Dodd-Frank Compliance

CFTC Regulation 1.35(a)(1)(iii)

At a Glance

Recording of Oral Communications

CFTC Regulation 1.35(a)(1)(iii) states:

“Each futures commission merchant, retail foreign exchange dealer, and introducing broker that has generated over the preceding three years more than $5 million in aggregate gross revenues from its activities as an introducing broker, shall:

. . .

(iii) Keep all oral and written communications provided or received concerning quotes, solicitations, bids, offers, instructions, trading, and prices that lead to the execution of a transaction in a commodity interest and any related cash or forward transactions (but not oral communications that lead solely to the execution of a related cash or forward transaction), whether transmitted by telephone, voicemail, facsimile, instant messaging, chat rooms, electronic mail, mobile device, or other digital or electronic media (for purposes of this section, all communications described in this paragraph (a)(1)(iii) are referred to as “oral pre-trade communications” if transmitted orally or as “written pre-trade communications” if transmitted in writing, and all such communications are referred to collectively as “pre-trade communications”).”

CFTC Regulation 1.35(a)(1)(iii) requires futures commission merchants, retail foreign exchange dealers, and certain introducing brokers to record voice communications of relevant staff when engaged in conversations that lead to the execution of a transaction in a commodity interest and any related cash or forward transactions.

By referring generically to “oral” communications, the rule is applicable to conversations over desk and mobile phones as well as discussions over collaboration platforms like Zoom and Microsoft Teams.  Given corresponding supervision mandates under NFA Compliance Rule 2-9, voice and collaboration conversations should be reviewed to validate the activities of associated persons.

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Theta Lake's Solutions for Archiving Compliance

Theta Lake’s Compliance Suite includes detections for Dodd-Frank relevant conversations and displayed information, so that futures commission merchants, retail foreign exchange dealers, and certain introducing brokers can supervise Regulation 1.35(a)(1)(iii) communications across audio, video, chat, and file transfer mechanisms in audio and collaboration applications.