Product Reviews – Mission Activity Description

The Commission reviews new product filings by exchanges as well as no-action letters related to such product issues. The CFTC’s scope of work includes reviewing new futures, options and swap contract filings, reviewing contract amendment submissions, reviewing foreign stock index futures, and developing new rules and policies to accommodate innovations in the industry. The focus is primarily on verifying that derivatives contracts are not readily susceptible to manipulation or other price distortions, and that contracts are subject to appropriate position limits or position accountability standards. The Commission implemented a procedure that assigns greater review priority to contracts that have achieved certain thresholds of trading volume and open interest.

The Commission has the responsibility to review aggregate position limits for physical commodity derivatives. The Commission establishes uniform position limits and related requirements for all economically-equivalent derivatives across trading venues. Thus, in accordance with the Dodd-Frank Act, the Commission proposes rules to establish Federal position limits for specified core commodities and reviews periodically those Federal limits.

The Commission also evaluates transaction and pricing data collected by SDRs to determine appropriate block trade and large notional swap threshold levels that registered SEFs, DCMs, and market participants may use to delay public reporting of swap transaction data. The Commission also evaluates market data and contract characteristics to determine whether a swap contract should be subject to mandatory clearing and whether it is listed on a DCM or SEF and been “made available to trade.” Transactions in contracts that have been “made available to trade” must be conducted on a DCM or SEF.

Additionally, the Commission reviews whether these new products are suitable for clearing by DCOs and, with respect to swap contracts, whether they should be mandated for clearing.

Product Reviews – Industry Trends and Emerging Issues

One of the most significant trends that affect the Commission’s ability to carry out its regulatory duties with respect to product review is the speed with which exchanges list new products, and the diversity of commodities underlying those products. For example, from FY 2012 to FY 2014, the number of contract certifications received from DCMs and SEFs increased from 894 to 1,088, an increase of more than 20 percent and we expect increases to continue into FY 2016. Exchanges, looking to gain a competitive advantage in the marketplace, are more often seeking to develop both novel products as well as contracts intended to compete directly with contracts listed on competitor’s platforms. This influx of new product listings is expected to further tax the exchange’s and Commission’s staff to maintain a high quality analysis of product offerings. In addition, the Commission expects an influx of swaps made available to trade that will also require staff review.

New capital and uncleared margin requirements, which the Commission is currently seeking to finalize, will likely cause market participants to seek clearing of additional and more complex transactions. The proliferation of greater numbers of products by industry participants, and the inherently greater complexity of swap contracts, requires the Commission to keep pace with industry’s innovations, to evaluate whether these products are suitable for clearing by DCOs, and to evaluate whether they should be mandated for clearing. Additional requests for the portfolio margining of these complex products is also likely to reduce excess collateral needs for market participants.

Product Reviews – Justification of CFTC Resource Requirements

The FY 2016 request for $6,387,651 will support current activities and enhance the Commission’s capabilities related to products review and assessment of product-related rules, and enable the Commission to address problems that it has been unable to resolve due to limited funding.

• The Commission anticipates on-going product reviews during FY 2015 and FY 2016 as new contracts are created in response to changing market needs. The Commission will continue to review public comments and refine its position limit rulemaking. The Commission also anticipates completing its analysis of swap data for the purpose of implementing reporting delays for large notional value swaps.
• In addition, the Commission anticipates that it will begin to analyze, by asset class, the percentage and volume of previously non-transparent swaps now cleared, the level of risk transfer, the potential relative movement of institutions to new financial products, and the implied overall credit and market risk in FY 2016 to ensure that the Commission’s regulations reflect an appropriate understanding of the markets and potential for systemic risk.
• Key regulatory processes supported by the CFTC regulatory portal will be fully automated and integrated with the electronic records and document management system. Dashboards will provide transparency and management visibility into the status of reviews.

Product Reviews – Impact if Not Funded at Requested Level of Resources

The Commission has seen a significant increase in the number of contracts filed by DCMs and SEFs, with the number of contract certifications increasing by more than 20 percent over the past two years, with a continued expectation of increases into FY 2016. If this request is not funded, many contracts, even those that exhibit market significance, will not be reviewed in a timely manner to ensure compliance with the CEA. Moreover, the Commission will be unable to fulfill its responsibilities to establish appropriate position limits for certain physical commodities, determine appropriate large notional/block sizes for swaps, or properly evaluate whether certain swaps should be subject to mandatory clearing on a DCO and mandatory trading on a DCM or SEF.

To the extent that resources are unavailable to review product innovations and their related impact on margin methodology at DCOs, market participants will bear the burden of delays, or inability to complete, reviews of new products for clearing or trading, and new margin methodologies will take longer to be evaluated. Market participants will see increased margin and capital charges as a result of the lack of clearing or inefficient margin methodologies, and systemic risk that may otherwise have been minimized through clearing could increase. Liquidity of trading and product choice may also be adversely impacted.

Enhancements to the CFTC regulatory portal and business process automation will be delayed or deferred, reducing the effectiveness of staff and the transparency of the review process, and require continued use of manual paper-based processes.

Breakout of Product Reviews Request¹⁴

¹⁴ The Commission considers the Salary and Expense and the Information Technology programs to be its sole programs, projects, and activities (PPAs). The budget displays by Mission Activity are for informational purposes only, and do not represent a PPA. (back to text)

¹⁵ Information Technology costs, including IT investments (e.g., hardware, software, contractor services), FTE, and indirect costs, are directly attributed to the benefiting Mission Activity wherever possible. Any IT costs that are not directly attributed to another Mission Activity are captured in the Data and Technology Support Mission Activity. (back to text)

Surveillance – Mission Activity Description

The Commission performs market surveillance and financial and risk surveillance, supported by business analytics.

Market Surveillance. The Commission monitors trading and positions of market participants on an on-going basis. Commission staff screen for potential market manipulations and disruptive trading practices, as well as trade practice violations.

Market oversight and surveillance activities are dependent on the ability to receive and load large volumes of data, coupled with the development of sophisticated systems to analyze that data and respond to outlying events or help identify trading or positions that warrant further inquiry. The combination of analysis of available data sets and Special Call authority leads to an understanding of market activities and possible violations of the CEA. It is anticipated that through the collection of shared data sets, including swaps data that is maintained at SDRs, the Commission will have the unique and essential ability to aggregate data received by all market participants by continuously improving data ingest, warehousing, and analytics systems and tools and implementing new systems and tools as needed or as innovative technology is adopted by industry participants. This ultimate aggregation will give the Commission a more encompassing view of futures, options and swaps transactions, which will, in turn, allow the Commission to conduct participant level surveillance for violations and abuses across markets. This capability is particularly important with the expansion of the Commission’s mandate in the disaggregated swaps markets, as market participants may have swaps data residing in multiple SDRs, and multiple DCOs. The increased complexity of swap instruments (versus futures and options) as well as the increased velocity of trading across these various instruments and trading venues makes it essential that the Commission have sufficient tools and resources to view data across the industry landscape in order to detect and deter market manipulation and disruptive trading practices.

Market surveillance monitoring is conducted to further understand structural market changes and support new regulatory requirements. Surveillance systems and tools will incorporate innovative surveillance approaches developed by staff into scheduled, regularly-run monitoring processes.

Financial and Risk Surveillance. Staff conducts risk and financial surveillance of DCOs, clearing FCMs, and other market participants, such as SDs, MSPs, and large traders, that may pose a risk to the clearing process.

As part of its financial and risk surveillance activities, the Commission is working to establish a specialized program to assess capital and margin models, both on an initial and ongoing basis, as part of the Dodd-Frank Act requirement to establish and implement margin and capital requirements for SDs and MSPs. The program would seek to leverage to the extent practicable, reviews and assessments performed by the prudential regulators, the Securities and Exchange Commission (SEC), and foreign regulators, and would include coordinating efforts with SROs.

Financial and risk surveillance technology allows identification of large traders whose positions may pose financial risk to the industry or a clearing firm, analyze an owner’s holdings and project the effect of market moves on these holdings, perform “what if” stress testing and risk scenarios to determine the effect of market movement on margin, and evaluate overall portfolio risk under different market conditions. Financial and risk surveillance technology also allows monitoring FCMs by storing and analyzing monthly financial statements and annual reports provided to the Commission to report net capital positions and other financial information.

Enhancing CFTC’s financial analysis tools is critical, as the Commission will be the only financial regulator that will be able to aggregate and evaluate risk across all DCOs. Each DCO’s view of risk is limited to market participants clearing at that DCO. Many market participants will have positions at multiple DCOs in more than one asset class. The Commission is enhancing its futures-specific risk surveillance program to include the ability to stress test positions in swaps for market participants and DCOs. These financial analysis tools, coupled with analysis of the swaps data that is maintained at SDRs, will also be used as part of oversight and reviews of FCMs and swaps dealers’ risk management controls.

Business Analytics. CFTC also maintains a business analytics platform that supports market surveillance and financial and risk surveillance. Platforms allow staff analyzing regulatory reporting and industry data to keep pace with the continuing growth in data volume and complexity and rapidly evaluate data, build specific work products for unique market and participant conditions, and develop innovative approaches to ongoing market and financial and risk monitoring.

Surveillance – Industry Trends and Emerging Issues

The implementation of the Dodd-Frank Act has increased the Commission’s surveillance responsibilities beyond the existing futures mandates to encompass oversight of new more complex products, product platforms, and registrants. As the market participants adapt and adjust to the fluid regulatory environment and develop technology based trading practices, the Commission’s understanding of new, more complex and sophisticated trading methods and technologies, as well as the interaction of physical and financial trading tools, is of paramount importance. Surveillance staff, in order to protect market integrity, must have access to a broad array of regulatory and market data and state-of-the-art technology. The Commission also continues to intensify surveillance efforts to protect against systemic risk and potential threats from market shocks or cybersecurity attacks.

