Release: #4792-03
For Release: June 9, 2003


WASHINGTON, D.C. – Bunching of orders is now available for the orders of all futures customers under a rule change by the Commodity Futures Trading Commission (CFTC). The rule also provides recordkeeping relief to Futures Commission Merchants (FCMs) and Commodity Trading Advisors (CTAs).

By allowing all customers the opportunity to have their orders bunched, customers may receive better execution and better pricing of their orders. This change is aimed at increasing the efficiency of the trading process while maintaining appropriate customer protections. Many FCMs and exchanges commented that the rule change recognizes that futures markets are increasingly electronic and global in nature.

“Modernization of the rules for intermediaries has been a high priority for me over the past year,” said Chairman James E. Newsome. “This rule change highlights my continued commitment to ensuring that the CFTC is a more effective regulator by recognizing the changing needs of the futures industry marketplace.”

Over the past two years the CFTC has been modernizing its rules to allow for greater flexibility, creativity, and innovation in the futures industry, representing a major step toward the Commission’s goal of implementing the Commodity Futures Modernization Act of 2000 (CFMA) and replacing standardized, detailed requirements for intermediaries with a more tailored regulatory framework.

The expansion of the bunched orders rule makes six significant changes. First, it expands the category of eligible customers to include all customers. Currently, only certain sophisticated customers are eligible for inclusion in a bunched order.

Second, it expands the category of eligible account managers to include additional entities. In addition to the registered CTAs and investment advisors who are currently eligible, entities that are exempt or excluded from registration are now also eligible. Any foreign advisor that trades solely for non-U.S. persons may also participate.

Third, the rule provides for information availability rather than mandated disclosure. Rather than requiring that advisors provide specified disclosures to customers before bunching orders, the new rules require that advisors must make certain information available to customers upon request.

Fourth, the amendment removes the requirement that each account manager provide certain certifications to the carrying FCM before bunching. This provision has proven burdensome to both account mangers and FCMs.

Fifth, the CFTC has modified the standard against which allocations of fills must be judged. Allocations, over time, must be fair and equitable and no account or group of accounts can consistently receive favorable or unfavorable treatment.

Sixth, the Commission has modified the recordkeeping requirements to clarify the delineation of responsibility between account managers and FCMs. Account managers will be required to keep and make available to the Commission records sufficient to demonstrate that the allocations meet the fair and equitable standard noted previously. FCMs will be required to keep and make available to the Commission records that, as applicable, indicate each order subject to bunching and the accounts to which contracts executed for such order are allocated.

The rules are being published in the Federal Register and will be in effect 30 days after publication. Copies of the rule can be obtained by contacting the Office of the Secretariat, Three Lafayette Centre, 1155, 21st Street, N.W., Washington, DC 20581, (202) 418-5100 or by accessing the Commodity Futures Trading Commission website at www.

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