Follow Us:
Print // Bookmark

Justification of Increase: Registration and Registration Compliance

Table of Contents >

Registration and Registration Compliance (29 FTE, $8.115 million)

Registration of Swap Execution Facilities and Designated Contract Markets

The Commission anticipates that, beginning in the second quarter of FY 2012 through FY 2013, four DCMs will file for registration and another 26 SEFs will file for temporary registration.  The Commission is under a statutory mandate of 180 days to complete an application of a DCM.  In addition, the Commission is mindful of the competitive nature of the derivatives market and the advantages a registered SEF could garner over one operating under a temporary registration.  Given these constraints, the Commission sees the need to complete the full application reviews of both DCMs and SEFs as expeditiously as possible.  To that end, the Commission will dedicate four review teams of six FTE each to review applications. In order to address the significant staffing needs that will be engendered by such a surge of applications, the Commission will temporarily re-allocate resources from across the organization.  In this regard, the Commission will re-allocate staff conducting examinations in the Division of Market Oversight and will reassign attorneys from enforcement activities. While even a short-term diminution of the examination and enforcement program is not ideal, this approach should enable the CFTC to process the initial surge of applications in FY 2012 and the first half of 2013 by newly established entities in a timely manner without seriously compromising its ability to carry out other key responsibilities.

Concurrently with registering new entities, the Commission will need to evaluate all existing DCMs to ensure that the exchanges are in compliance with the expanded core principles and Commission regulations implementing such core principles, and that the public is appropriately protected. On-going resources will also be needed to support the additional volume of work for compliance reviews for the three-fold expansion in registrants.  While there are currently 14 FTE to support the DCM registration and compliance review effort, the Commission seeks an additional five FTE to support the on-going expanded workload.   (5 FTE, $1.225 million)

Registration of Swap Data Repositories

The Commission assumes that five to eight swap data repositories will submit registration applications in FY 2012 and 2013.  The activities necessary to ensure timely review of the applications for compliance with core principles and regulations are comparable to those for DCM and SEF applications.  The Commission will use the provisional registration approach, which requires under its rules that the swap data repository show operability and compliance with regulations.  Resources will continue to be needed to support on-going compliance-based reviews, including annual Chief Compliance Officer and financial reports.  The Commission anticipates needing a single team of six FTE to perform swap data repository registration and reviews in FY 2012, which will also support swap product reviews on a capacity-available basis, redeploying resources from the Division of Enforcement and other divisions as necessary. On an on-going basis, the Commission anticipates a significant effort in registration, review and policy development in support of these new entities and requests one dedicated FTE to support SDR registrants. (1 FTE, $0.245 million)

Registration of Foreign Boards of Trade

The Commission is anticipating that 21 FBOTs will seek registration; most of these will come from those currently operating with no-action relief letters.  A significant effort will be necessary up-front to standardize the comparability review of foreign regulatory regimes of the home countries under which the FBOTs operate. As with registration of other new entities, the Commission will seek to use a phased approach to application review beginning in FY 2012.  During FY 2012, the current two FTE dedicated to review FBOTs, along with additional personnel drawn from other areas of the Commission on an as-needed basis, will be assigned to two-person teams to handle each registration.  After disposing of the expected initial surge of applications, the staff will, on an ongoing basis, maintain relationships with FBOTs for the purpose of reviewing required supplemental filings, assessing changes to the FBOT rules and regulatory regimes, and ensuring compliance with any conditions imposed, including position limits and position transparency requirements for contracts linked to DCM contracts.  With the increased volume of work in moving from operating under no-action relief letters to a more standardized and stringent regulatory framework, the Commission anticipates a need for three additional FTE to implement the FBOT registration program.  (3 FTE, $0.735 million)

Registration of Swap Dealers and Major Swap Participants

The Commission requests an additional seven FTE for FY 2013 to develop and implement a program to oversee the National Futures Association’s program for monitoring swap dealers’ and major swap participants’ compliance with applicable business conduct standards.  DFA directs the Commission to adopt both external and internal business conduct standards for these entities.  The proposed business conduct standards address such areas as:  risk management, monitoring position limits, diligent supervision, business continuity and disaster recovery, conflicts of interest, recordkeeping, reporting, swap confirmation, portfolio reconciliation, portfolio compression, and disclosure. These detailed business conduct standards are new regulatory requirements, and generally outside of the scope of CFTC requirements for other registrants such as futures commission merchants or introducing brokers.  The additional FTE are necessary to develop and implement a program to assess National Futures Association’s swap dealer and major swap participant compliance program to assess such entities’ compliance with these fundamentally new business conduct requirements.