The Dodd-Frank Act requires the Commission to adopt regulations imposing capital requirements on SDs and MSPs that are not subject to regulation by a U.S. prudential regulator. The Dodd-Frank Act also requires the Commission to adopt regulations setting minimum margin requirements for uncleared swap transactions that are entered into by SDs and MSPs that are not subject to margin rules of a U.S. prudential regulator. There currently are over 100 provisionally registered SDs and MSPs, and approximately 60 of these entities will be subject to the Commission’s capital and margin rules, as such SDs and MSPs are not subject to the capital or margin rules of a U.S. prudential regulator. Establishing capital and margin requirements is a central element for the Commission to achieve its regulatory objectives of reducing risks posed by swap transactions that are not centrally cleared and reducing overall system risk.

The Commission has proposed capital and margin rules for SDs and MSPs, and market participants have identified their ability to use internal capital and margin models as a critical issue of the proposals. Accordingly, the CFTC will seek to leverage the SD and MSP model reviews performed by domestic and foreign prudential regulators to the extent that such reviews covered the models used by the SDs and MSPs that are subject to the Commission’s jurisdiction. In addition, the Commission will work with the NFA to review models of other SDs and MSPs that have not had their models reviewed by prudential regulators.

Surveillance – Justification of CFTC Resource Requirements

The FY 2016 request for $62,429,488 will support the Commission’s activities related to surveillance. Additional funding is requested in light of the vastly expanded surveillance needs with the increase in the Commission’s responsibilities under the Dodd-Frank Act and the limited resources that have been available to those activities. The funding will, among other things, enable the Commission to begin regular surveillance of futures order message data to increase the scope of futures and cross-market surveillance; for increased data extraction, transformation, and loading to support a more encompassing view of futures, options, and swaps transactions; for increased data analytics support services to assist in the development and operationalization of innovative surveillance approaches; to enhance position limits monitoring systems; and to support the operations, maintenance, and incremental enhancement of market financial and risk surveillance systems and tools implemented to date.

Market Surveillance. The Commission anticipates building additional automated surveillance tools, and enhancing current tools, to adjust to evolving market dynamics and adopt state-of-the-art technology. As trading across the world’s marketplaces has moved almost entirely to electronic systems, the Commission must engage in substantial upgrades to its capabilities to handle unprecedented volumes of transactions in inter-related markets.

Staff will integrate the information in the swaps database with that currently held in the Commission’s futures and options database. In so doing, staff will be better able to track the positions of traders for the purpose of enhancing market surveillance of large traders as well as enforcing position limits. Case management technology will be enhanced continually and applied in all mission areas, including market surveillance. Automating integration between regulatory mission activities will improve workflow, increase re-use of information, improve situational awareness and coordination, and increase the ability of staff to correlate data and events. Staff will make use of newly available technologies to blend data from different data sources, such as futures and swaps position data, trade execution data and order data, and develop new methods to analyze trading within and across products and markets. Proof of concepts innovated by staff will be operationalized, enhanced, and adapted over time to address evolving market conditions. Best practices will be shared across CFTC market, financial and risk surveillance programs.

Staff will gather and analyze trade data from SEFs, SDRs and DCMs, and the Commission will work with DCMs and SEFs to collate order book data, develop a database to store this data and develop tools to analyze this data and integrate it with trade data. Similarly, staff will work with SEFs to develop data standards and protocols to collate both trade and order book data, and develop tools to analyze this data.

Financial and Risk Surveillance. The Commission’s financial and risk surveillance technology has been predominantly applied to futures and options on futures products. The Commission will continue to update existing and introduce new financial and risk surveillance technology to expand data intake, surveillance, analysis, and reporting.

The Commission will implement a SD capital and margin modeling program. The modeling program is a process for the review and ongoing assessment of models through a program of coordination with the prudential regulators, SEC, SROs, and foreign regulators.

Systems will support the identification and aggregation of related market participants across DCOs. The Commission will enhance tools to back test and evaluate sufficiency of all material product and portfolio margin requirements; monitor firm level variation and initial margin requirements across DCOs; evaluate the risk of market participants positions held at multiple FCMs or DCOs; and combine cleared and bilateral positions to obtain a more complete picture of a clearing firm’s risk.

Risk surveillance staff currently receive large amounts of new margin data from DCOs each day. The data includes variation margin and initial margin for house accounts and customer accounts. Risk surveillance staff are using financial and risk surveillance systems and data analytics platforms to develop methods that allow each risk analyst more flexibility to view the data in multiple ways and improve risk assessment.

The Commission is increasing the resources available to review new DCO margin models and changes to existing margin models. Many DCOs clear the same asset class. Each uses its own margin model to calculate margin requirements. In some instances the requirements for the same positions will not be the same at multiple DCOs. Risk surveillance staff compare and contrast these models in order to analyze differences and to ensure appropriate coverage.

Risk surveillance is increasing the amount of data extraction and loading of futures, options on futures and swaps positions. Risk surveillance is also increasing the related data analytics support services. In addition to these new efforts, risk surveillance will be performing continuing maintenance and enhancements on existing systems.

Business Analytics. The Commission will be able to improve its ability to conduct market surveillance, financial and risk surveillance, investigations, and economic analysis by expanding the use of its high-performance computing platform, continuously enhancing that platform, and applying state-of-the art technology for big data. With the investment in a high-performance computing platform, staff will be able to more quickly, and effectively analyze very large datasets, cross-correlate very large datasets, conduct market reconstructions and simulations, and conduct financial and risk models and assessments. This type of advanced technology will allow staff to begin surveillance of high-frequency trading that is currently unavailable using existing technology. Technology enhancements must keep pace with the increasing amount and complexity of the data. Staff must be able to rapidly analyze the increasing sophistication of surveillance algorithms.

To effectively accomplish its mission, the CFTC must adapt to frequent and innovative changes in the derivatives markets, implementation of new Commission rules, increasing use of technology and growing market complexity. The Commission will extend its data ingestion and analysis framework to manage market and NFA data as it evolves with the industry and to make greater use of pre-trade and non-regulatory data. The existing framework will continue to be leveraged and built upon to provide services that multiply the effectiveness of staff, accomplishing integration between futures and swaps data, NFA data, and increased integration of CFTC systems and processes for monitoring registered entities, market and financial risk, market integrity, trade practice; and conducting enforcement and economic analysis. This framework will include an expansion of the CFTC portal to accommodate new and existing data submissions.

The CFTC will reinforce common data standards and services among the SDRs to ensure data interchange and interoperability. The CFTC will also establish and maintain a unified set of master and reference data using legal entity identifiers as a linchpin. The Commission will seek to increase the use of data feeds from industry and government system-based data services in order to reduce the latency between market events and staff ability to analyze correlated data from diverse sources.

Data analytics platforms and high-performance computing technology will be enhanced by developing flexible dashboards to increase dynamic visibility into key sets of data. Additional data aggregation methods will also be established and refined. CFTC data storage will be expanded to handle the continuing growth of analytical data. High-performance computing infrastructure will be scaled to meet demand. Secure, private cloud services will be implemented to ensure future scalability and to cost-effectively support largely-fluctuating ingest volumes.

Surveillance – Impact if Not Funded at Requested Level of Resources

Market Surveillance and Related Business Analytics. Without adequate funding, the Commission will be significantly impaired in its ability to analyze both traditional and new sources of market data, and will possess a limited ability to develop deep expertise over a broad spectrum of commodity instruments. As a result, the Commission will be unable to analyze market anomalies or detect and analyze potential market abuses sufficiently, or develop and implement sophisticated analytic surveillance tools to the extent necessary to guard against market abuses. The Commission likewise will be unable to invest in and deploy an automated trading violation and surveillance alert system and other sophisticated analysis-based surveillance tools, which are essential to fulfill the Commission’s surveillance responsibilities over a marketplace that continues to grow in both size and complexity. Additionally, the Commission will continue to be limited in its capabilities with respect to potential threats from market shocks and cybersecurity attacks.

Pursuant to the Dodd-Frank Act, the volume of data to be reported to and analyzed by the Commission in the course of its surveillance activities has increased dramatically, requiring the Commission to aggregate the vast amount of data from multiple industry sources (i.e., DCM, SEFs, and DCOs), and from multiple markets (i.e., futures, exchange-traded swaps, and bilaterally-executed swaps). Without the requested level of funding, the Commission will be extremely limited in its ability to ensure that the data reporting requirements are properly structured to facilitate proper market surveillance, and that the Commission will be able to fulfill its obligations to promote transparency and monitor for risk. The lack of a comprehensive understanding of market events and participant trading behaviors, caused by a lack of adequate funding of the Commission’s surveillance activities, will significantly increase the likelihood that major market risks or illegal activities will go undetected, thereby significantly increasing the costs to be borne by other market participants and the broader U.S. economy.

Historic underfunding of the surveillance function has dramatically and adversely impacted or compromised the Commission’s ability to protect market integrity and to detect and deter manipulation within the futures space. Surveillance mandates had increased prior to Dodd-Frank Act legislation. The Commission expects the increased requirements throughout FY 2015 and continuing into FY 2016. If adequate funding is not received, the CFTC will be required to abandon forensic evaluations, postpone surveillance tool development, and provide surface-only examination of swaps data for potential abuses. Technology acquisition is only a partial solution to assist in identifying potential problems.

