Appendix 4 – FY 2013 Planned Objectives by Strategic Goal (continued)
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Goal Two: Protect the public and market participants by ensuring the financial integrity of derivatives transactions, mitigation of systemic risk, and the fitness and soundness of intermediaries and other registrants.
In fostering financially sound markets, the Commission’s main priorities are to avoid disruptions to the system for clearing and settling contract obligations and to protect the funds that customers entrust to FCMs. Clearing organizations and FCMs are integral to the financial integrity of derivatives transactions – together, they protect against the financial difficulties of one trader becoming a systemic problem. Several aspects of the regulatory framework that contribute to the Commission achieving Goal Two are: 1) requiring that market participants post margin to secure their ability to fulfill financial obligations; 2) requiring participants on the losing side of trades to meet their obligations, in cash, through daily (sometimes intraday) margin calls; 3) requiring FCMs to maintain minimum levels of operating capital; and, 4) requiring FCMs to segregate customer funds from their own funds.
The Commission works with the exchanges and the NFA to closely monitor the financial condition of the FCMs themselves, who must provide the Commission, exchanges and NFA with various monthly and annual financial reports. The exchanges and NFA conduct routine, periodic audits and daily financial surveillance of their respective member FCMs. As a regulator, the Commission reviews the audit and financial surveillance programs of the exchanges and NFA and also monitors the financial condition of FCMs directly, as appropriate. This includes reviewing each FCM’s exposure to risk from large customer positions that it carries. The Commission also conducts extensive daily surveillance of risks posed by traders, firms and DCOs and periodically reviews clearing organization procedures for monitoring risks and protecting customer funds.
The Commission works with the NFA to ensure that those seeking registration as intermediaries meet high qualification and fitness standards through the registration process. The Commission also drafts and interprets rules that apply to the conduct of business by these intermediaries.
With the implementation of the Dodd-Frank Act, the Commission has substantially greater responsibilities, including oversight of newly registered derivatives dealers, as well as implementation of enhanced compliance requirements for intermediaries and new core principle requirements for DCOs. The Commission also will be responsible for determining the initial eligibility or the continuing qualification of a DCO to clear swaps, as well as for the review of swaps submitted to the Commission for a determination as to whether the swaps are required to be cleared. The Commission also will be implementing new statutory provisions regarding review of new rules and rule amendments submitted by DCOs. In addition, the scope of the Commission’s reviews of DCOs, designated self-regulatory organizations, and intermediaries will be expanded to include swap transactions and swap intermediaries.
Summary of Goal Two Performance Indicators
Goal Two: Protect the public and market participants by ensuring the financial integrity of derivatives transactions, mitigation of systemic risk, and the fitness and soundness of intermediaries and other registrants.
Objective 2.1: Clearing organizations and firms participating in the derivatives industry are financially sound.
Strategy 2.1.1: Monitor, review, and assess DCOs’ compliance with core principles.
| Performance Measure 2.1.1.1: Review systemically important DCOs annually. Percentage of systemically important DCOs reviewed. |
Plan |
Actual |
| FY 2011 |
|
75% |
75% |
| FY 2012 |
|
100% |
|
| FY 2013 |
|
100% |
|
| Performance Measure 2.1.1.2: On a risk-based basis, review all other DCOs annually to address compliance with DCO core principles and Commission requirements. |
Plan |
Actual |
| FY 2011 |
|
100% |
44% |
| FY 2012 |
|
100% |
|
| FY 2013 |
|
100% |
|
| Performance Measure 2.1.1.3: Percentage of requests for Commission orders that are completed following review under the applicable provisions of the CEA. |
Plan |
Actual |
| FY 2011 |
|
90% |
0% |
| FY 2012 |
|
92% |
|
| FY 2013 |
|
94% |
|
Strategy 2.1.2: Review and assess DCMs’ applications for compliance with the financial integrity provisions of the CEA.
| Performance Measure 2.1.2.1: Applications are reviewed and a determination made regarding compliance with financial integrity provisions of the CEA within statutory time frames. Percent in compliance with financial integrity provisions. |
Plan |
Actual |
| FY 2011 |
|
100% |
100% |
| FY 2012 |
|
100% |
|
| FY 2013 |
|
100% |
|
Strategy 2.1.3: Review and analyze monthly and annual filings and conduct risk-based direct examinations of the FCMs’ and RFEDs’ compliance with financial requirements.
| Performance Measure 2.1.3.1: All material exceptions in monthly and annual financial filings by FCMs and RFEDs and notices of noncompliance with respect to minimum capital and segregation are reviewed and assessed within one business day. Percent completed within one business day. |
Plan |
Actual |
| FY 2011 |
|
100% |
100% |
| FY 2012 |
|
100% |
|
| FY 2013 |
|
100% |
|
| Performance Measure 2.1.3.2: On a risk-based basis, conduct direct examinations of FCMs and RFEDs, identify deficiencies, and confirm that all deficiencies identified are corrected within the specified period of time. Percent corrected within specified time period. |
Plan |
Actual |
| FY 2011 |
|
90% |
100% |
| FY 2012 |
|
92% |
|
| FY 2013 |
|
94% |
|
Strategy 2.1.4: Review swaps submitted to the Commission for a determination regarding whether such swaps are required to be cleared.
