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Outcome Objective 2.1

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Outcome Objective 2.2

Outcome Objective 2.2: Commodity professionals meet high standards.

Performance Measure 2.2.1


Performance Measure 2.2.1: Percentage of self-regulatory organizations that comply with CFTC Core Principles.
Status: Effective
Data Source: Documentation from SROs and FCMs under review, agency reports, and files from reviews and analyses.
Verification: Review and analysis of systems, data, procedures, policies, practices, and manuals, including on-site visits at SROs and FCMs.
ACTUAL
FY 2006
ACTUAL
FY 2007
ACTUAL
FY 2008
ACTUAL
FY 2009
PLAN
FY 2009
100% 100% 100% 100% 100%

Lead Program Office

Division of Clearing and Intermediary Oversight

Performance Analysis & Review

DCIO met the performance target for FY 2009. DCIO completed two SRO reviews during FY 2009. Based on these reviews, staff determined that the SROs’ programs met the applicable requirements of the Act and Commission regulations.

CFTC Core Principles require, in relevant part, boards of trade to establish and enforce rules to ensure the financial integrity of FCMs and the protection of customer funds. As part of its oversight program, DCIO conducts periodic, routine examinations of the financial and sales practice programs of the SROs for the purposes of reviewing the effectiveness of such programs, and assessing the compliance of SROs with applicable CFTC Core Principles, Commission regulations, and staff interpretations.

Examinations by DCIO of SROs generally involve an assessment of some or all of the following areas: the level of staffing dedicated by the SRO to conduct financial and sales practice review of FCMs; the conduct of infield examinations of FCMs; the review of financial statements and regulatory notices submitted by FCMs; the review of the FCM’s maintenance of required books and records; and the review of the SRO’s disciplinary program.

Performance Highlights

DCIO completed reviews of two SROs’ financial surveillance programs during FY 2009. Staff concluded that the SROs conducted their financial and sales practice programs in compliance with applicable provisions of the Act and Commission regulations and staff interpretations. DCIO also is in the process of conducting a third review of an SRO’s financial surveillance program that will not be completed until FY 2010.

Performance Measure 2.2.2


Performance Measure 2.2.2: Percentage of derivatives clearing organizations that comply with CFTC Core Principles.
Status: Effective
Data Source: Documentation from DCOs, agency reports and files, and financial surveillance materials.
Verification: Review and analysis of systems, data, procedures, policies, practices, and manuals, including on-site visits at DCOs.
ACTUAL
FY 2006
ACTUAL
FY 2007
ACTUAL
FY 2008
ACTUAL
FY 2009
PLAN
FY 2009
100% 100% 100% 100% 100%

Lead Program Office

Division of Clearing and Intermediary Oversight

Performance Analysis & Review

DCIO met the performance target for FY 2009. Three reviews to assess compliance with certain CFTC Core Principles were completed during FY 2009. Based on its reviews, staff determined that the DCO programs met the applicable requirements of the Act and Commission regulations. In addition to conducting these reviews, DCIO staff conduct financial and risk surveillance of DCOs and clearing members on a daily basis, a central element of DCIO’s ongoing oversight. Staff have identified no instances of noncompliance. Another component of DCO oversight is the review of rules and rule changes of DCOs. During the past fiscal year, 68 rule submissions, many containing multiple rules, were filed by DCOs under the self-certification provisions of the Act. Staff reviewed each of the submissions and found none that violated CFTC Core Principle.

Performance Highlights

One review of a DCO focused on CFTC Core Principle of financial resources, and another review of several DCOs focused on CFTC Core Principle of default procedures. A third review, conducted jointly with DMO, focused on CFTC Core Principle of system safeguards of several DCOs. Based on its reviews, staff determined that the DCO programs met the applicable requirements of the Act and Commission regulations.

Performance Measure 2.2.3


Performance Measure 2.2.3: Percentage of professionals compliant with standards regarding testing, licensing, and ethics training.
Status: Effective
Data Source: NFA’s audit reports.
Verification: NFA audits and the agency’s ongoing oversight of NFA’s compliance and registration programs.
ACTUAL
FY 2006
ACTUAL
FY 2007
ACTUAL
FY 2008
ACTUAL
FY 2009
PLAN
FY 2009
100% 100% 100% 100% 100%

Lead Program Office

Division of Clearing and Intermediary Oversight

Performance Analysis & Review

DCIO met the performance target for FY 2009: 100 percent of professionals were compliant with standards regarding testing, licensing, and ethics training.

Performance Highlights

In May 2008, the Farm Bill became effective. Within the Farm Bill are several amendments to the Act concerning off-exchange retail forex transactions. Among other things, the legislation: creates a new category of Commission registrant eligible to act as a counterparty in these transactions, known as a retail foreign exchange dealer (RFED); provides financial requirements for FCMs, FCM affiliates, and RFEDs, who act as counterparties in retail forex transactions; and permits the intermediation of such transactions by registrants. In general, the Farm Bill establishes that those involved in offering forex products to retail customers should be registered with the Commission, unless they are otherwise regulated. DCIO staff have drafted, but not yet released, proposed regulations for Commission consideration that address off-exchange retail forex transactions, and require the registration of all intermediaries and RFEDs, and that will establish financial requirements for the new entities. Staff have also drafted proposed amendments to the Commission’s existing regulations regarding registration, maintenance of books and records, anti-fraud, risk-disclosure, and supervisory requirements as necessary to incorporate the new categories of registrants, and unique structure of OTC retail forex markets into existing regulations.