Financial and Risk Surveillance and Related Business Analytics. The importance of comprehensive and robust surveillance of DCOs cannot be understated, and is critical to minimizing systemic risk. In recent years, following the enactment of the Dodd-Frank Act, the role of DCOs has continued to increase, as standardized swap contracts have been cleared by market participants with increasing frequency. If the Commission is not funded at the requested level, it will not have the resources to adequately enhance systems, tools, and models and efficiently perform analytics to evaluate initial margin and variation margin across DCOs, clearing firms and large traders. Several DCOs clear the same asset class, many clearing firms clear at multiple DCOs, and many large traders have positions at multiple DCOs. Being able to evaluate the entire risk picture—across multiple asset classes, DCOs, clearing firms, and large traders—is crucial to the Commission’s efforts to minimize systemic risk.

Each large DCO has recently either developed a new margin model or enhanced an existing margin model. These margin models are very complex, and analysis of them involves complex mathematical modeling and requires significant resources. Establishing a sufficient margin requirement is one of the first and most important lines of defense a DCO has available to cover a default, and the Commission has established regulations concerning margin model coverage. Without the requested level of funding, the CFTC’s efforts to monitor the effectiveness of these new margin models will be limited, and the Commission will be unable to conduct an adequate amount of stress testing and back testing to properly evaluate the performance of margin models. The Commission also will be unable to regularly conduct hypothetical default exercises, which would enhance the Commission’s review of the adequacy of the margin models and default procedures of DCOs, and facilitate the development of best practices.

Without the requested funding, the Commission will be unable to complete with sufficient frequency its reviews of clearing members that are registered as FCMs or SDs, which increases the risks to the DCOs as a whole. For example, the Commission will not be able to make sufficient reviews of compliance by FCMs with risk management standards of Regulation 1.73, or by SDs with risk management standards of Regulation 23.609. Furthermore, without adequate funding, the Commission will be unable to develop an effective program to oversee the use of margin and capital models by SDs and MSPs.

Additionally, without the requested funding the Commission will be prevented from providing staff with access to the full scope of data and the use of up-to-date technology systems, high-performance computing platforms, and tools required to efficiently conduct both market and financial and risk surveillance, and the Commission will continue to be limited in its capabilities with respect to potential threats from cybersecurity attacks.

Breakout of Surveillance Request¹⁶

¹⁶ The Commission considers the Salary and Expense and the Information Technology programs to be its sole programs, projects, and activities (PPAs). The budget displays by Mission Activity are for informational purposes only, and do not represent a PPA. (back to text)

¹⁷ Information Technology costs, including IT investments (e.g., hardware, software, contractor services), FTE, and indirect costs, are directly attributed to the benefiting Mission Activity wherever possible. Any IT costs that are not directly attributed to another Mission Activity are captured in the Data and Technology Support Mission Activity. (back to text)

Examinations – Mission Activity Description

Examinations are formal, structured reviews of regulated entities’ operations or oversight programs to assess on-going compliance with statutory and regulatory mandates. Regular examinations, in concert with the Commission’s surveillance and other activities, are a highly effective method for ensuring that entities are complying with the core principles established in the CEA and Commission regulations. This mission activity covers both direct examinations performed by Commission staff and oversight of the examinations by the SROs and DSROs. The CEA requires examinations of market structures such as DCMs, DCOs, SEFs, and SDRs, as well as intermediaries like FCMs, CPOs, commodity trading advisors (CTAs), introducing brokers (IBs), SDs, and MSPs. It also requires oversight of the examinations and functions performed by the SROs.

Examinations – Industry Trends and Emerging Issues

The Commission has struggled to provide robust examinations and oversight in the face of extensive change in the markets and in its responsibilities over the past few years.

The Commission must examine DCMs and the other entities for which it is responsible for system safeguards, which includes market continuity planning and rule enforcement. While examinations by the Commission’s Division of Market Oversight were previously limited to DCMs, this division now must also examine SEFs and SDRs. Moreover, SEFs present an array of different trading models, requiring both additional time and training to understand. SDRs present new industry functions that must be adequately addressed in examinations. Both require appropriate resources for the greater number and complexity of examinations.

Similar challenges are faced in the Commission’s oversight of DCOs, which has greatly expanded, both as a result of legislation and changes in DCO activities and memberships. The DCOs are holding substantial amounts of collateral that have been deposited by clearing members and their customers, creating increased urgency in ensuring that DCOs are complying with customer protection rules. Both clearing members and their customers are aware of these facts, and want the DCOs to be rigorously supervised, which is difficult with the current level of funding.

More frequent examinations are required for DCOs that wish to be treated as “qualifying CCPs” for bank capital purposes in order to lower costs to member institutions. These qualifying CCPs must meet the same requirements as CCPs that have been designated by the FSOC as systemically important entities. As such, qualifying CCPs should be fully examined once each year. The additional staff would enable the Commission to examine qualifying CCPs and other DCOs on a more timely basis. It also would permit the Commission to complete reviews of new DCO applications within the 180 days prescribed by regulation. Finally, the Commission must engage with domestic regulators for systemically important DCOs and with foreign regulators for DCOs registered in multiple jurisdictions, adding complexity to the oversight responsibilities. While the Commission leverages the resources of other supervisory agencies when conducting joint exams to the greatest extent possible, other supervisors look to the Commission to lead examinations for DCOs based in the United States.

Additionally, technology represents significant challenges for all registrants, both from cybersecurity threats and market structure issues. Commission staff must be able to respond quickly as threats arise to better understand and mitigate such threats. This is particularly critical for DCMs and DCOs, and other critical elements of market infrastructure, as well as for FCMs and SDs, where vulnerability to cybersecurity attack represents a significant threat to the markets. Similarly, the increased complexity of automation through the order and trade life-cycle will require a similar ability. In FY 2014, staff responded to multiple major cybersecurity incidents and a greater number of other cybersecurity incidents at DCMs, DCOs, and SDRs, lessening staff ability to meet other examination responsibilities. We expect this trend to continue, and perhaps increase in FY 2015 and FY 2016.

Extensive change in the marketplace over the past few years likewise has impacted the Commission’s ability to conduct robust examinations of SDs, FCMs and other intermediaries. While the mission of the Commission has been expanded by legislation, the recent failures of FCMs highlight the increased challenges faced even in its traditional role as regulator of the futures markets.

The risk profiles of FCMs and intermediaries registered with the Commission has increased, with profitability reduced due to increased technology and compliance costs, low volatility, and low interest rates, all resulting in increased risk to customers. The higher risk profile of primary market participants increases the need for the Commission to focus on monitoring registrants to help ensure industry risks are managed effectively. This requires the Commission to ensure that examinations of FCMs and SDs are more risk-sensitive and focused on the key risks facing the industry and protecting customers. Moreover, DCMs and DCOs have now de-mutualized and are being managed as profit-making entities. These factors, combined with the need to examine many more entities, such as SDs, SEFs, and SDRs, have created the need for a substantial increase in the Commission’s resources for examinations.

The Commission must examine FCMs and SDs to review whether they employ effective risk management techniques, have appropriate compliance monitoring, and retain adequate levels of liquidity, in an effort to protect the over $240 billion of customer funds held by these registrants. However, the complexity of the firms, increased sophistication of technology, the advent of heightened risk events related to cybersecurity, business continuity, liquidity issues, complex and global financial structures, and anti-money laundering have made proactive examinations even more critical.

In light of recent events surrounding the financial difficulties of Registered Foreign Exchange Dealers (RFEDs), following high volatility related to the Swiss franc, the Commission should also review whether its rules for RFEDs are sufficient to protect retail customers. Given that the RFED rules have been in place for almost five years, it would be timely for the Commission to review the protections for those engaging in retail foreign exchange transactions.

Examinations – Justification of CFTC Resource Requirements

The FY 2016 request for $35,364,712 will substantially improve the Commission’s examination activities and address historical underfunding problems.

While this staff is augmented in some areas by staff of the National Futures Association (NFA) or an SRO, the staff has primary responsibility for examining Commission registrants and overseeing the activities of the NFA and SROs.

