The Commission focuses on issues of market integrity, seeking to protect: 1) the economic integrity of the markets so that markets may operate free from manipulation; 2) the financial integrity of the markets so that the insolvency of a single participant does not become a systemic problem affecting other market participants; and 3) the operational integrity of the markets so that transactions are executed fairly and proper disclosures to existing and prospective customers are made.
In fostering open, competitive, and financially sound markets, the Commission’s two 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 the backbone of the clearing and settlement system; together, they protect against the possibility that the financial difficulties of one trader may become a systemic problem for other traders.
Commission staff members also work with the SROs and NFA to monitor closely the financial condition of FCMs through review of various monthly and annual financial reports and notices of reportable events. The SROs and NFA also conduct audits and daily financial surveillance of their respective member FCMs, reviewing and assessing each FCM’s exposure to losses from large customer positions that it carries. As an oversight regulator, the Commission not only reviews the audit and financial surveillance work of the SROs and NFA, but also monitors the financial strength of FCMs directly, as appropriate. In addition, the Commission periodically reviews clearing organization procedures for monitoring risks and protecting customer funds.
As a result of these and other ongoing financial oversight and risk surveillance activities in FY 2009, there were no losses of regulated customer funds as a result of an FCM failure or the inability of customers to transfer their funds from a failing FCM to a financially sound FCM. The performance result indicates that the program’s objectives of ensuring sound financial practices of clearing organizations and firms holding customer funds, and the protection of customer funds are being met.
The following table summarizes the FY 2009 investment and overall performance results for Strategic Goal Three. In addition, FY 2009 performance results are compared against the FY 2009 targets and FY 2008 actual results.
|Budget Authority||Performance Results||Percentage|
|Not met but improved over prior years||N/A|
|Results not demonstrated||N/A|
|Outcome Objectives and Performance Measures||Met/Not Met||Change (+/-) from
|Change (+/-) from
|3.1 Clearing organizations and firms holding customer funds have sound financial practices.|
|3.1.1.a. Lost funds: Number of customers who lost funds.||Met||0||0|
|3.1.1.b. Lost funds: Amount of funds lost.||Met||$0||$0|
|3.1.2. Number of rulemakings to ensure market integrity and financially sound markets.||Exceeded||+1||+4|
|3.1.3. Percentage of clearing organizations that comply with requirement to enforce their rules.||Met||0%||0%|
|3.2 Commodity futures and option markets are effectively self-regulated.|
|3.2.1. Percentage of intermediaries who meet risk-based capital requirements.||Met||0%||0%|
|3.2.2. Percentage of self-regulatory organizations that comply with requirement to enforce their rules.||Met||0%||0%|
|3.3 Markets are free of trade practice abuses.|
|3.3.1. Percentage of exchanges deemed to have adequate systems for detecting trade practice abuses.||Met||0%||0%|
|3.3.2. Percentage of exchanges that comply with requirement to enforce their rules.||Met||0%||0%|
|3.4 Regulatory environment is flexible and responsive to evolving market conditions.|
|3.4.1. Percentage of CFMA Section 126(b) objectives addressed.||Met||0%||0%|
|3.4.2. Number of rulemakings, studies, interpretations, and statements of guidance to ensure market integrity and exchanges’ compliance with regulatory requirements.||Exceeded||+27||+22|
|3.4.3. Percentage of requests for no-action or other relief completed within six months related to novel market or trading practices and issues to facilitate innovation.||Met||0%||0%|
|3.4.4. Percentage of total requests for guidance and advice receiving CFTC response.||Exceeded||+6%||+18%|