to carry out its oversight and enforcement responsibilities must be retained, regardless of the form, including all forms of electronic messaging.
What Does This Mean for You?
FCMs, IBs and Members of designated contract markets must maintain all electronic records, including email, instant messages and other forms of communication created or transmitted electronically for all dealings in commodity futures, commodity options and cash commodities for up to five years.