• The Commission currently has 14 DCMs, over 20 SEFs and four SDRs that it seeks to fully examine on a regular basis, with those which are deemed most significant on an annual basis and others on a two or three year cycle. Examinations cover a wide range of areas including system safeguard examinations to address business continuity and disaster recovery plans and cybersecurity, and reviews of market integrity, risk management, customer protection and compliance with other regulations. To date, the Commission has not been able to meet even this frequency of examinations, which is necessary to regulate the integrity of the markets. Moreover, these same staff are active participants on SEF registration teams, must perform rule enforcement reviews discussed below, and make time to respond to market halts, automated system issues, cybersecurity incidents or other irregular occurrences that require immediate response.
• Rule Enforcement Reviews (RERs) of DCMs and SEFs (and eventually fully registered SEFs) play an essential role in protecting futures and swaps market participants from market manipulation, fraud, and other market abuses. RERs examine DCM and SEF staffing to ensure it is adequate for performing required self-regulatory functions and compliance with statutory and regulatory requirements relating to audit trail, trade practices and market surveillance, and disciplinary programs. The Commission projects that the number of SEFs will grow by the end of 2016. Examinations will require additional staff with expertise to complete annual exams of these new entities in addition to DCMs and SEFs.
• SDRs accept and maintain swap data and make such data available to regulators in order to provide systemic risk mitigation, transparency, and market supervision. Availability and maintenance of swaps data is essential to the Commission’s surveillance function. In addition, reliable and accurate swaps data mitigates systemic risk for the nation’s financial sector as a whole. Examinations of SDRs will be instrumental in improving swap data quality reported to the Commission and made available to the public. The focus of SDR reviews will be on compliance with system safeguard rules, including business continuity and disaster recovery, various swap data reporting rules and the ability to adhere to various obligations, duties, and core principles.
• The Commission’s examination expertise will be expanded to examine registrants’ compliance with emerging risks in information security, especially in the area of cybersecurity. System Safeguards Examinations of DCMs, SEFs, SDRs, and DCOs are an essential part of the Commission’s examinations program. Sophisticated computer systems and technical expertise are crucial to the ability of DCMs, SEFs, DCOs, and SDRs to conduct trading in, clear transactions for, and provide data concerning markets that are vital to the U.S. economy. The financial sector faces heightened operational risk from cybersecurity threats and market incidents. The Commission has an urgent need to be able to respond promptly when cybersecurity attacks or system malfunctions disrupt or threaten DCMs, SEFs, DCOs, or SDRs.
• The Commission currently lacks sufficient resources to examine all of the DCOs for which it is responsible on a reasonable schedule, or even the subset of DCOs that have sought to qualify as qualifying CCPs. Examinations of DCOs’ compliance with the core principles and implementing regulations will necessitate the need for new automated tools that will aid in the evaluation of compliance with these new regulations. Moreover, Commission staff expects the number of DCOs to grow by FY 2016.
• The Commission has limited FTE resources devoted to examinations of the 14 clearing organizations. The Commission has sought to add additional FTE to its examination staff in FY 2015 and is in need of additional FTE in FY 2016 to increase the total number of examiners that would be devoted to all clearing organizations.
• Examinations of FCMs, SDs, MSPs and RFEDs to assess compliance with risk management and chief compliance officer regulations, as well as liquidity, capital, segregation, technology, and financial reporting requirements, protect markets from systemic risk and customers from loss. Examinations performed will include “for cause” reviews, limited scope reviews and horizontal reviews that may target specific aspects of registrant operations (e.g., information technology risks, anti-money laundering controls, etc.). Additional resources would enable the Commission to increase its technology and risk management staffing, which would greatly enhance the Commission’s ability to monitor firms on these critical issues.
• The Commission has limited FTE resources devoted to examinations of nearly 75 FCMs, seven RFEDs, 105 SDs, two MSPs, and approximately 1,800 CPOs, 2,600 CTAs, and 1,500 IBs, as well as oversight of the SROs and their examination functions. The Commission seeks to add staff to this function for FY 2016, which would enable it to come closer to meeting its goals in terms of coverage.
• Examinations of FCMs, SDs, MSPs and RFEDs to assess compliance with risk management and chief compliance officer regulations, as well as liquidity, capital, segregation, technology, and financial reporting requirements, protect markets from systemic risk and customers from loss. Examinations performed will include “for cause” reviews, limited scope reviews and horizontal reviews that may target specific aspects of registrant operations (e.g., information technology risks, anti-money laundering controls, etc.). Additional resources would enable the Commission to increase its technology and risk management staffing, which would greatly enhance the Commission’s ability to monitor firms on these critical issues.
• Enhanced audit systems and software tools could be used to monitor registrant financial and non-financial activities as well as regulatory notices filed with the Commission. This would include the use of dashboards to monitor individual firms, analyze peer groups, and industry trends for potential increased risk; and provide additional analytic and assessment capabilities. The Commission currently does not have the ability to obtain or perform these functions, and resources are requested to alleviate this issue.
• The Commission also has responsibility to assess and validate the DSRO’s and NFA’s oversight of FCM and SD compliance with the CEA and applicable SRO rules and Commission regulations, including business conduct, capital, margin segregation requirements, and risk management standards. While these organizations can enhance the Commission’s capacity, oversight is critical to ensure that these functions are performed properly.
• The Commission, in coordination with the NFA, will put in place a base examinations program for SDs/MSPs that, while similar in many respects to the examinations of FCMs/RFEDs, will be specifically tailored to address the business operations, internal controls, risks and compliance requirements of these new registrants. It is important to note that, unlike the roughly 82 FCM/RFED registrants that the Commission already examines, a significant portion of the SDs that will be subjected to examinations have had no prior connection to the CFTC’s regulatory regime. As such, we anticipate that these firms will require additional advisory support and more detailed examinations review to both assess their compliance and assist in any remediation efforts when issues are identified.
• The CFTC’s intermediary examinations program (much like its legal compliance operations) will increasingly leverage and integrate financial and business data points from a greater variety of sources to enhance the effectiveness of its reviews and confirm/validate registrant compliance. For example, as SD trade data reporting is better harmonized among the four SDR entities, the SD examinations program can use this information to enhance its ability to readily monitor registrant business risk.
• Absorbing significant increase in examinations responsibilities since the enactment of the Dodd-Frank Act, generated by the Commission’s number of primary intermediaries (i.e., increasing from approximately legacy FCMs/RFEDs to a combined total of almost 200 FCM/RFED and SD/MSP registrants) requires a significant investment in new staffing resources. In addition, the Commission’s use of new data streams to better guide examination assessments and the expansion of registrant business and risk management areas to strengthen and enhance industry situational awareness also have workload ramifications since these enhancements add to review complexity and in certain cases require additional specialized knowledge, training, time and manpower to perform.
• The Commission will perform SD/MSP on-site reviews, review and monitor registrant reporting, coordinate with the NFA on matters of mutual interest, and supplement the Commission’s efforts to develop more comprehensive examinations products by testing and validating additional aspects of registrant operations and related risks.
• The Commission will continue efforts to design and implement examinations processes and procedures to address a wider range of registrant business operations and related risks. For example, the CFTC will seek to cover important issues such as registrant business continuity plans (in the wake of natural or manmade disasters), anti-money laundering detection processes, and place additional emphasis on testing the firm’s governance structure and its ability to continuously review and update internal controls.
• Automating integration between registration and review, market and trade practice surveillance, financial and risk surveillance, examination, and enforcement activities will result in a reusable data sources, improve workflow, increase re-use of information, improve situational awareness and coordination, and increase the ability of staff to correlate data and events.

Examinations – Impact if Not Funded at Requested Level of Resources

The Commission will be limited in its ability to perform examinations of its registered entities if additional funding is not received.

If the requested funding level is not received, the Commission’s ability to conduct examinations of DCMs, SEFs, and SDRs, including System Safeguards Examinations will be reduced. Further, staff may have a reduced ability to work proactively to consider and help reduce or mitigate threats to market integrity and customer protection in the long term. The examinations would focus on a subset of entities, a subset of core principles and Commission regulations, or both. A reduction in the number of planned examinations conducted or the subject areas reviewed will be detrimental to the self-regulatory system established by the CEA, which relies on Commission oversight of regulated entities to ensure that markets operate fairly, effectively, and efficiently.

The Commission also will be hampered in its ability to fulfill its DCO oversight responsibilities to perform examinations in as comprehensive and thorough a manner as would be optimal if it does not have adequate resources. For example, each DCO should be subject to an in-depth, targeted examination on a regular basis. However, currently, the Commission only has capacity to examine two systemically-important DCOs annually. Other DCOs are examined less often, as resources permit, and for these DCOs the Commission relies on review of DCO rule changes, daily risk surveillance, analysis of periodic financial reports, and DCO self-reporting.

Due to the increase in swaps business at DCOs, the amount of collateral on deposit is growing at DCOs. The Commission is hampered in its ability to review policies, procedures and reconciliations regarding how collateral is handled for the customers of clearing members. The public would benefit from an increase in this activity to aid in identifying if customer property is not being handled appropriately. The four largest DCOs were holding approximately $300 billion in clearing member collateral, both customer and house.

The Commission must possess the expertise and skills to evaluate compliance with the regulations and must have enough staff to perform due diligence during examinations. Lack of resources will cause the Commission to fall short of meeting its responsibilities under the CEA. Additionally, if the Commission is not able to perform frequent examinations for DCOs seeking treatment (for bank capital purposes) as qualifying CCPs, it will likely have an impact on a DCO’s ability to qualify as a CCP. If the DCO is not able to qualify, there will be an increase in capital charged to its bank clearing members, thus making it more costly to do business in the United States.

If the level of funding requested is not provided, it would directly impact the Commission’s base capabilities for examining FCMs, SD, and MSPs at a time when these examinations are most needed. In this regard, insufficient funding would limit the Commission’s ability to assess FCM, SD, and MSP compliance with risk management and Chief Compliance Officer regulations, and as well as such registrants’ compliance with liquidity, capital, segregation, and financial reporting requirements.

The Commission would not have the manpower necessary to meet the anticipated high workload demands for the new and complex SD/MSP registrant population. In addition, the resources available to assess and monitor FCMs will also decrease as staff resources will be redirected to provide a minimal level of monitoring of SD/MSP activities. The resultant staff shortfall could impact the Commission’s ability to detect potential threats to customer funds and adversely impact the Commission’s ability to produce the more specialized and varied examination products the agency needs to more comprehensively address systemic and other risks that could threaten customers’ funds and the market at large.

Breakout of Examinations Request¹⁸

¹⁸ The Commission considers the Salary and Expense and the Information Technology programs to be its sole programs, projects, and activities (PPAs). The budget displays by Mission Activity are for informational purposes only, and do not represent a PPA. (back to text)

¹⁹ Information Technology costs, including IT investments (e.g., hardware, software, contractor services), FTE, and indirect costs, are directly attributed to the benefiting Mission Activity wherever possible. Any IT costs that are not directly attributed to another Mission Activity are captured in the Data and Technology Support Mission Activity. (back to text)

Enforcement – Mission Activity Description

The Commission is responsible for protecting market participants and other members of the public from fraud, manipulation and other abusive practices in the futures and swaps markets. Its cases range from quick strike actions against Ponzi enterprises that victimize investors across the country, to actions concerning sophisticated manipulative and disruptive trading schemes in markets the Commission regulates, including financial instruments, oil, gas, precious metals and agricultural goods.

