The OCE provides economic support and advice to the Commission, conducts research on policy issues facing the Commission, and educates and trains Commission staff. The OCE plays an integral role in the preparation of new financial market regulations by providing economic expertise and analysis of cost-benefit considerations underlying those regulations. As new financial market regulations are implemented, the OCE will assess the impact of these regulations on derivatives markets.
|Mission Activity||FY 2012
|Review of Products and Rules of Operation||$245||1|
|Data Acquisition, Analytics, and Surveillance||$980||4|
|Economic and Legal Analysis||$2,185||5|
Products and rules introduced by designated contract markets, swap execution facilities and swap data repositories. The OCE will support the Commission’s functions with respect to the review and approval of products to be made available for trading. The OCE will also participate in the evaluation of the real time reporting process, including the determination of block trade threshold levels. The OCE will conduct economic analysis pertaining to exchange traded contracts and block trade levels so that such contracts maintain the market’s price discovery function and offer market participants who use these contracts sufficient ability to hedge their risk.
Swap data acquisition and analytics for oversight and surveillance. The OCE will help evaluate the reporting requirements applied to swap market participants. The OCE will also conduct economic and statistical analysis of swaps data that would be reported to swap data repositories. The OCE will provide support in the development of automated surveillance capabilities by building new models to generate alerts, thereby facilitating market and financial surveillance. Moreover, the OCE will provide input into the modification of the Commission’s large trader reporting and financial and risk surveillance systems to support new swaps data analysis, internal reporting requirements, and transparency reporting on the CFTC.gov website.
Position Limits. The OCE will help to quantitatively evaluate the impact of position limits utilizing data from both commodity futures and swap markets as it becomes available. Using this data and analysis, the OCE will propose modifications to the existing surveillance reports and new or modified surveillance processes that will need to be developed.
Capital, Margin and Segregation requirements for intermediaries. The OCE will aid in responding to the anticipated requests of numerous major swap participants and swap dealers to compute both initial margin and market risk and credit risk capital charges using proprietary mathematical models. After the initial review and assessment of such models, the OCE will assist in performing periodic reviews of such models to assess their performance.
The OCE will provide significant analytical support to the Commission’s enforcement program to police the markets for fraud, manipulation and other abuses. Specifically, the OCE will provide economic expertise for the analysis and evaluation of data pertaining to anti-manipulation and disruptive trading practice violations in both futures and swap markets.
Commission-wide economic analysis. The OCE maintains an economic research program focused on the quantitative analysis of the ever-evolving changes in trading technology, trading instruments, and types of market participants. Specifically, the OCE focuses its quantitative research program to analyze the following four broad areas:
The analysis of the composition of speculative market participants provides input into the Commission’s policy decisions on the potential impact of these traders in markets. Such analyses include identifying certain categories of traders and whether their individual or collective positions or trading activity impact price, volatility, or liquidity in markets.
The analysis of the linkages between various markets helps to assess the transmission mechanisms between derivatives markets and securities and cash markets in order to monitor systemic risk issues. Such analysis includes identifying correlations among various markets and asset classes and determining whether an event in one market may trigger similar events in other markets.
The analysis of the effects of swap execution facilities and swap market participants on the market structure of derivatives markets provides input into the Commission’s assessment of new market participants and trading venues. Further, economic analysis will serve as the basis for many studies mandated after the DFA regulations are in effect.
The analysis of high frequency and algorithmic trading provides tools to help the Commission’s surveillance and enforcement divisions to detect disruptive trading patterns and participants who attempt to manipulate markets.
Participated in the preparation of proposed and all finalized Dodd-Frank rulemakings, especially with respect to the consideration of costs and benefits.
Provided quantitative analyses for at least 11 enforcement investigations.
Organized and held the 1st annual CFTC Conference in Commodities Markets.
Composed at least 7 working papers on Commission oriented topics made available to the public with 25 presentations and 3 publications.
Participated in the preparation of the FSOC annual report.
Participation in all proposed and finalized Dodd-Frank rulemakings, especially with respect to the consideration of costs and benefits of the estimated 42 rules.
Provide quantitative analyses for 13 enforcement investigations.
Host the 2nd annual CFTC Conference in Commodities Markets and compose 10 working papers on Commission oriented topics to make available to the public with 28 presentations and 6 publications.
Preparation of market simulation and reconstruction model and automated simulated alerts.
Publication of transparency measures based on transaction level data.
Participation in the implementation of Dodd-Frank rules, including entity and product review, review of trading and clearing facilities, valuation of complex swaps, and positions limits.
Provide quantitative analyses for 15 enforcement investigations.
Participation in data collection and analysis of swaps, futures, and options data.
Provide quantitative analysis of trading strategies of market participants in derivatives markets.
Host the 3rd annual CFTC Conference in Commodities Markets and compose 13 working papers on Commission oriented topics to make available to the public with 31 presentations and 9 publications.