CFTC Goals
The development of a CFTC Strategic Plan at this time creates a unique situation in that the mission expanding Dodd-Frank Act was passed in July 2010. The Dodd-Frank Act will greatly increase the scope of regulation by the CFTC by bringing oversight to the swaps marketplace. The futures marketplace that the CFTC currently oversees is a $40 trillion industry in notional value. The swaps market that the Dodd-Frank Act tasks the CFTC with regulating is far larger; the Office of the Comptroller of the Currency estimates it at $217 trillion notional value (2010), while others estimate it being as high as $300 trillion.
Congress gave this swaps oversight responsibility to the CFTC because of its strengths in regulating the futures and options markets. While the swaps marketplace has only been around since the 1980s, the futures marketplace has existed since the 1860s. The CFTC and its predecessor agencies have been regulating and working with the futures markets since the 1920s.
The regulation of the swaps markets included in the Dodd-Frank Act builds upon:
- the Commission’s strengths applicable to oversight of the futures markets;
- the benefits of clearing in the futures markets;
- the transparency and price discovery that centralized trading brings to the futures markets;
- the concept that intermediaries should be regulated to lower risk in the markets; and
- the understanding that effective oversight can only be accomplished if the regulator has access to all relevant information about activity in the markets.
The goals of the CFTC largely remain the same with the regulation of swaps being incorporated within the regulatory structure currently applied to the futures and options markets. The CFTC’s primary focus will be to write the rules to regulate the swaps markets, implement those rules, test and adjust those rules, and write new rules as necessary to bring effective regulation to all derivatives markets over the next five years. The Commission will also adopt as policy President Obama’s Executive Order signed on January 18, 2011, entitled “Improving Regulation and Regulatory Review.” The Commission will apply this standard to all future and pending rulemakings under the Dodd-Frank Act and seek to streamline its existing rules and regulations as well. To sustain a focus on its expanded scope and new swaps regulation, the Commission must review and properly align its organizational structure, ensure it is appropriately staffed, and ensure the CFTC is technologically ready to address greatly increased data and analysis requirements.
The focused rule-writing efforts through July 2011 are not being treated as a strategic goal, but as a tactical goal that has an objective, strategy and performance measure. The Strategic Goals are long-term and focused on implementation of the Dodd-Frank Act and continuing to improve the CFTC’s regulation of the derivatives markets.