Records to Be Maintained

Recordkeeping exists so a regulator can reconstruct what was disclosed, what was traded, and how performance was calculated. The tested twist here is the fairness rule for combined orders.

Who Keeps What

The records track the money and the advice, matched to who does which job.

• A Commodity Pool Operator (CPO) keeps the pool's books and records: subscriptions, redemptions, the pool's transactions, financial statements, and each participant's ownership.
• A Commodity Trading Advisor (CTA) keeps records of the advice it gives and the transactions it directs for client accounts, plus the records supporting any performance it presents.
• These records must be kept for the required retention period and be available for inspection by the Commodity Futures Trading Commission (CFTC) and the National Futures Association (NFA). The goal is a verifiable trail regulators can follow.

Bunched Orders: Combine, Then Allocate Fairly

A bunched order is a single order a CTA (or another eligible account manager with written discretion) places for several clients at once, instead of a separate order per account. Bunching is permitted because it can get clients a better, more uniform execution.

• The catch is allocation. When the bunched order fills, often at several prices, the fills must be split among the participating accounts by a pre-established, objective, non-preferential method, decided so the advisor cannot cherry-pick the good fills for favored accounts.
• The standard is fair and equitable over time: no account or group of accounts may receive consistently favorable or unfavorable treatment, and the method must be objective enough to be independently verified by regulators and auditors.
• Allocation may be done post-execution, by the end of the trading day, under the eligible-account-manager procedures. The advisor must review each trading program at least quarterly to confirm the allocations have in fact been fair, and records must support the allocation and be available to clients on request.

Think of it this way: bunching is like one big pizza order for the whole office instead of everyone calling in separately. Ordering together is smart. The fairness question is how you cut and hand out the slices: you set the rule before the pizza arrives, you apply it the same way every time, and you keep the receipt, so nobody can accuse you of saving the best slices for your friends after seeing what showed up.

Exam Tip: Gotchas

• Bunching is allowed; after-the-fact, cherry-picked allocation is not. The violation is not combining the orders, it is steering the good fills to favored accounts once prices are known. The allocation method must be pre-set, objective, and verifiable, with records to back it.
• Fairness is judged over time, not trade by trade. A single allocation that happens to favor one account is not automatically a violation; the test is whether any account or group is consistently favored across the quarterly review.