Commodity Futures Trading Commission

FY 2008 President’s Budget and Performance Plan

 

 

 

Prepared for the 

Committee on Appropriations 

 

February 2007 
THE FY 2008 PRESIDENT’S BUDGET & PERFORMANCE PLAN 

Table of Contents 

SH UMMARY & HIGHLIGHT STATEMENT................................... H1

The Commission and the Industry We Regulate................. H H1

Indicators of Industry H Growth Complexity ....................................... H1

The number of actively Growth in Volume of Futures & Option H

Contracts Traded & FTEs ................................................................... H1

Actively Traded Future H s & Option Contracts .................................... H2

Growth of Foreign H Commodity Trading ............................................ H3

Number of Re H gistrants ....................................................................... H4

Preservation of Market Integrity and Protection of Market Users... H H5

HContract Markets Designated by the CFTC, 2001 – 2006................ H6

HNumber of CFTC-Registered Derivatives Clearing Organizations, 

2001 – 2006........................................................................................ H7

HExempt Commercial Markets, 2001 – 2006..................................... H8

HExempt Boards of Trade, 2001 – 2006 ............................................. H9

HCustomer Funds in Futures Commission Merchants Accounts..... H10

HOVERVIEW OF PLANNED OUTCOMES BY STRATEGIC GOAL.... H11

HIntroduction ...................................................................................... H11

HFY 2008 Outcomes by Goal ............................................................. H12

HCOMMISSION STRATEGIES TO INFLUENCE OUTCOMES ......... H16

HStrategic Goal One - Ensure the Economic Vitality of the 

Commodity Futures and Option Markets. ......................... H16

HSummary of Goal One Performance Indicators.............................. H22

HBreakout of Goal One Request by Program Activity....................... H23

HBreakout of Goal One Request by Outcome Objective ................... H24

HStrategic Goal Two – Protecting Market Users and the 

Public.................................................................................. H25

HSummary of Goal Two Performance Indicators.............................. H30

HBreakout of Goal Two Request by Program Activity ...................... H31

HBreakout of Goal Two Request by Outcome Objective ................... H32

HStrategic Goal Three – Ensuring Market Integrity in Order 

to Foster Open, Competitive, and Financially Sound 

Markets............................................................................... H33

HSummary of Goal Three Performance Indicators ........................... H40

HBreakout of Goal Three Request by Program Activity.................... H41

HBreakout of Goal Three Request by Outcome Objective ................ H42

HJUSTIFICATION OF THE FY 2008 BUDGET & PERFORMANCE 

ESTIMATE ..........................................................................H43

HBreakout of $116.0 Million Budget Estimate by Program.............. 43H

HBreakout of $116.0 Million Budget Estimate by Object Class ........ 44H

HCrosswalk from FY 2007 to FY 2008 .............................................. 45H

HMarket Oversight ............................................................... 46H

HTotal Budget: $23,180,000 101 FTEs ..........................................46H

HTotal Change: $ 3,162,000 1 FTE ..........................................46H

HClearing & Intermediary Oversight................................... 52H

HTotal Budget: $17,070,000 69 FTEs............................................ 52H

HTotal Change: $3,697,000 7 FTEs........................................... 52H

HEnforcement ...................................................................... 58H
HTotal Budget: $30,262,000 120 FTEs ...................................... 58H

HTotal Change: $ 3,549,000 0 FTE..................................... 58H

HOffice of the Chief Economist............................................ 64H

HTotal Budget: $ 3,796,000 14 FTEs ....................................... 64H

HTotal Change: $ 1,613,000 5 FTEs ..................................... 64H

HOffice of Proceedings ......................................................... 68H

HTotal Budget: $ 2,384,000 11 FTEs ........................................ 68H

HTotal Change: $ 315,000 0 FTE....................................... 68H

HOffice of the General Counsel............................................ 72H

HTotal Budget: $ 8,874,000 32 FTEs ................................ 72H

HTotal Change: $ 1,920,000 4 FTEs................................. 72H

HExecutive Direction & Support.......................................... 77H

HTotal Budget: $30,434,000 128 FTEs ......................................77H

HTotal Change: $ 3,735,000 0 FTE....................................77H

HAPPENDIX 1 ................................................................... 81 H

HThe Commissioners ..........................................................................81 H

