WASHINGTON (HedgeWorld.com)–The Commodity Futures Trading Commission issued final amendments to its regulations governing the bunching of customer orders, ?1.35(a-1)(5).
The existing body of rules concerning allocation procedures began to take shape in 1972, when the CFTC created ?1.35, which, among other things, required futures commission merchants to prepare a written record of every customer’s order. In that form, the rule didn’t allow for the bunching of orders at all, but it became clear over time that such bunching would enable customers to get better execution and a better price.
The issue of bunching was treated ad hoc for some time. It wasn’t until 1998 that the CFTC approved amendments to ?1.35 that authorized advisers to provide FCMs with account and allocation information subsequent to the execution of a bunched order. Those rules attached a lot of conditions to this procedure, and the new rules adopted June 11 modify those conditions in six respects: eligible customers, eligible managers, information availability, allocation, record keeping and account certification.
A memorandum prepared by Dorsey & Whitney LLP, Minneapolis, June 23, explains that the amendments also clarify the respective responsibilities of account managers on the one hand and FCMs on the other.
The Six Changes
The old rule limited the bunching of orders to sophisticated customersPrevious HedgeWorld Story. Under the new rule, the CFTC regards as eligible all customers who provide written investment discretion to their managers.