Customer Type Indicator (CTI) Codes
What Are Customer Type Indicator (CTI) Codes?
Customer type indicator codes (CTI codes) are part of a system that recognizes futures exchange transactions made by brokers for various clients or for themselves. Four normalized codes show the party for whom the transaction is made.
Understanding Customer Type Indicator (CTI) Codes
The primary purpose for carrying out customer type indicator (CTI) codes is to make a robust audit trail to follow transactions by "what" and "when" yet additionally "who" (or what sort of customer) made the trade.
A designated contract market's audit trail incorporates an electronic transaction history database. This database must carry a history, everything being equal, whether by open outcry or, all the more usually, by going into an electronic trading system. This incorporates all changes and scratch-offs, the customer type indicator code, and timing and sequencing data to remake trading.
Futures exchanges utilize numbered codes to show various types of transactions. These codes are part of the paper trail recorded with the exchange's clearinghouse. Their purpose is to recognize for whom and on what type of account the trades are being set.
Here are the four coded categories, as defined on the National Futures Association (NFA):
- CTI 1: Transactions initiated and executed by an individual member for their own account, for an account they control, or for an account wherein they have ownership or financial interest.
- CTI 2: Transactions executed for the proprietary account of a clearing member or non-clearing member firm.
- CTI 3: Transactions where an individual member or authorized trader executes for the personal account of one more individual member, for an account the other individual member controls, or for an account wherein the other individual member has ownership or financial interest.
- CTI 4: Any transaction not meeting the definition of CTI 1, 2, or 3. (These ought to be non-member customer transactions).
Standardization of Information
The Joint Compliance still up in the air in 2004 that there was a need to make uniform CTI codes across all U.S. futures markets. The JCC, itself, is a committee of senior compliance authorities from each of the domestic futures exchanges and the National Futures Association, shaped in May 1989 to foster improvements and uniformity in their systems and procedures.
The code system improvements were explicitly intended to address the developing number of electronic trading systems and a wide range of scenes for getting to markets. Several futures exchanges intended to reclassify CTI codes on their own markets. That would bring about a wide range of, and conceivably conflicting codes, as well as a loss of uniformity across exchanges. The primary benefits were the lightening of confusion for market participants and reduction in the compliance burden put on trading firms.
Features
- CTI codes are utilized to follow order flow and audit trades to guarantee that priority is given properly.
- CTI codes distinguish what type of customer is involved, however who initiated the trade and when, in light of four primary assignments.
- Customer Type Indicator Codes (CTI codes) distinguish what type of customer is engaged with a futures contract transaction.
