REFILE-US CFTC postpones decision on debated tape recording rule

Tue Oct 16, 2012 7:40pm EDT

(Fixes formatting in first graph, adds dropped word "separate" in 2nd graph.)

* US grain industry opposed rule calling it unwieldy

* Final recording rule will be released separately

By Christine Stebbins

CHICAGO, Oct 16 (Reuters) - Commodities regulators on Tuesday postponed a decision on a record keeping rule for the U.S. grain industry that has met opposition from merchants and traders who say its requirements to tape conversations will prove cumbersome and costly.

"Regarding recording of oral communications and the scope of written communications and related amendments  the Commission has determined to address those changes in a final rule in a separate release," the Commodity Futures Trading Commission said in a statement. The comment was included in the Commission's final rule that amended specific current regulations as part of the landmark Dodd-Frank market reform law.

The proposed recording rule, first outlined in the Federal Register on June 7, 2011, sought a number of "conforming changes" for the commodities industry to align daily transactions with Dodd-Frank including a rule change that would require members of futures exchanges "to record all oral communications that lead to the execution of transactions in a commodity interest or cash commodity."

The recordings, which must be stored for five years in addition to full electronic records of transactions, must be "identifiable by counterparty and transaction," the proposed rule said.

CFTC received more than 50 comment letters from grain players, mostly appealing against the original language, since last summer. Grain merchants complained the rule, geared toward market transparency and accountability, would force them to record every conversation with farmers and thousands of grain buyers and sellers. Futures groups say the rule would be costly to implement and penalize exchange memberships.

"They are punting on the issue for the time being and that makes a lot of sense to me given all that CFTC has been busy with over the past few days with the flurry of announcements - I don't think the CFTC had enough time to address this issue," said Sanjeev Joshipura, president of the Commodity Markets Council, a trade group representing grain traders, exchanges and futures market participants.

CFTC released a slew of rule announcements since last Wednesday as it pushed to meet an Oct. 12 deadline to finalize rules mandated by the 2010 Dodd-Frank financial reform.

"The question remains as to when they will get to this. Is it going to be before November or after?" he added. (Reporting by Christine Stebbins; editing by Andrew Hay)