Strategic Goal One–Ensure the Economic Vitality of the Commodity Futures, Options and Swap Markets
In seeking to fulfill its mission, a substantial portion of the Commission’s resources are devoted to daily oversight of exchanges, intermediaries, and DCOs. In 1974, when the Commission was founded, the vast majority of regulated derivatives trading consisted of futures trading in agricultural sector products. These contracts gave farmers, ranchers, distributors, and end-users of everything from corn to cattle an efficient and effective set of tools to hedge against price volatility.
Over the years, however, the derivatives industry has become increasingly diversified. Farmers and ranchers continue to use the futures markets as actively as ever to effectively lock in prices for their crops and livestock months before they come to market. However, highly complex financial contracts based on interest rates, foreign currencies, Treasury bonds, and securities indexes, and other products have far outgrown agricultural contracts in trading volume. Latest statistics show that approximately eight percent of on-exchange commodity futures and option trading activity occurs in the agricultural sector. Financial and commodity futures and option contracts make up approximately 79 percent. Other contracts, such as those on metals and energy products, make up about 13 percent. The passage of the Dodd-Frank Act in July 2010, has further expanded the Commission’s regulatory responsibilities to cover both bilateral and exchange-traded swaps contracts leading to even further growth and diversification.
In FY 2012, the Commission requests $113.0 million to fund its efforts to reach the following outcomes of Strategic Goal One:
- Markets that accurately reflect the forces of supply and demand for the underlying commodity and are free of disruptive activity⎯with an FY 2012 performance goal of zero price manipulations, which would cause loss of confidence or negatively affect price discovery or risk shifting.
- Markets that are effectively and efficiently monitored to ensure early warning of potential problems or issues that could adversely affect their economic vitality⎯with an FY 2012 performance goal of improving the effectiveness and efficiency of market surveillance for futures and swaps products traded on registered entities as well as swaps executed bilaterally.
Breakout of Goal One Request by Outcome
| Goal One Outcomes | FY 2011 | FY 2012 | Change | |||
|---|---|---|---|---|---|---|
| Budget Request |
FTE | Budget Request |
FTE | Budget Request |
FTE | |
| 1.1 Futures, options and swaps markets that accurately reflect the forces of supply and demand for the underlying commodity and are free of disruptive activity. | $48,211 | 193 | $95,028 | 304 | $46,817 | 111 |
| 1.2 Markets that can be monitored to ensure early warning of potential problems or issues that could adversely affect their economic vitality. | 5,409 | 22 | 17,983 | 58 | 12,574 | 36 |
| Total Goal One | $53,620 | 215 | $113,011 | 362 | $59,391 | 147 |