Enforcement – Industry Trends and Emerging Issues

• The Dodd-Frank Act gave the Commission expanded responsibility for the swaps market, which also meant whole new categories of entities subject to Commission jurisdiction (SDs, SEFs and SDRs).
• Increasing use of automated trading and high frequency trading in the markets overseen by the Commission requires new enforcement efforts to prevent manipulation and fraud.
• Commission anticipates more time-intensive and inherently complex investigations due to innovative products and practices within the industry, coupled with new anti-manipulation authority in the futures and swaps markets and the statutory prohibition on disruptive trading.
• In order to investigate and litigate market-wide violations, as well as those less complex but equally important retail fraud cases, the number of specialized enforcement experts must increase. The Commission further expects matters relating to the compliance, reporting, recordkeeping and internal controls requirements pertaining to swaps and the regulated entities on and through which they are traded and cleared.
• The Commission foresees an increase in multi-jurisdictional and multi-national investigations given the global nature of the swaps marketplace and the challenges associated with substitute compliance. The Commission is also experiencing an increase in international enforcement investigations in its traditional markets (the most significant being the international benchmark rate rigging cases). These cases are expected to be more resource intensive due to increased demands for legal counsel and expertise in connection with multi-lateral initiatives such as International Organization of Securities Commissions (IOSCO) Committee on Enforcement and Information Sharing and G-7 initiatives.
• In addition to extending the Commission’s jurisdiction to the swaps markets, the Dodd-Frank Act also clarified its jurisdiction with respect to certain retail off-exchange transactions, including transactions in foreign exchange and precious metals. This area has had significant fraud and will result in more matters referred for investigation and enforcement action.
• As the Commission increases investor’s awareness through Consumer Outreach efforts and Whistleblower programs, it is anticipated we will receive a spike in tips and complaints for referrals to Enforcement.

Enforcement – Justification of CFTC Resource Requirements

The FY 2016 request for $69,993,535 will support and expand the Commission’s activities related to enforcement.

A robust enforcement program, including the proverbial “cops on the beat,” is critical to protecting the public. The expansion of the Commission’s responsibilities to include the swaps market as well as continued growth in the size and complexity of the markets—with more products, more sophisticated electronic trading, and more interactions between futures and cash markets—require the Commission to substantially enhance its enforcement efforts if it is to keep pace. In addition, the Commission needs additional enforcement resources if it is to take advantage of the expansion of the Commission’s enforcement powers with regard to retail fraud and manipulative trading. As the enforcement demand increases, the Commission will continue utilizing its authority to: 1) shut down fraudulent operations and immediately preserve customer assets through asset freeze and receivership orders; 2) terminate manipulative and disruptive schemes; 3) ban defendants from trading and being registered in its markets; and 4) seek restitution, disgorgement and monetary penalties.

The eLaw technology components supporting the enforcement program will be enhanced. Data storage capacity will be increased to support ever increasing volumes of digital evidence and analytic support databases. Computer forensics will be enhanced to examine new types of digital evidence. Technical support services for staff will be increased to ensure that technical and logistical activities minimally constrain the critical time lines of enforcement actions.

Enforcement – Impact if Not Funded at Requested Level of Resources

The industry continues to grow in volume and complexity as increasingly sophisticated systems or instruments and practices are employed across the market and around the world. At the same time, the sophistication of the wrongdoers also is increasing, including their use of technology to gain the advantage or conceal their activities. The Commission’s enforcement efforts require adequate resources to ensure that timely and responsive enforcement is achieved as the industry rapidly grows. The Commission’s ability to respond in a timely manner to market events, act swiftly where customers are at risk, require new and existing registrants to meet their regulatory obligations, and protect the integrity of the markets subject to the Commission’s jurisdiction will be strengthened if adequate resources are provided.

If the requested funding level is not received, the Commission faces an inability to respond quickly to investigate and pursue wrong-doing in the markets, particularly where retail customers are involved, which threatens to significantly undermine confidence in the markets and our oversight. An ever-larger segment of the population has investments in the futures and swaps markets, either directly or indirectly through pension funds or ownership of shares in companies that participate in the markets. The continued growth in responsibilities, and industry complexities coupled with inadequate resources will directly impact the agency’s mission to enforce the laws and preserve the market’s integrity.

Allegations related to off-exchange retail foreign exchange and precious metals fraud, as well as industry allegations concerning manipulation, trade practice violations, and false reporting have grown significantly and require additional resources to address. Failure to increase funding will mean that the Commission’s enforcement program will increasingly be unable to generate new cases and investigations.

The increasing use of automated trading strategies and high frequency trading has created the potential for new manipulative practices, such as spoofing. The expanded use of such trading techniques has captured public attention and led to increasing concern about the integrity of the markets. Although the Commission’s ability to investigate such matters was enhanced by Dodd-Frank, its ability to do so effectively requires increases in resources, particularly given the resource-intensive nature of such matters.

Integrity of benchmarks also continues to be an issue, as evident by the London Interbank Offered Rate (LIBOR) and foreign exchange orders brought by the Commission. On these matters alone, Commission actions related to manipulation of benchmarks have resulted in fines and penalties of over $6 billion between June 2012 and November 2014. There are hundreds of thousands of contracts used in the markets overseen by the Commission that depend on benchmark rates.

Finally, failing to enhance the eLaw technology components supporting the enforcement program will reduce the efficiency of enforcement staff, reduce the number and increase the duration of active investigations and cases, and place enforcement staff at a competitive disadvantage when conducting investigations and enforcement actions.

Breakout of Enforcement Request²⁰

²⁰ The Commission considers the Salary and Expense and the Information Technology programs to be its sole programs, projects, and activities (PPAs). The budget displays by Mission Activity are for informational purposes only, and do not represent a PPA. (back to text)

²¹ Information Technology costs, including IT investments (e.g., hardware, software, contractor services), FTE, and indirect costs, are directly attributed to the benefiting Mission Activity wherever possible. Any IT costs that are not directly attributed to another Mission Activity are captured in the Data and Technology Support Mission Activity. (back to text)

Economic and Legal Analysis – Mission Activity Description

Economic analysis is critical in supporting the regulatory activities in a wide range of areas, including:

• Economic and quantitative analysis, including cost-benefit considerations utilized in designing and implementing the Commission’s rulemaking;
• Determining the requirements for reporting and data rules;
• Analyzing the quality, integrity, and usefulness of the market data reported to the Commission;
• 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;
• Providing the technical expertise to evaluate and report on risk models, stress tests, and other stability-related evaluations necessary for oversight; 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 the CEA.

The Commission supports a focused research group that analyzes innovations in trading technology, developments in trading instruments, and market structure, and interactions of various market participants in the futures and swaps markets. These specialized economists collaborate with staff across the Commission’s divisions and offices. The Commission also publishes various periodic reports including the Commitment of Traders Report, and the weekly, semi-annual and annual Swaps Reports.

The legal activities of the Commission include: 1) regulatory issues; 2) engaging in defensive, appellate, and amicus curiae litigation; 3) providing general legal advice and support; 4) assisting the Commission in the performance of its adjudicatory functions; and 5) providing advice on legislative and other intergovernmental affairs issues. In addition to providing support on new and evolving issues, the Commission is responsible for providing on-going analysis under government ethics, personnel, procurement, and recordkeeping rules and under statutes such as the Government in the Sunshine Act, Federal Advisory Committee Act, Federal Information Security Management Act, the Freedom of Information Act, and other statutes applicable to the Commission.

Economic and Legal Analysis – Industry Trends and Emerging Issues

The Commission seeks to maintain a staff with extensive research and analytical backgrounds to ensure that analyses reflect the forefront of economic knowledge and econometric techniques. Economics staff with particular expertise and experience provide leverage to dedicated staff throughout the Commission in order to anticipate and mitigate significant regulatory, surveillance, clearing, and enforcement challenges. Economic analysis plays an integral role in the development, implementation, and review of financial regulations to ensure that regulations are economically sound and have undergone a rigorous consideration of potential costs and benefits.

Commission staff has established a network of well-renowned researchers and academics in quantitative financial methods, applied mathematics, econometrics, and statistics to augment the resources of the Commission. 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 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.

Effective research requires a data environment that is supported by transparent policies and procedures; allows data to be used and shared with external parties without compromising privacy, confidential, or sensitive information; and provides researchers with flexibility in using tools and approaches.

Regulatory Legal Issues. The Commission requires legal expertise to interpret and opine on questions of statutory and regulatory authority and review for legal sufficiency proposed exemptive, interpretive, and no-action relief to regulated entities and other market participants. Staff review draft rulemakings and provide legal counsel in support of all substantive Commission and staff actions, including registration and rule submission review, regulations, exemptions, product reviews and market and clearing issues. Staff analysis ensures compliance with the CEA, and laws of government-wide applicability, such as the Administrative Procedure Act, the Regulatory Flexibility Act, the Congressional Review Act, and the Paperwork Reduction Act.

• Requests from registrants and other market participants potentially affected by Commission rules must be reviewed by legal counsel for compliance with statutory authority. This review has been hampered by the lack of resources available, slowing responsiveness of the agency to requests for relief or interpretations.