HAPPENDIX 2................................................................... 83H

HSummary of Goals, Outcomes, and Business Processes ................ 83H

HAPPENDIX 3................................................................... 85H

HManagement Initiatives Supporting the President’s Management 

Agenda .............................................................................................. 85H

HAPPENDIX 4...................................................................90H

HProposed Goal 4: To facilitate Commission performance through 

organizational and management excellence, efficient use of 

resources, and effective mission support. ....................................... 90H

HAPPENDIX 5 ................................................................. 104 H

HPrivacy Policy for the CFTC Web Site ........................................... 104 H

HAPPENDIX 6................................................................. 105 H

HTable of Acronyms ..........................................................................105 H

HAPPENDIX 7 ................................................................. 108 H

HCFTC Mandatory Proposal: Futures & Options Transaction Fee 108 H
FY 2008 President’s Budget & Performance Plan—Figures and Tables 

Figure 1: Growth of Volume of Contracts Traded and FTEs........................... 1H

Figure 2: CFTC Actively Traded Contracts ...................................................... 2H

Figure 3: Foreign Commodity Trading ............................................................ 3H

Table 1: Number of Registrants........................................................................ 4H

Table 2: Energy Markets................................................................................... 5H

Table 3: Foreign Currency Markets ................................................................. 5H

Table 4: Designated Contract Markets ............................................................ 6H

Table 5: CFTC-Registered Derivatives Clearing Organizations...................... 7H

Table 6: Exempt Commercial Markets ............................................................8H

Table 7: Exempt Boards of Trade..................................................................... 9H

Figure 4: Customer Funds in FCM Accounts ............................................... 10H

Figure 5: Budget & Performance Estimate by Strategic Goal ........................ 11H

Table 8: Breakout of Goal One by Outcome .................................................. 12H

Table 9: Breakout of Goal Two by Outcome .................................................. 13H

Table 10: Breakout of Goal Three by Outcome.............................................. 14H

Table 11: Summary of CFTC Mission, Goals, and Outcomes ........................ 15H

Figure 7: Goal One Resource Strategy Mapping ........................................... 18H

Table 12: Breakout of Goal One Request by Program Activity ...................... 23H

Figure 8: Breakout of Goal One Request by Program Activity ...................... 23H

Table 13: Breakout of Goal One by Outcome..................................................24H

Figure 9: Breakout of Goal One Request by Outcome Objective................... 24H

Figure 10: Goal Two Resource Strategy Mapping ......................................... 26H

Table 14: Breakout of Goal Two Request by Program Activity ..................... 31 H

Figure 11: Breakout of Goal Two Request by Program Activity..................... 31 H

Table 15: Breakout of Goal Two by Outcome ................................................. 32H

Figure 12: Breakout of Goal Two Request by Outcome Objective ................. 32H

Figure 13: Goal Three Resource Strategy Mapping....................................... 34H

Table 16: Breakout of Goal Three by Program Activity.................................. 41 H

Figure 14: Breakout of Goal Three Request by Program Activity.................. 41 H

Table 17: Breakout of Goal Three Request by Outcome................................. 42H

Figure 15: Breakout of Goal Three Request by Outcome Objective............... 42H

Table 18: Budget Estimate by Program ......................................................... 43H

Figure 16: $116.0 Million Budget Estimate by Program ............................... 43H

Table 19: Budget Estimate by Object Class....................................................44H

Figure 17: $116.0 Million Budget Estimate by Object Class.......................... 44H

Table 20: Crosswalk from FY 2007 to FY 2008 ............................................ 45H

Figure 18: Market Oversight Percentage of Total Budget Dollars................. 46H

Figure 19: Market Oversight Percentage of Total Budget FTEs .................... 46H

Table 21: Market Oversight Request by Subprogram ...................................50H

Figure 20: Market Oversight FY 2008 Budget by Subprogram ................... 50H

Table 22: Market Oversight Request by Goal................................................ 51H

Figure 21: Market Oversight FY 2008 Budget by Goal ................................. 51H

Figure 22: Clearing & Intermediary Oversight Percentage of 

Total Budget Dollars........................................................................................ 52H

Figure 23: Clearing & Intermediary Oversight Percentage of 

Total Budget FTEs ........................................................................................... 52H

Table 23: Clearing & Intermediary Oversight Request by Subprogram....... 56H

Figure 24: Clearing & Intermediary Oversight FY 2008 

Budget by Subprogram.................................................................................... 56H

