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  • Concurring Statement, Commodity Futures Trading Commission Strategic Plan FY 2011-2015

    Commissioner Scott D. O’Malia

    March 1, 2011

    I support the Strategic Plan because the Commission is now committed to reorganizing the CFTC’s technology, data collection and analysis functions into a central group. For the first time, the Commission will focus on its technology needs in an organized manner to enhance its oversight of the futures markets and meet its new statutory responsibilities under the Dodd-Frank Act. As proposed, the new group will serve as the primary data collection point and will improve the CFTC’s cross market surveillance capabilities. It’s my expectation that this group will develop core risk analysis competencies that will provide great value to the Commission and industry as a whole. This group should be provided its own budget separate from the Commission operations’ funds to specifically advance technology investments, automated surveillance, automation of all forms and compliance applications, and enhanced cross division and cross market analytical tools. While the Strategic Plan indicates that the reorganization of the Commission will be completed in the near future, it is my hope that the new technology and data group will be in place by July 15, 2011, consistent with the implementation date of the Dodd-Frank Act. The CFTC should address its organizational challenges in the same manner and with the same conviction it has demonstrated in implementing the Dodd-Frank Act within the statutory time frame.

    If we learned anything from the 2008 financial crisis, it’s that improved transparency and integrated cross divisional analysis is critical. The Commission’s own shortcomings in data collection and cooperation were identified in the March 2009 Promontory Financial Group Market Surveillance Review (the “Promontory Report”), which found that communications between divisions “appears to impede the overall effectiveness of the Commission’s effort to not only detect and prevent, but in certain circumstances, to take enforcement action against market manipulation.” The report found that the lack of cooperation and coordination among the divisions within the Commission limited the CFTC’s effectiveness.

    This strategic plan also recommends establishment of a new oversight group for swap dealer and intermediary oversight. In light of the recommendations of the Promontory Report, I fear this proposed new group will further fracture the Commission’s oversight responsibilities at a time when we should consolidate and coordinate our supervisory oversight functions. By creating another division that separates intermediary oversight from clearing oversight in the swaps market, we risk blinding the Commission to an important systemic risk relationship. The Dodd-Frank Reforms mandate greater utilization of clearing and require asset managers, end users and others to use intermediaries to access clearing. Understanding the systemic relationship between the customer and the clearing house is important, but even more important, is understanding and identifying the risk exposure between the intermediary and the clearing house. The Commission can ill afford to create bureaucratic silos that fail to identify this critical systemic risk.

    I am also pleased that the Strategic Plan in Goal 5.1 proposes to establish a new education group specifically focused on consumer education and protections. The Dodd-Frank Act provides for educational programming to be funded entirely from civil monetary penalties, which means that little to no appropriated funding is necessary to establish this important outreach program. As such, there are minimal hurdles to building this important office.

    Last Updated: March 1, 2011



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