The chairman of the Commodity Futures Trading Commission (CFTC) Tuesday called on a Senate panel to support President Obama’s request for additional funds for the agency in fiscal year (FY) 2014 so that it can protect the derivatives and futures markets from fraud, manipulation and other abusive practices.
As a result of the sequestered budget cuts, the CFTC currently has a budget of $195 million to regulate the $300 trillion derivatives market and futures market. The administration has requested a budget of $315 million for the CFTC in FY 2014 with a staff of 1,015 full-time employees (FTEs), up slightly from $308 million in FY 2013.
“This is an incredibly strained budget environment. But without sufficient funding for the CFTC, the nation cannot be assured this agency can closely monitor for the protection of customer funds and utilize our enforcement arm to its fullest potential to go after bad actors in the futures and swaps markets,” Chairman Gary Gensler told the Senate Appropriations Subcommittee on Financial Services and General Government.
“The CFTC’s…team is just 9% more in numbers than at our peak in the 1990s. Yet since that time, the futures market has grown five-fold, driven by rapid advances in [trading] technology. The swaps market is eight times larger than the futures market.”
“Though data has started to be reported to the public and to regulators, we need the staff and technology to access, review and analyze the data. With 80 entities having registered as new swap dealers and major swap participants, we need people to answer their questions and work with the NFA [National Futures Association] on the necessary over to ensure market integrity. Furthermore, as market participants expand their technological sophistication, CFTC technology upgrades are critical for market surveillance and to enhance customers fund protection programs.”
Only partial funding will lead to a backlog in registrations, responses to inquiries, and product review “because we won’t have personnel sufficient to review their submissions in a timely and complete manner,” Gensler said.
In a breakdown of the budget proposal, the administration has requested $44.3 million, an increase of $25.6 million, for CFTC to determine whether major market participants are complying with the laws. “This is an area where the agency has fallen short of our goals in performance reviews. The CFTC directly reviews clearinghouses and trading platform and will review SDRs [swap data repositories]. But while the agency reviews them directly, we don’t have the resources to have full-time staff onsite, unlike other regulatory agencies that do have on-the-ground staff at the significant firms they oversee.”
For FY 2014, Obama has proposed $61.7 million and 174 FTEs for surveillance, data acquisition and analytics, an increase of $18.3 million and 53 FTEs.
The administration is seeking $57.7 million and 213 FTEs for enforcement in FY 2014, an increase of $18.1 and 51 in FY 2013. “In 2002, we had 154 people devoted to enforcement, and that number is nearly flat with our current staff of 156. This staff has been called upon to enforce laws and rules that are new to our arsenal.”
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