An initial component of this program will require Commission staff to work with the staff of the National Futures Association in the design and implementation of an effective National Futures Association examination program.  Once such a program has been established and implemented by National Futures Association, the Commission’s role will switch to one of oversight over National Futures Association’s execution of the business conduct program.  Commission staff also will conduct direct examinations of certain swap dealers and major swap participants to access their compliance with the business conduct requirements.  Such direct examinations may be part of Commission’s assessment of National Futures Association’s execution of its oversight program.  Alternatively, the direct examinations may be conducted in response to a specific issue or general Commission concern with a particular swap dealer or major swap participant.  Direct examinations also are necessary to ensure that Commission staff maintains an adequate understanding of the operations at major swap participants and swap dealers so that staff is better positioned to respond to evolving business processes and other developments, particularly in responding to urgent situations.

The request for seven additional FTE to fulfill these responsibilities is based upon the Commission’s overall experience with the staffing resources needed to conduct financial surveillance oversight of self-regulatory organizations. (7 FTE, $1.715 million)

The National Futures Association expects to establish membership categories for swap dealers and major swap participants during the course of FY 2012.  The Commission will be required to respond to numerous requests for information regarding the registration obligations of certain entities, including domestic and foreign-based swap dealers and major swap participants in FY 2012 and beyond.  In addition, the Commission will also be required to review numerous National Futures Association rule submissions in support of registration of these entities, to assess whether the proposed rules are consistent with the CEA and Commission regulations.  Four additional FTE are requested to respond to issues in registration and retail foreign currency issues. (4 FTE, $0.980 million)

The Commission also anticipates that numerous registration issues will arise regarding foreign-domiciled entities that would otherwise be required to register as swap dealers or major swap participants as those terms are defined under the CEA and Commission regulations.  These issues may require the establishment of a program to assess the comparability of developing swap regulations in foreign jurisdictions in a manner consistent with the Commission’s current Part 30 program.  The Commission anticipates that it will need four additional FTE to properly staff this function.  (4 FTE, $0.980 million)

Streamlining the entity submission process

The Commission will be applying technology to improve the efficiency of the process by which registered entities submit applications for registration and other filings. The current submission process is highly manual. Applications, filings, and requests are received via email and broadly distributed throughout the CFTC.  Metadata from the submission is extracted from the submitted materials and manually entered into existing systems.  This data is not shared with other Commission systems, leading to duplicative data entry efforts and the possibility of missing or erroneous data.  In FY 2013, the CFTC will be continuing the phased deployment of a web-based registration system, called OPERA (organizations, products, events, rules and actions).  The OPERA system will allow for the direct registration of entities, registration of FBOTs, rule and product filings, and requests for Commission actions or interpretations. With OPERA, market participants will be able to apply directly using and the information collected will flow directly into internal CFTC systems (2 FTE, $0.770 million)

Direct submission by registered entities

The Online Portal (Portal) located on the website will be a secure online gateway that will provide a more efficient method of submitting entity registration applications and other submissions to the Commission. The Portal will become a central location for all external business interactions with the Commission.  The Portal will improve data quality, minimize the need for CFTC to update participant data, and provide those interacting with the Commission with a view of their submissions to the CFTC. The Portal will improve transparency of CFTC processes and procedures, providing automated notifications to those interacting with the Commission regarding required actions. (3 FTE, $1.465 million)


Organizationally, the Commission’s registration and registration compliance related increases will support the requirements of four program areas:

Registration and Registration Compliance Increases by Program
($ in thousands)
Program FTE Personnel
Data & Technology 5.00 $1,225 $1,010 $2,235
General Counsel 1.00 245 0 245
Market Oversight 8.00 1,960 0 1,960
Swap Dealer and Intermediary Oversight 15.00 3,675 0 3,675
Total 29.00 $7,105 $1,010 $8,115

Registration and Registration Compliance Increases by Program
Program Percentage
Data & Technology 28%
General Counsel 3%
Market Oversight 24%
Swap Dealer and Intermediary Oversight 45%


< Previous Page | Table of Contents | Next Page >