Litigation. Attorneys in the litigation area represent the Commission in: 1) Federal appellate litigation, as a party or, where appropriate, as amicus curiae; 2) certain Federal court trial-level cases, including challenges to agency rulemakings and bankruptcy cases involving derivatives industry professionals; and 3) personnel actions, equal employment opportunity complaints, and other related employment litigation. The Commission also maintains the capability to respond to labor, contract, and Freedom of the Information Act matters, and Merit Systems Protection Board cases arising under the Civil Service Reform Act of 1978. In addition, attorneys in the litigation program advise the Commission on responses to appeals from decisions of industry SROs, Administrative Law Judges or Judgment Officers in administrative reparations or enforcement actions.

• The Commission has a variety of new enforcement tools under the Dodd-Frank Act. Efforts to use these new tools are likely to lead to an increase in appeals from the Commission’s enforcement actions, which must be handled by litigation program staff.

General Law. The Commission also manages information governance in compliance with applicable laws. Principal responsibilities include Freedom of Information Act and Privacy Act compliance. The Commission maintains a robust capability with respect to all matters related to information requests, and implements the processes, policies, and information systems to ensure that the Commission appropriately manages electronically stored information as required in the Federal Rules of Civil Procedure and relevant judicial decisions. As the Commission’s enforcement caseload increases, the program’s role in advising and responding to information requests increases apace.

• The Commission also ensures compliance with the Government in the Sunshine and Federal Advisory Committee Acts. The Commission also is responsible for maintaining compliance with the government-wide ethics regulations promulgated by the Office of Government Ethics.
• National Treasury Employees Union was successful in a recent vote to unionize Commission staff in Washington, Kansas City and Chicago. The Commission expects a significant increase in labor and employment law workload as a result.

Legislation and Intergovernmental Affairs. 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. Additionally, the Commission maintains liaisons with other Federal regulators to analyze and resolve jurisdictional issues and to address specific matters implicating the jurisdiction of multiple agencies.

• The Commission is a member of the FSOC, a government organization established by the Dodd-Frank Act. The Legislation and Intergovernmental Affairs team supports the Commission’s activities with the FSOC. This group works with staff to review requests for data sharing among agencies and by the Office of Financial Research and to provide guidance on appropriate access to data consistent with the CEA.

Economic and Legal Analysis – Justification of CFTC Resource Requirements

The FY 2016 request for $27,948,756 will allow the Commission to produce timely economic and legal analysis with a high level of quality to inform the public and support the entire Commission.

The Commission’s economists play an integral part in the cost-benefit considerations of Commission rules. Consistent with the mission of the CFTC, new and existing regulations are evaluated in light of considerations of, among other factors, protection of market participants and the public, efficiency and competitiveness of futures markets, price discovery, and sound risk management practices. The extensive research and analytical backgrounds of Commission economists will help to ensure that analyses reflect the forefront of economic knowledge and econometric techniques.

The increased funding will assist in implementing a research-focused data environment that will support CFTC and inter-agency research into evolving market conditions. It will also assist in continuing to provide appropriate market information to the public to increase market transparency.

As mentioned above, the Commission interprets and applies legal requirements of a variety of government-wide statutes to assure the legal sufficiency of all Commission actions.

The Commission also drafts and reviews domestic and international memoranda of understanding and other agreements as appropriate to further the work of the Commission and assure that Commission data is protected and agreements are consistent with the CEA. The increased level of inter-agency cooperation to analyze emerging risks, as well as increased international cooperation with foreign regulators and multi-lateral regulatory groups has increased this work significantly and created the need for increased funding.

Economic and Legal Analysis – Impact if Not Funded at Requested Level of Resources

Without the requested additional resources the Commission will struggle to provide the research, analysis, advice and counsel necessary to meet its mission to protect market users from systemic risk, and to foster open, transparent, competitive and financially sound markets. Inadequate staffing will hurt the Commission’s ability to leverage the rich data accessible to provide sound quantitative economic analyses for the Commission. In addition, it will hurt the ability of the Commission’s economists to collaborate effectively with academic experts in subject matters of interest to the Commission and the public.

Similarly, without adequate funding to allow for additional personnel and expertise, the Commission will be unable to maintain its current workload and effectively address new matters. Among other key concerns, inadequate funding would create delays with respect to rulemaking (including revising or rescinding rules in light of market developments or new information and conducting a retrospective review of Commission regulations to identify and address outdated, unnecessary or unduly burdensome rules), and a slowing of responsiveness by the Commission to concerns raised by regulated entities and market participants, such as end-users of derivative instruments.

Breakout of Economic and Legal Analysis Request²²

²² The Commission considers the Salary and Expense and the Information Technology programs to be its sole programs, projects, and activities (PPAs). The budget displays by Mission Activity are for informational purposes only, and do not represent a PPA. (back to text)

²³ Information Technology costs, including IT investments (e.g., hardware, software, contractor services), FTE, and indirect costs, are directly attributed to the benefiting Mission Activity wherever possible. Any IT costs that are not directly attributed to another Mission Activity are captured in the Data and Technology Support Mission Activity. (back to text)

International Policy – Mission Activity Description

The global nature of the futures and swaps markets makes it imperative that the United States consult and coordinate with international authorities. The Commission is actively communicating internationally to avoid conflicting requirements and to engage in international cooperative efforts, wherever possible. For example, the Commission has engaged in bilateral discussions and shared many of our pre-decisional memoranda, term sheets, and draft rule proposals with international regulators, such as the European Commission, the European Central Bank, the Bank of England, the European Securities and Markets Authority, and the Financial Services Authority of Japan.

The Commission participates in numerous international working groups regarding derivatives, including numerous IOSCO committees and task forces, as well as projects with the Basel Committee on Banking Supervision, the Committee on Payments and Market Infrastructures, and the Financial Stability Board. Over the past four years, the CFTC, SEC, European Commission, European Securities Market Authority, and market regulators from around the globe have been meeting to discuss and resolve issues related to financial reform through a technical working group.

The Commission also is consulting with many other jurisdictions such as Hong Kong, Singapore, Japan, and Canada. Discussions have focused on the details of the Dodd-Frank Act and implementing rules, including mandatory clearing, mandatory trade execution, reporting swap transactions to trade repositories, and regulation of SDs and derivatives market intermediaries. The Commission’s international outreach efforts directly support global consistency in the oversight of the derivatives markets.

In addition, the Commission has been engaged in ongoing international work and policy coordination in the development of data and reporting standards under Dodd-Frank Act rules. Data standards and common identifiers provide easier, less expensive data sharing and transfer by providing regulators and diverse industry participants with consistent terms, format, and quality measures. Legal Entity Identifiers (LEIs) are part of a unique identification system for parties to financial transactions being adopted by financial markets globally and will allow regulators to cost-effectively determine the controlling and benefitting party to every derivatives transaction. Unique product identifiers (UPIs) for standardized derivatives will allow regulators to cost-effectively determine the characteristics of most derivatives transactions.

Finally, the Commission has entered into and also is negotiating cooperative supervisory arrangements for regulated cross-border entities and market participants.

International Policy – Industry Trends and Emerging Issues

The adoption of Dodd-Frank Act legislation and the development of implementing rules by the Commission have significantly increased communication between the Commission and global regulatory authorities, most notably the European Commission. In particular, the implementation of the Dodd-Frank Act regulations requires continued development of supervisory coordination arrangements with foreign authorities in major jurisdictions where regulated entities are located, such as the European Union, Canada, and Japan. With regard to the European Union, we are engaging not only the European Commission, but also the European Securities and Markets Authority and relevant national regulators, such as those in the United Kingdom, France, and Germany, to negotiate supervisory arrangements for entities that are subject to regulation in both the European Union and the United States. Similar arrangements are being negotiated in other major market jurisdictions.

The aftermath of the financial crisis spawned a multitude of initiatives within the Financial Stability Board and IOSCO and within the U.S. Treasury and G20 working groups that address topics such as: cooperation and coordination in the areas of OTC regulation, CCP clearing standards, the monitoring and control of systemic risk, the protection of customer funds, and mechanisms to share systemically important information internationally. International concerns regarding the integrity of commodity derivatives markets are being addressed within the IOSCO committee on Commodity Derivatives Markets, which is co-chaired by Commission.

Commission participation in these work-streams is critical, primarily because the work-product is transformed into international standards of best practice, which are then subject to compliance assessment by the International Monetary Fund in its Financial Sector Assessment Program. The Commission’s participation historically has focused on incorporating the Commission’s regulatory approach into these internationals standards and encouraging international harmonization.

The Commission’s international agenda also includes responding to requests from the U.S. Treasury to participate in international dialogues (e.g., U.S.-China dialogue), providing technical assistance to developing market jurisdictions, and engaging in bilateral discussions with foreign regulators to resolve cross-border issues.

Finally, the Commission also is focusing on strengthening its supervision of registered entities such as clearing organizations, markets and dealers that are registered by both the Commission and a foreign regulator, and on ensuring that the recipients of regulatory exemptions remain in compliance with applicable requirements. Achieving this goal of greater due diligence and ongoing compliance monitoring will require the Commission to coordinate closely with foreign regulators.

