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Strategic Goal One–Ensure the Economic Vitality of the Commodity Futures, Options and Swap Markets

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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:

Breakout of Goal One Request by Outcome


Breakout of Goal One Request by Outcome
($ in thousands)
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

 

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