Performance Measure 2.2.4


Performance Measure 2.2.4: Percentage of self-regulatory organizations that comply with requirement to enforce their rules.
Status: Effective
Data Source: Documentation from SROs, agency reports,and files from reviews and analyses.
Verification: Review and analysis of systems, data, procedures, policies, practices, and manuals, including on-site visits at SROs.
ACTUAL
FY 2006
ACTUAL
FY 2007
ACTUAL
FY 2008
ACTUAL
FY 2009
PLAN
FY 2009
100% 100% 100% 100% 100%

Lead Program Office

Division of Clearing and Intermediary Oversight

Performance Analysis & Review

DCIO met the performance target for FY 2009. Two reviews to assess the financial surveillance programs of SROs, and one review to assess an SRO’s arbitration program were completed in FY 2009.

CFTC Core Principle 11 provides, in relevant part, that a DCM shall establish and enforce rules to ensure the financial integrity of FCMs and the protection of customer funds. DCMs, in their capacity as SROs, receive and review monthly financial reports submitted by FCMs for the purpose of assessing whether the FCMs are in compliance with the Commission’s and the SRO’s minimum financial requirements, including requirements related to the safeguarding of customer funds. Commission regulations further require, and SRO rules require, an FCM to file a notification with the Commission and the FCM’s designated SRO whenever the SRO fails to meet capital and segregation requirements.

DCIO conducts periodic, routine examinations of the financial and sales practice programs of the SROs for the purposes of reviewing the effectiveness of such programs, and assessing the SROs’ compliance with applicable CFTC Core Principles, Commission regulations, and staff interpretations. DCIO also reviews the programs of registered futures associations for compliance with Section 17 of the Act. DCIO’s examinations of SROs generally involve an assessment of some or all of the following areas: the level of staffing dedicated by the SRO to conduct financial and sales practice review of FCMs; the conduct of infield examinations of FCMs; the review of financial statements and regulatory notices; the review of the FCM’s maintenance of required books and records; and the review of the SRO’s disciplinary program.

Performance Highlights

DCIO completed reviews of two SRO’s financial surveillance programs that focused on the SRO’s oversight of member FCMs compliance with the CFTC, and SRO minimum financial and related reporting requirements. Staff concluded that the SROs conducted their financial and sales practice programs in compliance with applicable provisions of the Act and Commission regulations and staff interpretations. DCIO also completed a review of an SRO’s arbitration program for the settlement of customers’ claims or grievances against any member or employee of a registered futures association. DCIO determined that the SRO’s arbitration program was in compliance with applicable provisions of the Act and Commission regulations. DCIO is in the process of conducting a third review of an SRO’s financial surveillance program that will not be completed until FY 2010, and is finalizing a review of an SRO’s registration program that also will be completed in FY 2010.

Performance Measure 2.2.5


Performance Measure 2.2.5: Percentage of total requests for guidance and advice receiving CFTC responses.
Status: Effective
Data Source: Signed letters (formal) and email and telephone responses (informal).
Verification: Agency files maintained in chronological files and responses to formal requests published on the Commission’s Web site.
ACTUAL
FY 2006
ACTUAL
FY 2007
ACTUAL
FY 2008
ACTUAL
FY 2009
PLAN
FY 2009
95% 95% 75% 90% 90%

Lead Program Office

Division of Clearing and Intermediary Oversight

Performance Analysis & Review

DCIO met the performance target for FY 2009. DCIO staff respond to numerous requests for guidance and advice on the CEA and Commission regulations each year. Requests are received from members of the public, market participants, intermediaries, SROs, foreign entities, and others. These requests may be formal, such as written requests for no-action, interpretative, or exemption letters. DCIO also receives numerous informal requests for guidance and advice via e-mail and phone calls.

Although DCIO responds to all requests it receives, it is not always possible for DCIO to respond within the fiscal year that it receives a request. DCIO estimates that up to 10 percent of requests may fall in this category. Some requests that raise novel or complex issues, or requests in the form of no-action letters, interpretations, or exemptions, take more time to research and to prepare a response. It should be noted, however, the statistics on numbers of letters issued or e-mail responded to may not reflect the complexity of any particular matter, or the resources necessary to address one issue versus another issue. In addition, matters commenced in one fiscal year may overlap, and be completed during the subsequent fiscal year, resulting in some imprecision in statistical measures for a given year. DCIO makes every effort to respond to requests as quickly as possible, but the timeliness of a response also is affected by the speed with which a requester provided additional information sought by staff, and the length of time required by other Commission divisions or offices to review a draft response, factors outside the control of DCIO.

Performance Highlights

In FY 2009, DCIO responded to numerous requests, both formal and informal, for interpretations of the Commission’s registration requirements, and issued exemptive and no-action letters addressing various issues, including the circumstances under which general partners of commodity pools may be relieved from CPO registration requirements when a registered designee serves as the pool’s operator. Additionally, DCIO issued an exemptive letter granting relief from certain record-keeping and disclosure requirements to a registered CPO of a publicly offered commodity pool. The relief is predicated on substituted compliance with parallel requirements under securities laws.

DCIO also issued a letter, in FY 2009, providing guidance to CPOs on complying with the financial reporting requirements set forth in Part 4 of the Commission’s regulations. The letter assisted CPOs in meeting their regulatory requirements by highlighting recent regulatory changes affecting the financial filings required of CPOs, and identified common deficiencies observed in prior year financial filings.