| Performance Measure 2.1.4.1: Reviews of swaps submitted to the Commission are completed within statutory and regulatory deadlines. |
Plan |
Actual |
| FY 2011 |
|
100% |
N/A1 |
| FY 2012 |
|
100% |
|
| FY 2013 |
|
100% |
|
Strategy 2.1.5: Review new rules and rule amendments submitted by DCOs.
| Performance Measure 2.1.5.1: Reviews of DCO rules submitted to the Commission are completed within statutory and regulatory deadlines. |
Plan |
Actual |
| FY 2011 |
|
100% |
100% |
| FY 2012 |
|
100% |
|
| FY 2013 |
|
100% |
|
Strategy 2.1.6: Review and analyze financial risks on large trader and clearing member positions and determine whether they are being appropriately managed by traders, firms, and DCOs.
| Performance Measure 2.1.6.1: Perform risk analysis and stress testing on large trader and clearing member positions to ascertain those with significant risk and confirm that such risks are being appropriately managed. Number of positions analyzed. |
Plan |
Actual |
| FY 2011 |
|
500,000 |
500,000 |
| FY 2012 |
|
550,000 |
|
| FY 2013 |
|
600,000 |
|
Performance Measure 2.1.6.2: On a risk-based basis, meet with large traders, FCMs, swap dealers, and other industry participants to discuss risk management issues. Number of entities met with and risk issues reviewed. |
Plan |
Actual |
| FY 2011 |
|
110 |
110 |
| FY 2012 |
|
122 |
|
| FY 2013 |
|
132 |
|
Objective 2.2: Registered intermediaries meet standards for fitness and conduct.
Strategy 2.2.1: Review swap dealers and major swap participants to ensure that they comply with the CEA and Commission regulations.
| Performance Measure 2.2.1.1: Conduct direct examinations of swap dealers and major swap participants identify deficiencies, and confirm that all deficiencies identified are corrected within specified period of time. |
Plan |
Actual |
| FY 2011 |
|
100% |
N/A2 |
| FY 2012 |
|
100% |
|
| FY 2013 |
|
100% |
|
Strategy 2.2.2: Review registered futures associates to ensure they fulfill their statutory and delegated responsibilities.
| Performance Measure 2.2.2.1: Under a risk-based approach, conduct reviews of selected programs of all RFAs to assess fulfillment of statutory and delegated responsibilities and confirm that any deficiencies identified are corrected within the specified period of time. Percent of deficiencies corrected within specified time period. |
Plan |
Actual |
| FY 2011 |
|
90% |
0% |
| FY 2012 |
|
92% |
|
| FY 2013 |
|
94% |
|
| Performance Measure 2.2.2.2: Percentage of RFA rules submitted for which determinations are made within statutory time frames. |
Plan |
Actual |
| FY 2011 |
|
90% |
100% |
| FY 2012 |
|
92% |
|
| FY 2013 |
|
94% |
|
Strategy 2.2.3: Conduct risk-based examinations of intermediaries not holding customer funds to ensure they are in compliance with Commission requirements.
| Performance Measure 2.2.3.1: On a risk-based basis, conduct direct examinations of non-FCM intermediaries, identify deficiencies, and confirm that any deficiencies identified are corrected within the specified period of time. Percent of time that deficiencies are corrected within specified time period. |
Plan |
Actual |
| FY 2011 |
|
90% |
0% |
| FY 2012 |
|
92% |
|
| FY 2013 |
|
94% |
|
Objective 2.3: Ensure self-regulatory organizations fulfill their financial surveillance responsibilities.
Strategy 2.3.1: Conduct oversight of the financial surveillance programs of SROs.
| Performance Measure 2.3.1.1: On a risk-based basis, review all SROs annually to assess compliance with CEA and Commission requirements, identify deficiencies and confirm that any deficiencies identified are corrected within the specified period of time. Percent of time in which deficiencies are corrected within specified time period. |
Plan |
Actual |
| FY 2011 |
|
90% |
80% |
| FY 2012 |
|
92% |
|
| FY 2013 |
|
94% |
|
| Performance Measure 2.3.1.2: Percentage of direct examinations of registered intermediaries that confirm proper execution of SRO programs. |
Plan |
Actual |
| FY 2011 |
|
90% |
100% |
| FY 2012 |
|
92% |
|
| FY 2013 |
|
94% |
|
Objective 2.4: Ensure that information technology systems support the Commission’s existing and expanded responsibilities to ensure financially sound markets, mitigate systemic risk, and monitor intermediaries.
Strategy 2.4.1: Deliver technology infrastructure, systems, and services that support the financial integrity of derivatives transactions, the mitigation of systemic risk, and the fitness and soundness of intermediaries.
| Performance Measure 2.4.1.1: Program redesign to cover new registrants monitored by the RSR and SPARK systems. Percentage of system redesign accomplished. |
Plan |
Actual |
| FY 2011 |
|
80% |
80% |
| FY 2012 |
|
90% |
|
| FY 2013 |
|
95% |
|
| Performance Measure 2.4.1.2: Program design to cover new data collection requirements to monitor systemic risk posed by CPOs and CTAs advising private funds, and new registration of swap dealers. Percentage of system redesign accomplished. |
Plan |
Actual |
| FY 2011 |
|
80% |
N/A3 |
| FY 2012 |
|
90% |
|
| FY 2013 |
|
95% |
|
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