Oral testimony by Brooksley Born May 1, 1997

ORAL STATEMENT

BROOKSLEY BORN
CHAIRPERSON
COMMODITY FUTURES TRADING COMMISSION

BEFORE THE
SENATE COMMITTEE ON APPROPRIATIONS
SUBCOMMITTEE ON AGRICULTURE, RURAL DEVELOPMENT,
AND RELATED AGENCIES

MAY 1, 1997

Mr. Chairman and members of the Subcommittee, thank you for this opportunity to discuss with you the President's fiscal year 1998 budget request for the Commodity Futures Trading Commission. I request that my written testimony be included in the record of the hearing. With me today is Madge Bolinger, Director of the Commission's Office of Financial Management.

The Commodity Futures Trading Commission is a small agency with an important mission. It oversees the nation's eleven futures and option exchanges and supervises 64,000 commodity professionals who trade on the floor of those exchanges or represent customers. These markets are growing rapidly, having more than doubled in trading volume in the last decade.

The President's fiscal year 1998 budget request for the

Commission is $60,101,000 with a staffing level of 600. This request represents an increase of $5 million and 20 staff persons over the fiscal year 1997 appropriation. About $4 million of the request is required for the Commission to sustain its current level of services, and $1 million is to fund the requested 20 additional staff years.

The Commission's tasks are to ensure the integrity of the U.S. futures and option markets, protect customers from fraud and other trading abuses, monitor the markets to detect and to prevent price distortions and manipulation, and maintain the competitive strength of the nation's exchanges. The requested increase will be used to continue enhancement of the Commission's enforcement and surveillance programs and slightly to expand the Commission's industry oversight function. Approximately 75 percent of the requested dollar increase will be dedicated to enforcement efforts to increase our investigative activities, litigation support and cooperative law enforcement efforts. The Commission's goal is to send a strong message that fraudulent activity and other violations of the Commodity Exchange Act will be promptly and thoroughly investigated and proceeded against vigorously.

The increase will also enhance the ability of the Commission to use its new integrated market surveillance system which will assist Commission staff in monitoring systemic risk in the marketplace. This increase will also provide the resources to sustain the necessary level of oversight over the compliance programs of the nation's futures and option exchanges and the National Futures Association.

The increase in funding and staffing is well justified and will benefit agricultural producers and processors, financial services firms, energy concerns, and the many other sectors of the economy that depend on the important price-discovery and risk-shifting functions of the futures and option markets.

The Commission remains committed to the elimination of unnecessary regulatory burdens and is currently reviewing and amending its regulations to streamline them as appropriate in light of the Commission's mandate to protect the public interest. The Commission is also committed to working with Congress to improve and update the Commodity Exchange Act through legislative amendments.

Bills to amend the Act have been introduced in Congress which would result in the pervasive deregulation of our futures and option markets and thus would pose grave dangers to the public interest. Our current regulatory system has allowed our futures markets to become the strongest and most respected in the world by convincing market participants from around the world that they are safe, fair and transparent. The Commission is strongly opposed to the provisions of the bills which would eliminate government regulation of much of our exchange trading in futures and options and would leave those who use and rely on the integrity of our markets exposed and unprotected. Even if these provisions were enacted, the Commission's funding needs for fiscal year 1998 would not decrease.

The Commission recognizes that this Subcommittee faces difficult appropriations decisions this year. Nonetheless, we believe that the increase the President has requested for fiscal year 1998 is essential for the Commission to fulfill its Congressional mandate and to keep pace with a growing, complex, and dynamic marketplace.

Thank you again, Mr. Chairman. I would be happy to respond to questions from you or other members of the Subcommittee.