International Policy – Justification of CFTC Resource Requirements

The FY 2016 request for $4,914,647 will support the Commission’s activities related to the Commission’s international policy coordination, including but not limited to:

• Perform outreach to harmonize the international regulatory framework for derivatives. The Commission will work with leaders of authorities with responsibility for the regulation of the OTC derivatives markets in major market jurisdictions to support the adoption and enforcement of robust and consistent standards in and across jurisdictions and to develop concrete and practical solutions to conflicting application of rules, identify inconsistent or duplicative requirements, identify gaps and reduce the potential for regulatory arbitrage.
• Work with staff at the European Commission, in order to harmonize requirements between European Union and the Commission's Dodd-Frank Act rulemakings, to resolve policy differences, and avoid gaps that could lead to regulatory arbitrage. Commission staff will continue to coordinate meetings with the European Commission and European Union authorities.
• Continue engagement with a number of foreign regulators, such as Australia, Canada, Japan, and Singapore, to harmonize and coordinate rules in these jurisdictions with U.S. rules.
• Coordinate supervision of global entities with foreign authorities and work with foreign authorities, to coordinate policies.
• Negotiate cooperative arrangements with foreign regulators in connection with the supervision of regulated cross-border entities and market participants.
• Continue to participate in IOSCO's Board and co-chair the IOSCO committee on commodity derivatives markets, as well as continuing to participate in IOSCO’s task force on benchmarks, the committee on secondary markets, the committee on intermediaries, the committee on emerging risks, the committee on investor protection, the cross-border task force, and the OTC derivatives task force. All of these activities relate collectively to the development of standards of best practices and guidance in derivatives regulation.
• Support U.S. Treasury and other initiatives. Coordinate CFTC participation in U.S. Treasury financial dialogues, Financial Stability Board projects and other multilateral initiatives, such as free trade agreements.
• Continue to plan and coordinate the Commission's annual trading seminar for foreign market authorities; the Commission's annual hosting of an international conference for foreign regulators in Boca Raton, Florida; visits to the Commission requested by foreign regulators to the Commission; and on-site technical assistance to foreign market authorities, on a staff-available basis.
• Work with the FSOC’s Designations Committee to monitor both designated financial market infrastructures in the U.S. and non-designated financial market utilities in other jurisdictions.
• Work in coordination with foreign regulatory authorities to evaluate compliance with the Committee on Payment and Settlement Systems-IOSCO Principles for Financial Market Infrastructures.
• Effect and maintain global establishment of entity, product and transaction data standards.

International Policy – Impact if Not Funded at Requested Level of Resources

The failure to provide requested resources will result in a diminution of the Commission’s ability to help develop a sound global regulatory framework at a time when the Commission will be implementing Dodd-Frank Act rules, and when many multilateral organizations and regulatory authorities are engaged in developing new responses to the financial crisis generally and OTC derivatives in particular. IOSCO, the U.S. Treasury, and important international regulatory authorities look to the Commission for leadership in futures and swaps market policies. Any diminution in resources would require the Commission to reduce its international program, thereby making it less able to advocate for harmonization of international regulatory policies and to resolve potentially conflicting rules. A failure to establish global entity, product and transaction data standards will increase operating costs and risk for both regulators and industry participants.

Breakout of International Policy Request²⁴

²⁴ The Commission considers the Salary and Expense and the Information Technology programs to be its sole programs, projects, and activities (PPAs). The budget displays by Mission Activity are for informational purposes only, and do not represent a PPA. (back to text)

²⁵ Information Technology costs, including IT investments (e.g., hardware, software, contractor services), FTE, and indirect costs, are directly attributed to the benefiting Mission Activity wherever possible. Any IT costs that are not directly attributed to another Mission Activity are captured in the Data and Technology Support Mission Activity. (back to text)

Data and Technology Support – Mission Activity Description

Information technology costs, including IT investments (e.g., hardware, software, and contractor services), FTE, and indirect costs, are directly attributed to the benefiting Mission Activity wherever possible. Any IT costs that are not directly attributed to another Mission Activity are captured in the Data and Technology Support Mission Activity as described below. A full breakout of the Commission’s IT Portfolio, which includes IT costs relating to other Mission Activities, is located in Appendix 2.

The Commission’s IT program uses a service-oriented approach to provide technology infrastructure and services that allow staff Commission-wide to work effectively and increase the integration of data and technology into the Commission operating model. The Office of Data and Technology will ensure that Commission staff have secure and appropriate access to highly available communication, processing, and storage infrastructure capabilities. The Commission supports the following priorities:

• Provide available, flexible, reliable, scalable, and high performance infrastructure and base services. The CFTC IT infrastructure includes hardware, software and telecommunication equipment as well as base services that empower staff to fulfill the CFTC mission. The Commission will scale and enhance communication, processing, storage, and platform infrastructure to meet mission requirements.
• Facilitate data understanding and ingestion. Because CFTC has a unique imperative to aggregate various types of data from multiple industry sources across multiple market segments both domestic and international, data access, data transfer, data ingest, data warehousing, data standards, and data quality activities are essential.
• Provide CFTC market, financial, legal, and economic analysts with the ability to rapidly adjust their analytic activities and approaches. Staff must be provided with platforms and tools that enable them to innovatively analyze data while minimizing time, process, and resource constraints.
• Provide automation services and solutions that address and support a diversity of roles and activities and increase data re-use across the Commission. Enterprise-wide solutions are preferable to narrowly focused systems and allow CFTC to leverage limited resources.

Data and Technology Support – Industry Trends and Emerging Issues

The CFTC is a data-centric organization. The growth in the past several years for the types of data required to be received and analyzed by the Commission, the number of data sources providing data, the complexity of the data, and the volume of the data have each expanded significantly. This is driving the significant need for a more comprehensive and capable technology platform, such as that available in the form of high-performance computing technology. Additional technology requirements such as advanced extraction, data loading and browsing technology are growing to provide the capability to perform analysis on the thousands of lines of transactions and provide timely responses to queries. Only by providing advanced tools and enriched data for staff to connect, analyze, and aggregate data can the Commission attempt to understand the industry changes and fulfill its responsibility to appropriately oversee the proper functioning of the derivatives markets, particularly with respect to effective market and risk surveillance.

Data and Technology Support – Justification of CFTC Resource Requirements

The FY 2016 request for $63,133,843 will support and continue to enhance the Commission’s activities related to its data infrastructure, without which the Commission will be severely limited in its ability to fulfill its responsibilities. This funding level supports required technology refreshment on a sustainable cycle, and infrastructure and services to support new mission initiatives as well as improvements to the current mission and management programs. Hardware, software, and other components that provide communications, processing, and storage will be updated to maintain acceptable performance and provide cost-effective and secure operation and scalability. In FY 2016, the Commission will conclude the migration to a virtual desktop environment that will allow increases in desktop computing capacity and enhancements to desktop tools to be provided to staff more quickly and efficiently. The virtual desktop environment will also improve mobile computing for staff, which, for example, will enable the Commission’s surveillance and examinations staff to more effectively fulfill their duties.

Given the importance of continuing oversight of derivatives markets to the health of the United States and global financial systems, the Commission must be fully prepared for continuity of operations under a broad range of circumstances. To ensure consistency of day to day operations that the Commission needs to have a safe and reliable environment for its production systems, the server room at the Washington, D.C. Headquarters location will be de-commissioned and the Commission’s alternate computing facility will be supplemented with a second, geographically co-located alternate computing facility. In addition to the current capability to recover operations within recovery time objectives, application system architectures will be adjusted to further automate recovery and reconstitution processes and reduce the need for outages for planned maintenance.

The Commission will continue to improve information technology and management capabilities in the areas of data management to support analytics, economic analysis, and market research. The Commission also will implement enterprise technology solutions that enable the sharing and reuse of data for cross-divisional purposes. Policy, procedures, and resources will continue to be used to govern, manage, and access data using a Commission-wide information architecture and framework. Such improvements will significantly improve the Commission’s ability to maximize the productivity of its workforce across multiple functions and work areas. Furthermore, the Commission will facilitate the improvement in the quality of data received from market participants to empower its staff to perform the complex data analyses needed to regulate the futures and swaps markets. An example of such improvements is the Commission’s continued work to harmonize SDR data reporting, the effective functioning of which is essential to the Commission’s mission to oversee the swaps markets.

The Commission plans to utilize increased funding to fully deploy a National Archives and Records Administration compliant electronic record and document management system that will improve information management and security, support process automation, improve internal controls, and improve staff productivity. A secure enterprise search capability will allow simultaneous searching of key Commission information sources and databases. In addition, the IT program will imbed division specific SharePoint support to leverage the new electronic records system.

In FY 2016, the Commission will focus on the information security requirements, specifically on Cybersecurity Continuous Diagnostics and Mitigation implementation and sustainment as well as continuing to enhance automated controls to mitigate the risk of evolving security threats. Since the Commission is charged with protecting sensitive information assets that are critical to overseeing the markets, Cybersecurity Continuous Diagnostics and Mitigation is required to assess and mitigate risk more effectively.

Mobile computing and mobile communication services will be enhanced to increase the productivity of investigators, examinations staff, and international affairs staff by ensuring availability of information and services. Mobile video conferencing that enables individuals to participate fully in meetings from remote locations will be implemented. The ability to securely host online meetings with desktop sharing and video conferencing with external parties will be implemented.

Media streaming will be implemented to improve the ability of large numbers of staff to view external presentations and conferences. After-hours technical support will be increased to improve the productivity of investigators, examinations staff, and international affairs staff by ensuring availability of information and services, anytime and anywhere. It will also improve the productivity of staff working extended hours on high-priority projects under tight deadlines.

Data and Technology Support – Impact if Not Funded at Requested Level of Resources

If the Commission does not receive the requested level of resources, the Commission will not be able to use technology to expand the scope and depth of its oversight. IT initiatives previously funded in prior fiscal years will be halted or delayed in FY 2016 due to funding limitations. The impact will be widespread across the Commission’s activities, severely limiting the Commission’s ability to fulfill its statutory responsibilities.