Table 24: Clearing & Intermediary Oversight Request by Goal.................... 57H

Figure 25: Clearing & Intermediary Oversight FY 2008 Budget by Goal .... 57H

Figure 26: Enforcement Percentage of Total Budget Dollars ....................... 58H

Figure 27: Enforcement Percentage of Total Budget FTEs........................... 58H

Table 25: Enforcement Request.....................................................................62H

Table 26: Enforcement Request by Goal ....................................................... 63H
Figure 28: Enforcement FY 2008 Budget by Goal........................................ 63H

Figure 29: Chief Economist Percentage of Total Budget Dollars.................. 64H

Figure 30: Chief Economist Percentage of Total Budget FTEs ..................... 64H

Table 27: Office of the Chief Economist Request.......................................... 66H

Table 28: Office of the Chief Economist Request by Goal............................ 67H

Figure 31: Proceedings Percentage of Total Budget Dollars......................... 68H

Figure 32: Proceedings Percentage of Total Budget FTEs ........................... 68H

Table 29: Proceedings Request by Subprogram ........................................... 70H

Figure 33: Proceedings FY 2008 Budget by Subprogram ............................ 70H

Table 30: Proceedings Request by Goal ......................................................... 71H

Figure 34: Proceedings FY 2008 Budget by Goal .......................................... 71H

Figure 35: Percentage of Total Budget Dollars ............................................. 72H

Figure 36: Percentage of Total Budget FTEs................................................ 72H

Table 31: General Counsel Request ................................................................75H

Table 32: General Counsel Request by Goal ................................................. 76H

Figure 37: General Counsel FY 2008 Budget by Goal .................................. 76H

Figure 38: Percentage of Total Budget Dollars ..............................................77H

Figure 39: Percentage of Total Budget FTEs.................................................77H

Table 33: Executive Direction & Support Request by Subprogram ............. 79H

Figure 40: Executive Direction & Support FY 2008 

Budget by Subprogram ................................................................................... 79H

Table 34: Executive Direction & Support Request by Goal.......................... 80H

Figure 41: Executive Direction & Support FY 2008 Budget by Goal ........... 80H

Table 35: Breakout of Goal Four by Outcome.............................................. 103 H

Figure 42: Breakout of Goal Four Request by Outcome Objective ............ 103 H
Summary & Highlight Statement 

February 5, 2007 

The Honorable Robert C. Byrd 

Chairman 

Committee on Appropriations 

United States Senate 

S-128 Capitol Building 

Washington, D.C. 20510-6025 

The Honorable David R. Obey 

Chairman 

Committee on Appropriations 

United States House of Representatives 

S-218 Capitol Building 

Washington, D.C. 20515-6015 

Dear Chairman Byrd and Chairman Obey: 

I am pleased to transmit to you the Commodity Futures Trading Commission’s 

(CFTC) Budget and Performance Estimate for FY 2008. This budget requests an appropriation of $116,000,000 and 475 staff-years, an increase of approximately 

$18,000,000 and 17 staff-years over the estimated FY 2007 appropriation of 

$98,000,000. 

Congress created the CFTC in 1974 as an independent agency with the mandate to 

regulate commodity futures and option markets in the United States. The Commission’s mandate was renewed and/or expanded in 1978, 1982, 1986, 1992, and 1995. 

In December 2000, the Commission was reauthorized by Congress and the President 

through FY 2005 with passage of the Commodity Futures and Modernization Act of 

2000 (CFMA). Although the CFMA changed the Commission approach to regulation, the Commission mission remains the same. The CFTC continues to be responsible for fostering the economic utility of futures markets by encouraging their competitiveness and efficiency, ensuring their integrity, and protecting market participants against manipulation, abusive trading practices, and fraud. Through effective 

oversight regulation, the CFTC enables the commodity futures markets better to serve 

their vital function in the Nation’s economy – providing a mechanism for price discovery and a means of offsetting price risks. 

