Objective 1.2
| Ensure that U.S. DCMs and SEFs have the systems, procedures, and resources necessary for effective self-regulation and ongoing compliance with core principles. |
In fostering the integrity of DCMs and SEFs, it is not only necessary that markets adopt rules designed to protect the market function, but that they have in place systems, procedures, and resources that allow them to enforce their rules. The Commission maintains a market compliance program to oversee the regulatory and oversight activities of DCMs and SEFs to ensure that their self-regulatory obligations are met. The market compliance program consists of examinations of exchanges’ self-regulatory programs on an ongoing basis to assess their continuing compliance with applicable core principles under the CEA and Commission regulations. Reports resulting from these examinations are published on the Commission’s Web site.
Strategy 1.2.1 Conduct examinations of individual DCMs and SEFs to ensure the structural sufficiency of their self-regulatory and core principle compliance programs.
Staff routinely conduct examinations, or RERs, of DCMs (and SEFs, when they come into existence), to ensure that exchanges, on a continual basis, are meeting their self-regulatory responsibilities and complying with the core principles. During these reviews, staff conduct interviews of exchange staff and review documents and other information related to self-regulatory and core principle compliance programs. Following these reviews, staff produce a publicly available report, noting any deficiencies that may exist and making recommendations to correct the deficiencies. If deficiencies are found, exchanges are given 30 days to respond with a written plan to correct the deficiencies and Commission staff follow up with a review of the exchanges’ efforts during the next RER. In order to assure that staff resources are being used effectively, DCMs and SEFs will be categorized in terms of whether they serve as a major or non-major role in the markets. A major DCM or SEF will be defined as the largest entities that contribute to at least 75 percent of observed volume in the overall futures and swaps markets. Staff will then conduct annual reviews on these major DCMs and SEFs, while scheduling reviews on non-major DCMs and SEFs with lesser frequency. Staff also will conduct reviews of any DCM or SEF (regardless of size) where Commission staff have reason to believe that the exchange has self-regulatory issues.
| FY 2011 | 100% |
|---|---|
| FY 2012 | 100% |
| FY 2013 | 100% |
| FY 2014 | 100% |
| FY 2015 | 100% |
| FY 2011 | 100% |
|---|---|
| FY 2012 | 100% |
| FY 2013 | 100% |
| FY 2014 | 100% |
| FY 2015 | 100% |
Strategy 1.2.2 Conduct regular reviews of DCMs’ and SEFs’ automated systems and business continuity and disaster recovery programs for compliance with core principles related to market continuity.
Technical reviews of the electronic systems and business continuity and disaster recovery (BC-DR) capabilities of DCMs and SEFs are essential to effective market oversight in today’s futures trading environment, in which electronic trading now dominates. Sophisticated computer systems are crucial to an exchange’s ability to execute and clear transactions, maintain a comprehensive audit trail, publish timely market data, and conduct adequate market and trade practice surveillance. These systems provide a basis to monitor and enforce compliance with exchange rules and Commission regulations. Oversight of the DCMs’ and SEFs’ systems and BC-DR capabilities is thus essential to mitigating systemic risk. Commission staff regularly conduct technical reviews to evaluate the compliance of such electronic systems and BC-DR capabilities with the cyber and information security, capacity, and functionality and BC-DR requirements of the CEA, including core principles and Commission regulations and policies. As with RERs, BC-DR reviews will be scheduled to occur more frequently for DCMs and SEFs where the greatest level of activity and concern resides.
| FY 2011 | 100% |
|---|---|
| FY 2012 | 100% |
| FY 2013 | 100% |
| FY 2014 | 100% |
| FY 2015 | 100% |
| FY 2011 | 33% |
|---|---|
| FY 2012 | 33% |
| FY 2013 | 33% |
| FY 2014 | 33% |
| FY 2015 | 33% |