Executive Summary

By any measure, the markets under CFTC's regulatory purview are large and economically significant. The CFTC regulates a futures and options market of an estimated $29 trillion notional value in the United States; this market is, in turn, impacted by the $60 trillion notional value globally.  With the passage of the Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank Act), the CFTC is tasked with regulating the swaps markets with an estimated notional value of over $222 trillion in the US and $600 trillion globally.

The Commission has based its FY 2014 request on continuing its planned level of effort set forth in the President's 2013 Budget ($308 million and 1,015 FTE).  The 2013 Budget provides the resources for:

  • Promptly registering market participants;
  • Improving oversight of registered entities;
  • Increasing surveillance of markets and market participants;
  • Enhancing the examinations of self-regulatory organizations (SROs) and other significant entities;
  • Aggressively pursuing investigations and enforcement actions of expanded scope and complexity; and
  • Acquiring and analyzing large quantities of data for swaps market transparency.

The Commission continually responds to the challenges presented by operating in a fluid environment.  Input from industry groups, other Federal and international regulators, and others impact the timing and details of forthcoming rules, which in turn impacts the timing and nature of the CFTC's resource needs.  New information from the markets sheds light on risks  in the Commission's pre-Dodd-Frank Act scope that need to be examined and/or addressed, most notably in the past year on the protection of customer funds and the potential for market disruptions from algorithmic trading. The 2013 Budget was driven by the assumption that the bulk of the initial Dodd-Frank activities would be largely completed in FY 2012, including the registration of new entities, reviews of new products, and provision of guidance to industry on the new regulatory framework.  It represented the Commission's best judgment at that time on the scope of final regulation, the span of regulated entities, and the resources required to fulfill the Commission's statutory and regulatory mandates for FY 2013.

The Commission's FY 2013 plan has been realigned to meet the new realities. FY 2013 is a pivotal year for CFTC, as it transitions from developing the regulatory framework for its new authorities under Dodd-Frank to operationalizing its new and significant responsibilities.  October 12, 2012 marked the beginning of a new era in swaps market reform.  The Commission has requested public input on the first set of swaps subject to mandatory clearing. Cleared interest rate and credit default swap transactions are being reported to swap data repositories (SDRs). By the new year, these transactions will be subject to real-time reporting; uncleared swap transactions entered into by swap dealers will also be subject to real-time reporting.  And, swap dealers will begin registering in the next months.

It is anticipated that in FY 2013:

  • The Commission will expend just over 29 percent of its staffing resources in four major activities:
    • Registering new entities and ensuring that currently registered entities comply with new core principle requirements;
    • Review new contracts, making mandatory clearing determinations, and other product review activities;
    • Providing legal guidance and interpretations on the new regulatory framework; and
    • Coordinating with international regulators to ensure cross-border harmonization of these global markets.
  • Approximately 32 percent of the Commission's staffing resources will be focused on surveillance (including data standards, acquisition and analytics) and examinations of systemically important derivatives clearing organizations (SIDCOs) as required by Title VIII of the Dodd-Frank Act, and examinations of other significant registered entities;
  • Another 21 percent of the Commission's staffing resources will be engaged in enforcement activities; and
  • The remaining 18 percent of the Commission's staff will be responsible for supporting the Commission's information technology infrastructure and agency direction, management, and administrative support.

The majority of the Commission's investment in information technology  will be focused on building the infrastructure and services necessary to manage market data as it evolves across multiple industry sources and multiple markets.  Areas of focus will include investment in standards and systems that support swaps data management, position and transaction surveillance, risk management and market and data analytics, among others.  In addition, the Commission will begin implementation of high-performance computing capabilities, to increase the speed and capability of CFTC analytic activities.

In FY 2014, the Commission is requesting a total of $315 million to support the level of effort proposed in the FY 2013 President's Budget, with a modest increase of 2.3 percent for changes in compensation-related costs and information technology costs.  The allocation of the 1,015 FTE resources, however, will be adjusted among the mission activities, to reflect the transition from Dodd-Frank "start-up" activities to more sustaining activities in 2014:

  • The Commission will modestly shift its resource allocation to support and maintain direct examinations.
  • This shift will come from a reassignment of staff from registration, product review, economic and legal analysis, and management and administrative mission activities.
  • Staff resources for enforcement and information technology infrastructure will be essentially unchanged.

IT investments, however, will grow slightly in FY 2014 to maintain purchasing power.  The Commission is requesting an additional $3 million in FY 2014 for its information technology services.  The bulk of the additional investment will support the Commission's surveillance programs, including continued integration of SDRs and derivatives clearing organization (DCO) data, integration of tools used by the SRO's, reduced latency for processing market data and increasing the number of entities providing order message data.

In realigning its resource priorities, the Commission will be well positioned to build its operational capabilities, evaluate changes in the industry as it responds to the new Dodd-Frank regulatory framework, and address any unanticipated issues that will naturally arise in implementing the sweeping reforms called for under the Dodd-Frank Act.  The Commission will continue to monitor its resource requirements for implementing the Dodd-Frank Act, and may seek additional staffing and/or information technology resources in FY 2015.