These trillion dollar futures markets, with massive economic force, are expanding 

steadily in both volume and new users and their complexity is rapidly evolving with 

new technologies, globalization, product innovation, and greater competition. In the 

past ten years trading volume has quintupled while Commission staffing levels have 

fallen significantly over the same time period. The funds requested will allow the 

Commission to hire critically needed staff, maintain the technological infrastructure, 

and acquire contractor assistance to keep pace with the volume and complexity of the 

burgeoning and dynamic futures markets. The Commission needs these funds simply 

to keep up with the industry we regulate. I respectfully submit that the additional 

sum requested in this budget is relatively small and needed to ensure the appropriate 

level of oversight. 

cc: 

 

The Honorable Tom Harkin 

Chairman 

Committee on Agriculture, 

Nutrition, and Forestry 

U.S. Senate 

SR - 328A Russell Senate Office Building 

Washington, D. C. 20510-6000 

The Honorable Collin C. Peterson 

Chairman 

Committee on Agriculture 

U.S. House of Representatives 

1301 Longworth House Office Building 

Washington, D. C. 20515-6001 
This page intentionally left blank. 

FY 2008 President’s Budget & Performance Plan

2 Actively Traded Contracts 

Actively Traded Futures & Option Contracts 

The number of actively traded contracts traded on U.S. exchanges has more than 

quintupled in the last decade. The number is expected to grow to over 1,500 contracts by FY 2008. 

Figure 2: CFTC Actively Traded Contracts 

199

258

286

251 266 250 278

538

662

906

1135

1420

1590

1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007

Est.

2008

Est.

Fiscal Year

Contracts
FY 2008 President’s Budget & Performance Plan

Foreign Commodity Trading 3 

Growth of Foreign Commodity Trading 

Since 2000, the number of foreign customers trading on U.S. exchanges more 

than doubled and the number of U.S. customers trading on foreign exchanges has 

more than quadrupled. 

54.0

144.6

27.0

130.8

2000 2006

Amount in Thousands

Foreign Customers Trading on U.S. Commodity Exchanges

U.S. Customers Trading on Foreign Commodity Exchanges

Figure 3: Foreign Commodity Trading 
FY 2008 President’s Budget & Performance Plan 

4 Registered Commodity Professionals 

Number of Registrants 

Companies and individuals who handle customer funds, solicit or accept orders, 

or give trading advice must apply for CFTC registration through the National Futures Association (NFA), a self-regulatory organization with delegated oversight 

authority from the Commission. 

The Commission regulates the activities of over 70,000 registrants: 

Type of Registered Professional Number as of September 30, 2006

Associated Persons (AP) (Sales People) 54,258 

Commodity Pool Operators (CPOs) 1,570 

Commodity Trading Advisors (CTAs) 2,589 

Floor Brokers (FBs) 8,203 

Floor Traders (FTs) 1,512 

Futures Commission Merchants (FCMs) 2101

Introducing Brokers (IBs) 1,741F

2

TOTAL 70,083

Table 1: Number of Registrants 

 

1 Includes 16 notice-registered FCMs. 

2 Includes 45 notice-registered IBs. 
FY 2008 President’s Budget & Performance Plan

Energy and Foreign Currency Markets 5 

Preservation of Market Integrity and Protection of Market Users 

Spotlight on Energy and Foreign Currency Markets 

Actions Taken Since Enron Bankruptcy in December 2001 Energy Markets

Number of Cases Filed or Enforcement Actions 35 

Number of Entities/Persons Charged 55 

Number of Dollars in Penalties Assessed 

F Civil Monetary Penalties $302,863,500 

Table 2: Energy Markets 

Actions Taken Since Passage of the CFMA in December 2000 Foreign Currency 

Markets

Number of Cases Filed or Enforcement Actions 93 

Number of Entities/Persons Charged 354 

Number of Dollars in Penalties Assessed 

F Civil Monetary Penalties $292,042,098 

F Restitution 

 On Behalf of Customers 

$182,471,571 

 25,070 

Table 3: Foreign Currency Markets 
FY 2008 President’s Budget & Performance Plan 

6 Designated Contract Markets 

Contract Markets Designated by the CFTC, 2001 – 2006 

Designated contract markets (DCMs) are boards of trade or exchanges that meet 

CFTC criteria and core principles for trading futures or options by both institutional and retail participants. 

