Table of Contents >

The futures industry has undergone enormous growth and change during the last 20 years—in both the products that are traded and the platforms on which they are traded. As the Commission looks ahead, it expects that technology, globalization, and innovation will continue to drive growth in the markets it regulates. As a result of the recent financial crises, Congress is examining the existing regulatory structures of the financial services sector. Legislative movement toward strengthening regulatory oversight and bringing OTC markets into a regulated environment presents the potential for the Commission to acquire significant new responsibilities with attendant demands on its financial and human resources. Similarly, as innovative products cut across regulators’ traditional jurisdictions and pose difficult questions regarding who should be responsible for oversight, the Commission will need to devote resources to the harmonization of its regulations with those of other regulators, such as the SEC.

In FY 2006, the Commission experienced a wave of retirements, losing many experienced staff. The Commission has, since then, struggled to operate at the level needed to do the job required by statute. The Commission has repeatedly found itself making difficult choices about how to use its limited resources to fulfill its statutory mission. During FY 2008 and FY 2009, the Commission was able for the first time in several years, to begin rebuilding its staff. The Commission needs to continue to increase staffing levels to counter attrition and to have staff necessary to effectively oversee today’s ever growing and more complex markets.

As noted in the discussion of the net cost of operations, the Commission attempts to balance its investment in four strategic goals, each focusing on vital areas of regulatory responsibility. To continue to be an effective regulator, the Commission will need to place greater reliance on risk management. It will also need to continue to leverage systems and data maintained by other Federal agencies and, where possible, by SROs. The Commission will need to confront the jurisdictional challenges created by innovation and the expansion of futures and option markets on a worldwide basis. These challenges, coupled with a wide array of new surveillance issues, are expected to significantly change the way the Commission uses and allocates resources across its performance goals.

Technology

• Technology makes it possible for market participants to trade globally 24 hours a day on a multitude of newly designed platforms. As the markets continue to change and grow, the Commission must evolve to meet new information collection and analysis needs. Electronic trading, in particular, will require the development of staff skills to oversee technologically driven markets and self-regulatory systems.
• The Commission will need to upgrade its own technology and infrastructure in order to deter manipulation attempts and other disruptions to the integrity of the markets the Commission regulates.
• Electronic trading, combined with the increase in the number of trading platforms and contracts, will require CFTC to increase its processing and storage capacity and improve computational performance. For example, to improve data quality, the CFTC will collect transactional trade data using FIXML, a worldwide standard. In addition, the agency will continue to implement the new TSS¹. TSS enhances the staff’s ability to effectively detect a range of trade practice violations in a rapidly changing electronic trading environment by performing sophisticated pattern recognition and data mining. TSS will also provide Commission staff with enhanced access to a range of exchange-provided data, allowing staff to generate ad hoc data requests and investigations more quickly.
• The Commission will also begin an information governance effort, which will involve several projects, including the redesign of the Commission’s external Web site and intranet and an electronic records and document management project. These tools will support the Commission’s external and internal communication needs as it grows to new levels and takes on new responsibilities, facilitating collaboration and knowledge transfer. In addition, these efforts will support the Commission’s response to eDiscovery and Federal records requirements.
• The Commission continues to upgrade its information technology management capabilities in the areas of analytics, statistical processing and market research. This ongoing initiative involves acquiring and implementing new and emerging software technologies that enhance and leverage its current information assets. The Commission is concentrating on technology that can be applied throughout the organization and especially in the regional offices that are responsible for Market Surveillance and Compliance. The Commission will also use this new capability to conduct market research that impacts policy decisions and provides the interpretive analysis necessary for Congressional inquiries and inter-agency programs.

Globalization

• The financial crisis has heightened global concerns with regard to systemic risk, Dodd-Frank Act, and cross-border transactions. Moreover, global concern has been growing with regard to volatility and possible abusive practices in strategically important energy and agricultural commodity markets. In an integrated electronically-linked global marketplace, market disruptions or abusive practices in one jurisdiction could result in global market systemic concerns. Moreover, the trading of economically linked contracts in different jurisdictions raises significant surveillance issues. The Commission will need to remain engaged internationally in seeking solutions to these problems and promote coordinated global responses that reduce the possibility of regulatory arbitrage or gaps. As a result, the agency will need to attract experienced staff to meet these increasing demands. Such international cooperation is built on relationships established and maintained by professional regulatory staff over time. Moreover, as the Commission works to promote greater transparency of global commodity markets, which requires greater data collection, sharing, and analysis— it will be critical for the Commission to have up-to-date technology and expert surveillance staff resources to evaluate this data.

Marketplace

• Development and growth of renewable energy sources (i.e., biofuels) could impact existing energy markets.
• Disruption of oil exports to the United States may disrupt energy markets.
• Significant portions of the electrical power grids may be disabled for an extended period of time, crippling markets.
• Convergence of products and markets and new congressional grants of anti-manipulation authority require increased interagency coordination with the SEC, Federal Trade Commission, and the Federal Energy Regulatory Commission. This coordination can address areas of mutual interest related to cross-jurisdictional issues, such as those presented by credit event products, commodity exchange-traded funds, and potential manipulation in the energy markets.
• Expansion of the markets results in demand for employees with the skills required to meet Commission goals, continually challenging the agency to offer competitive compensation.

Government

• Congress enacted the Farm Bill, which clarified and strengthened the Commission’s jurisdiction over off-exchange foreign currency transactions involving retail participants. The Commission will need to devote staff to reviewing developments and monitoring participants in the retail off-exchange foreign currency marketplace.
• Congress is considering significant regulatory changes that could impact the markets and add to the role of the Commission.
• Prompt implementation of enhanced E-Government business processes is a continual challenge with limited staff and financial resources.

¹ Refer to the CFTC Information Technology Systems in the Appendix for a description of functionality. (back to text)

< Previous Page | Table of Contents | Next Page >