In addition to the critical IT functions detailed in other Mission Activities that would be severely limited without the requested level of funds, the Commission will not have sufficient infrastructure to deploy mission systems that analyze orders as well as trades for trade practice violations or deploy more comprehensive financial and systemic risk modelling tools. The Commission likewise will not have sufficient infrastructure to support the upgrade of enforcement forensics and litigation tools, and there will be insufficient infrastructure to support the continuing implementation of straight-through processing for all regulatory processes. The Commission will not be able to complete infrastructure upgrades required to support the increased use of analytics platforms, and only very critical infrastructure technology refreshments will be accomplished, limiting the Commission to a reactive, as opposed to a proactive, posture with respect to its infrastructure.

In the critical area of business continuity, a secondary alternate computing facility (ACF) will not be implemented, exposing the entire Commission to an untenable continuity risk without the requested level of funding. Ongoing investments in cybersecurity technology will be reduced, increasing the risks imposed on Commission operations and the data and processes that are reliant on robust cybersecurity. The use of high-performance computing platforms for data analytics will not be expanded impacting the Commission’s ability to provide core activities such as surveillance, enforcement, examinations, and product reviews.

In the absence of adequate funding, the customer support provided to industry participants using the Commission portal will be minimal. The Commission will not be able to keep pace with the growth of new data, expanded mission requirements, or industry-related technological and data innovations that affect Commission regulatory functions.

Breakout of Data and Technology Support Request²⁶

²⁶ The Commission considers the Salary and Expense and the Information Technology programs to be its sole programs, projects, and activities (PPAs). The budget displays by Mission Activity are for informational purposes only, and do not represent a PPA. (back to text)

²⁷ Information Technology costs, including IT investments (e.g., hardware, software, contractor services), FTE, and indirect costs, are directly attributed to the benefiting Mission Activity wherever possible. Any IT costs that are not directly attributed to another Mission Activity are captured in the Data and Technology Support Mission Activity. (back to text)

Agency Direction and Management – Mission Activity Description

The Commission’s ability to achieve its mission of protecting the public, derivative market participants, the U.S. economy and the U.S. position in global markets is driven by well-informed and reasoned executive direction, strong and focused management, and an efficiently-resourced, dedicated, and productive workforce—this is a top-to-bottom requirement. These attributes of an effective organization combine to lead and support the critical work of the Commission to provide sound regulatory oversight and enforcement programs for the U.S. public. To ensure the Commission’s continued success, continuity of operations, and adaptation to the ever-changing markets it is charged with regulating, the Commission must empower strong, enterprise-focused leaders, maintain a high-performing, diverse and engaged workforce, promote transparent and clear communication, and develop and equip leaders at all levels of the organization. The Commission must manage its resources effectively through effective internal controls, governance and planning processes, and ensure its workforce has the leadership, knowledge, data and technology, and other tools to work effectively.

The Commission is committed to operationalizing its expanded regulatory scope and to maintaining its strong presence in its traditional markets. This requires unambiguous and timely direction, and the right quantity and quality of staff, aligned in an optimal operating structure supported by the necessary training, development, tools, resources and working environment.

The Commission utilized shared services provided by other agencies for its financial management and human resources systems, as well as services provided by commercial providers to many Federal agencies (e.g., travel and hiring systems). The Commission also maintains administrative services that are unique to the Commission (e.g., performance management, pay adjustment, and ethics compliance). To reduce data redundancy, rework, and support cost-effective automation, administrative data and systems must continue to be centralized, replacing point solutions and eliminating redundant data stores.

Agency Direction and Management – Industry Trends and Emerging Issues

The Commission continues to be in direct competition with industry and our Federal counterparts for highly-skilled technical and analytical positions that enable the Commission to fulfill our regulatory requirements. The Commission continues to struggle with recruiting and retention of sophisticated professionals that provide core mission activities.

The Commission is striving to maintain its dedicated team of management professionals focused on human capital strategy, talent management, and organizational performance to support the Commission of the future.

The Commission is focused on maintaining effective management and administrative programs as efficiently as possible to maximize the resources and staff available to the primary mission activities. The utilization of shared services continues to be an important strategy in maintaining these programs and services at a reasonable cost.

Agency Direction and Management – Justification of CFTC Resource Requirements

The FY 2016 request for $34,020,658 will continue to support and expand the Commission’s activities related to the Commission’s agency direction, management and administrative support.

The Office of the Inspector General (OIG) will add staff to expand its work regarding Dodd-Frank implementation and other high-visibility events and issues impacting the Commission, and enhance its ability to oversee the search and production of documents relevant to investigations, audits, and reviews. This will allow the OIG to oversee these processes in order to verify that any search is complete and appropriate while preserving OIG independence.

In the Administrative Management and Support area, the Commission will expand and fortify its performance management program to ensure the Commission is not only allocating resources to its highest priority activities in pursuit of its mission, but also in the leadership and management of the performance of those resources to achieve maximum results. This will require the addition of subject matter expertise in strategic and operational planning, specifically performance metrics and data analysis; and in human capital strategy and analysis, specifically in individual and organizational performance management system reform, compensation and workforce planning.

In addition, the Commission will expand and continue implementing a controlled unclassified information program, including additional controls for high-risk personally identifiable information and research data, and information security continuous monitoring. The addition of records management expertise in the controlled unclassified information program will strengthen the Commission’s ability to provide and ensure security of data throughout the agency.

Agency Direction and Management – Impact if Not Funded at Requested Level of Resources

The Commission will be unable to expand and improve on its highest priority mission support activities. Expertise in organizational and operational management, financial management, and human resources are needed at the requested levels in order for the agency to provide the systems, data protections, performance management and analysis needed to keep pace with the technology-driven innovative environment it is charged with overseeing and regulating.

Breakout of Agency Direction and Management Request²⁸

²⁸ The Commission considers the Salary and Expense and the Information Technology programs to be its sole programs, projects, and activities (PPAs). The budget displays by Mission Activity are for informational purposes only, and do not represent a PPA. (back to text)

²⁹ Information Technology costs, including IT investments (e.g., hardware, software, contractor services), FTE, and indirect costs, are directly attributed to the benefiting Mission Activity wherever possible. Any IT costs that are not directly attributed to another Mission Activity are captured in the Data and Technology Support Mission Activity. (back to text)

Appendix 2. Management of the IT Portfolio in FY 2016

The Commission requests $79.0 million for the Information Technology Program and $29.4 million for the Salaries and Expenses Program, in support of the following IT priorities:

Surveillance:

• Data Standards
  • Continue working with domestic and international regulators, as well as industry to harmonize and refine data standards and improve data quality.
  • Implement master reference data management.
  • Enhance data governance policy and implement revised procedures.
  • Automate data quality management activities and increase data analysis and analytics support activities.
  • Continue harmonizing data standards and data access services for all SDR data.
• Swaps Data Management
  • Continue data loading support for all new data submissions.
  • Implement data aggregation mechanisms for cross-SDR data analysis.
  • Continue integrating NFA systems and data with CFTC systems and data.
  • Continue integrating futures, swaps, and master and reference data in an enterprise data environment.
  • Continue enhancing the CFTC data warehouse to facilitate rapid access to large volumes of market data.
• Position and Transaction Surveillance
  • Continue modifying large trader reporting systems to support new swaps data analysis, internal reporting requirements, and transparency reporting.
  • Deploy systems that analyze orders as well as trades for trade practice violations.
  • Enhance position monitoring systems.
  • Enhance account ownership and control information systems.
• OTC Risk Management
  • Continue enhancing stress testing of positions in swaps for market participants and DCOs.
  • Continue enhancing systems to identify and aggregate data for related market participants across DCOs.
  • Continue improving tools for back testing and evaluation of sufficiency of all material product and portfolio margin requirements.
  • Continue improving monitoring of firm level variation and initial margin requirements across DCOs.
  • Continue enhancing tools to evaluate the risk of market participants positions held at multiple FCMs or DCOs.
  • Continue enhancing tools to combine cleared and bilateral positions to obtain a more complete picture of a clearing firm’s risk.
  • Continue to enhance financial analysis tools to support reviews of FCMs and swaps dealers risk management controls.
• Market and Data Analytics
  • Continue enhancing data availability and analytics tools that allow staff to prototype new surveillance and risk and compliance monitoring methods.
  • Adjust production analytics to use high-performance computing platforms.
  • Support additional public transparency reporting.

Other Mission Support:

• Registration and Compliance, Product Review and Assessment.
  • Automate regulatory mission and key activity processes.
• Examinations
  • Automate regulatory mission and key activity processes.
• Legal and Economic Analysis
  • Automate regulatory mission and key activity processes.

Enforcement:

• Enhance eLaw and forensics program technology and increase litigation technical support services.

Data Infrastructure:

• Increase storage, processing, and communications infrastructure to meet demand.
• Refresh desktop computing technology.
• Reduce business continuity risk and increase availability during non-business hours: decommission the server room at the DC Headquarters location; supplement the Commission’s ACF with a second, geographically co-located ACF; and adjust system architectures to further automate recovery and reconstitution processes and reduce the need for outages for planned maintenance.
• Increase customer support provided to CFTC staff during non-business hours.
• Implement information security continuous diagnostics and mitigation (CDM).
• Continue refreshing staff computing resources and complete the deployment of a virtual desktop environment.
• Upgrade the Commission’s public website, CFTC.gov.
• Increase customer support for industry participants using the CFTC portal.
• Implement an electronic records and document management system and enterprise search.
• Increase support for the Commission-wide collaboration site and division collaboration sites.

Management and Administrative Support:

• Enhance video production capabilities to support electronic learning and improved communications.

Appendix 2. Summary of Information Technology Budget by Cost Type