Introduction to Strategic Goal One
Table Of Contents
The focus of this goal is the marketplace. If U.S. commodity futures and option markets are protected from, and are free of, abusive practices and influences, they will fulfill their vital role in the U.S. market economy, accurately reflecting the forces of supply and demand and serving market users by fulfilling an economic need.
Performance Results for Goal One
Monitoring market activity represents one of the ways the Commission seeks to protect the economic function of the markets. Market surveillance is conducted to detect attempted manipulation and other abusive practices that could undermine the capacity of these markets to perform their economic function. The Commission takes preventive measures to ensure that market prices accurately reflect fundamental supply and demand conditions, including the routine daily monitoring of large trader positions, futures and cash prices, price relationships, and supply and demand factors in order to detect threats of price manipulation.
- Market Volume and New Products
In preparing the estimates of expected growth in futures trading activity for FY 2009, the Commission considers historical growth in activity over several prior years. However, in 2008, the United States and world economies suffered a severe downturn that had a material effect on futures trading on the U.S. regulated exchanges. This financial crisis and its effect on futures trading was not anticipated when the estimates of future growth were prepared. In particular, the demise of several large financial firms and the consolidation of others into a reduced number of entities meant that a smaller number of financial firms participated in the futures markets, which significantly reduced the volume of futures contracts traded. With decreased demand for products traded on the exchanges, overall trading volume dipped to 2.8 billion in FY 2009, as shown in the figure, Growth in Volume of Futures & Option Contracts Traded & CFTC FTEs, on page 11.
Even though overall trading volume decreased in FY 2009, the percentage of new products offered on the exchanges, in FY 2009, increased above projections as shown in the figure, Actively Traded Futures and Option Contracts, on page 11. This growth in the number of new products occurred despite the severe downturn in the economy. In response to the financial crisis and to accommodate firms’ hedging needs, exchanges remained innovative and rolled out many new contracts, most of which most were either slight variations of existing contracts or were attempts to duplicate existing products traded in the OTC market. The increased number of new products, above earlier projections, was not foreseeable.
The following table summarizes the FY 2009 investment and overall performance results for Strategic Goal One. In addition, FY 2009 performance results are compared against the FY 2009 targets and FY 2008 actual results.
Ensure the economic vitality of the commodity futures and option markets.
No price manipulation or other disruptive activities that would cause loss of confidence
or negatively affect price discovery or risk shifting.
| Budget Authority | Performance Results | Percentage |
|---|---|---|
| $45,094 million |
Met/Exceeded | 56% |
| Not Met | 22% | |
| Not met but improved over prior years | 11% | |
| Results not demonstrated | 11% |
| Outcome Objectives and Performance Measures | Met/Not Met | Change (+/-) from 2009 Target |
Change (+/-) from 2008 Actual |
|---|---|---|---|
| 1.1 Markets that accurately reflect the forces of supply and demand for the underlying commodity and are free of disruptive activity. | |||
| 1.1.1. Percentage growth in market volume. | Not Met | -43.5% | -19.5% |
| 1.1.2. Percentage of novel or innovative market proposals or requests for CFTC action addressed within six months to accommodate new approaches to, or the expansion in, derivatives trading, enhance the price discovery process, or increase available risk management tools. | Met | 0% | -25% |
| 1.1.3. Percentage increase in number of products traded. | Exceeded | +12.7% | +11.3% |
| 1.1.4.a. Percentage of new exchange applications completed within expedited review period. | Results Not Demonstrated |
-75% | -100% |
| 1.1.4.b. Percentage of new clearinghouse organization applications completed within expedited review period. | Results Not Demonstrated |
-100% | -100% |
| 1.1.5. Percentage of new contract certification reviews completed within three months to identify and correct deficiencies in contract terms that make contracts susceptible to manipulation. | Not Met | -11% | -11% |
| 1.1.6. Percentage of rule change certification reviews completed within three months, to identify and correct deficiencies in exchange rules that make contracts susceptible to manipulation or trading abuses or result in violations of law. | Not Met | -13% | -13% |
| 1.2 Markets that are effectively and efficiently monitored to ensure early warning of potential problems or issues that could adversely affect their economic vitality. | |||
| 1.2.1 Percentage of derivatives clearing organization applications demonstrating compliance with CFTC Core Principles. | Met | 0% | +100% |
| 1.2.2 Ratio of markets surveilled per economist. | Exceeded | +2 | 0 |
| 1.2.3 Percentage of contract expirations without manipulation. |
Met | 0% | 0% |
< Previous Page | Table Of Contents | Next Page >