Purpose Statement: Commission-Wide Economic and Legal Analysis
Commission-wide economic analysis
As the Commission’s statutory and regulatory mandate vastly expands, it is imperative that the Commission continues to invest in building robust economic analysis teams.
The Commission supports an in-depth, analytical research program that focuses on innovations in trading technology, developments in trading instruments, and the role of market participants in the futures, options, and swap markets. This team of specialized economists supports the Commission’s numerous divisions by analyzing these constantly evolving components of markets to help anticipate and mitigate significant regulatory, surveillance, clearing, and enforcement challenges. Economic expertise is especially important for the development and implementation of new financial regulations related to the Dodd Frank Act and the oversight of a new swaps regime.
Economic analysis is pervasive in supporting the regulatory activities in:
- Assessing whether newly developed products/contracts have a price discovery function and whether those products/contracts are eligible for trading;
- Determining the requirements for reporting and data rules;
- Developing analytical tools and methods in support of the Commission’s automated surveillance initiatives, especially as they pertain to SEFs and the connections between SEFs and DCMs;
- Determining whether certain products/contracts are eligible for clearing and the levels for capital and margin;
- Valuation of complex swaps in support of clearing functions;
- Assessing the impact of position limits on markets, and
- Developing analytical tools and methods in support of the Commission’s enforcement activities, including economic and statistical analysis or expert testimony to promote compliance with and deter violations of commodity laws.
The Commission is committed to integrating robust economic analysis into its regulatory activities and has established a network of well-renowned researchers and academics in quantitative financial methods, applied mathematics, econometrics, and statistics. By engaging the academic community in developing the necessary ground-breaking analyses, the Commission has access to a pool of credible, independent experts to support its regulatory activities. Furthermore, the Commission’s continued engagement with an extended network of experts across the Federal government has fostered the necessary dialogue to promote a common framework for interagency consensus-building. For example, the Commission’s involvement with the Financial Stability Oversight Council (FSOC) ensures financial regulatory agencies communicate perceived financial and economic issues with one another. This dialogue allows for a well-coordinated approach to address these potential issues.
Commission-wide legal analysis
The Commission’s legal services include: 1) engaging in defensive, appellate, and amicus curiae litigation; 2) interpreting the CEA; 3) providing legal advice and support for Commission programs; 4) drafting and assisting other program areas in preparing Commission regulations; 5) assisting the Commission in the performance of its adjudicatory functions; and 6) providing advice on legislative and regulatory issues.
- Regulatory Issues. The Commission’s legal analysis teams provide written interpretations of Commission statutory and regulatory authority and, where appropriate, provide exemptive, interpretive, and no-action letters to regulatees and potential regulatees of the Commission. Legal analysis also supports all substantial Commission actions such as registrations, Commission rules and regulations, product reviews, and clearing and market issues.
- Litigation Program. Through the litigation program, legal teams represent the Commission in appellate litigation, including participation as amicus curiae; certain trial-level cases, including bankruptcy cases involving futures industry professionals; and certain kinds of administrative litigation. Following the implementation of DFA regulations, the Commission anticipates a significant amount of litigation in FY 2012 and FY 2013. The Commission also maintains the capability to personnel, labor, contract, and employment law matters, including cases arising under Title VII of the Civil Rights Act of 1964 and other antidiscrimination statutes, and Merit Systems Protection Board cases arising under the Civil Service Reform Act of 1978.
- General Law. In the area of General Law, OGC manages the Commission’s Information Governance Program. Information Governance describes how the CFTC manages its information in compliance with applicable laws. This program includes three major activities: Freedom of Information Act (FOIA) compliance, the Privacy Act, and Electronic Discovery (e-Discovery). The Commission maintains a robust capability with respect to all matters related to requests received under FOIA, and responds to requests for non-public Commission records. In addition, the Commission also handles administrative appeals from initial determinations regarding FOIA requests for records. There has been a marked increase in the number of FOIA requests since the Commission began implementing the Dodd-Frank Act. Additionally, the Commission maintains the capability to review and process all Privacy Act requests, and it reviews proposed Privacy Act Systems of Records and Privacy Impact Assessments. The Commission also maintains an e-discovery program manages the processes, policies, and information systems to ensure that the Commission appropriately manages electronically stored information as set forth in the Federal Rules of Civil Procedure and relevant judicial decisions. As the enforcement caseload increases, the e-Discovery staff will have an increased role in advising on litigation holds and discovery strategies.
The Commission maintains the ability to assure compliance with laws of government-wide applicability such as the Administrative Procedure Act as well as the Government in the Sunshine, Regulatory Flexibility, Paperwork Reduction, and Federal Advisory Committee Acts. And, the Commission maintains an effort to manage all matters related to the Commission’s ethics standards and compliance with its Code of Conduct, as well as with government-wide ethics regulations promulgated by the Office of Government Ethics.
- Adjudicatory Opinions. The Commission also supports its adjudicatory functions through its Opinions and Review program, and responds to appeals from decisions by an Administrative Law Judge or a Judgment Officer in administrative reparations or enforcement actions.
- Legislation and Intergovernmental Affairs. Through the legislation and intergovernmental affairs program, the Commission monitors, reviews, and comments on proposed legislation affecting the Commission or the derivatives industry, and prepares technical assistance regarding draft legislation as requested by members of Congress or their staff. Additionally, the program staff liaisons with other Federal regulators to analyze and resolve jurisdictional issues, as well as address specific matters implicating the jurisdiction of multiple agencies.