At all times, Turnkey Trading Partners (“Turnkey”) is engaged in supporting a number of customers that are undergoing an NFA, CFTC, or CME related examination.  This gives Turnkey’s staff regular exposure to ongoing regulatory examinations, which allows for our staff to have first hand knowledge of which areas regulators are placing a new testing emphasis on and the newest trends. In this article we identify and discuss one of the significant trends we have seen recently.

One of the trends we have identified during recent audits of Introducing Brokers (“IBs”) is that  National Futures Association, Commodity Futures Trading Commission, and CME Group examiners are becoming increasingly particular about their testing of trade execution record keeping. In fact, the degree to which NFA is now testing these processes is more nuanced than Turnkey staff has witnessed in past years. This new testing focus means that all IB’s should have a proper documentation process for how all trades are recorded.


The best place to consider what NFA, CFTC, and CME expectations are CFTC Regulation 1.35(a).  While not all brokers fall under this regulation, examiners are increasingly attempting to enforce the regulation’s record keeping obligations and methods.  However, It seems that during recent exams, regulators want all firms, not just those obligated to CFTC 1.35(a) to be able to adhere to this regulation.

For those who are not familiar with CFTC Regulation 1.35(a), the regulation requires that brokers of commodity interest and related cash or forward transactions,  who have generated $5m or more in aggregate gross revenues over the preceding three years:

“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, whether transmitted by telephone, voicemail, facsimile, instant messaging, chat rooms, electronic mail, mobile device, or other digital or electronic media.”

It is Turnkey’s opinion that every firm, regardless of their obligation to CFTC 1.35(a), should evaluate its current record keeping practices.  Based on our observations during recent examinations, firms of all sizes are being asked to reconstruct selected trades to do this they are being asked to demonstrate that each step of the trade execution process has be adequately documented and recorded.

So, what can registrants do to be able to fully satisfy this new and increasing audit standard? There are some basic questions one can ask. First, were the text messages between the broker and the client captured and recorded?  Was the phone call recorded? Should it have been? If the texts were recorded, what if they had been made via personal cell phone? Are personal cell phone texts archived? What if the broker had used an instant message platform? How is that communication stored?


Listed below are some of the materials that examiners will likely request which will allow them to engage in their testing process:

  • ALL phone records of a pre-determined time frame
  • ALL text or instant messages of a pre-determined time frame
  • ALL social media correspondence (if firm permits use of social media)
  • ALL order tickers of a pre-determined time frame
  • ANY other client communications in the time frame selected

Examiners will then engage in the testing process is as follows:

  • Select, at random, order tickets to review
  • Identify the dates the orders were placed and tie those back to phone call/text messages, or other forms of communication.
  • Listen to the phone call/review the text message or other forms of communication which correspond to the selected order.
  • Identify if there are any high-pressure sales tactics, presentations of misleading information, inappropriate suggestions, etc.
  • Confirm that the order was accepted, placed, executed and handled in accordance with both regulatory and market best practice expectations.
  • Consider if CFTC 1.35(a) was followed OR if not applicable supervisory and record keeping obligations are properly being upheld.


Turnkey has some recommendations including:

  • All firms should consider mandating the use of only company issued phones. These phones should be connected to an archiving platform or software service. Many brokers utilize RingCentral, Cell Trust, Smarsh or other similar vendors to capture phone recordings, text messages, and other client communications.
  • If it is not possible to issue company phones to all brokers, firms should then consider banning the use of personal phones and/or text messages for conducting company related business. If a broker is talking on a personal phone with a client, and they want to discuss brokerage business, your policy should be that the broker must hang up and continue the call on a dedicated company line. This line should be set up for proper record keeping.
  • If personal phones are permitted, firms should consider installing applications on these devices to ensure regulated activity is properly captured and archived.
  • Firm’s that allow brokers to use social media for business purposes must have in place a mechanism for capturing ALL correspondence between the broker and the public. Additionally, if a broker uses their personal social media account(s) for business purposes, these must also be reviewed and captured to adequately monitor solicitation and/or trade practices


As a firm, even if you do not fall under CFTC 1.35(a) you should consider the above, trend. If the trends Turnkey has been seeing continue, this area is something you may see during your next examination.

Each year compliance obligations grow.  Keeping up with these obligations can be very difficult and time consuming.  Let Turnkey Trading Partners help you to stay compliant in 2022!  To further discuss your firm’s operations regarding CFTC/NFA regulatory obligations, please contact us today via (312) 324-0040 or by clicking here.