Commodity Exchanges F

3 2001 2002 2003 2004 2005 2006 

BTEX 9 9 9 

CBOT 9 9 9 9 9 9 

CCFE 

9 9

9 

CFFE 9 9 

CFE 9 9 9 9 

CME 9 9 9 9 9 9 

CSCE 9 9 9 9 

EPFE 9 

Eurex US 9 9 9 

HedgeStreet 9 9 9 

INET 9 

KCBT 9 9 9 9 9 9 

MACE 9 9 9 

ME 9 9 9 9 

MGE 9 9 9 9 9 9 

NQLX 9 9 9 9 9 

NYBOT 9 9 9 

NYCE 9 9 9 9 

NYFE 9 9 9 9 

NYMEX 

(incl. COMEX) 

9 9 9 9 9 9 

OCX 9 9 9 9 9 

PBOT 9 9 9 9 9 9 

TOTAL 14 16 15 18 13 12 

Table 4: Designated Contract Markets 

 

3 Refer to the CFTC Glossary in Appendix 6 for full names of organizations 
FY 2008 President’s Budget & Performance Plan

CFTC-Registered Derivatives Clearing Organizations 7 

Number of CFTC-Registered Derivatives Clearing Organizations, 

2001 – 2006 

Clearinghouses that provide clearing services for CFTC-regulated exchanges must 

register as DCOs. Currently, 11 DCOs are registered with the Commission. 

DCOs F

4 2001 2002 2003 2004 2005 2006 

AE 

Clearinghouse 9 9

BTEX 9 9 9

CCorp 9 9 9 9 9 9

CBOT 9 9 9

CME 9 9 9 9 9 9

EnergyClear 9 9 9

FCOM 9 9 9

GCC 9 9

HedgeStreet 9 9 9

ICC 9 9 9

KCBT 9 9 9 9 9 9

LCH 9 9 9 9 9

MGE 9 9 9 9 9 9

NYCC 9 9 9 9 9 9

NYMEX 9 9 9 9 9 9

OCC 9 9 9 9 9

ONXCC 9 9 9

TOTAL 11 14 14 10 11 11 

Table 5: CFTC-Registered Derivatives Clearing Organizations

 

4 Refer to the CFTC Glossary in Appendix 6 for full names of organizations. 
FY 2008 President’s Budget & Performance Plan 

8 Exempt Commercial Markets 

Exempt Commercial Markets, 2001 – 2006 

Electronic trading facilities providing for the execution of principal-to-principal 

transactions between eligible commercial entities in exempt commodities may operate as ECMs as set forth under the CEA and the Commission’s regulations. An 

ECM is subject to antifraud and anti-manipulation provisions and a requirement 

that, if performing a significant price discovery function, the ECM must provide 

pricing information to the public. A facility that elects to operate as an ECM must 

give notice to the Commission and comply with certain informational, recordkeeping and other requirements. An ECM is prohibited from claiming that the facility is registered with, or recognized, designated, licensed or approved by, the Commission. To date, 17 ECMs have filed notices with the Commission. 

Exempt Commercial 

Markets F

5 2001 2002 2003 2004 2005 2006 

CCX 9 9 9 9

CDXchange 9 9 9 9 9

HSE 9 9 9 9 9

ICE 9 9 9 9 9 9

IMAREX 9 9 9 9 9 9

NGX 9 9 9 9 9

OPEX 9 9 9 9 9 9

SL 9 9 9 9

TFSE 9 9 9 9

TFS 9 9 9 9

TS 9 9 9 9 9

ChemConnect 9

ICAP ETC 9

ICAP 9

ICAP HYDE 9

TCX 9 9

NTP 9

TOTAL 3 7 11 11 12 17 

Table 6: Exempt Commercial Markets 

 

5 Refer to the CFTC Glossary in Appendix 6 for full names of organizations. 
FY 2008 President’s Budget & Performance Plan

Exempt Boards of Trade 9 

Exempt Boards of Trade, 2001 – 2006 

Transactions by eligible contract participants in selected commodities may be conducted on an XBOT as set forth under the CEA and the Commission’s regulations. 

XBOTs are subject only to the CEA's anti-fraud and anti-manipulation provisions. 

An XBOT is prohibited from claiming that the facility is registered with, or recognized, designated, licensed, or approved, by the Commission. Also, if it is performing a price discovery function, the market must provide certain pricing information 

to the public. To date, six XBOTs have filed notices with the Commission. 

Exempt Boards of 

Trade F

6 2001 2002 2003 2004 2005 2006 

CME AM 9 9

AE 

9 9 9

MATCHBOXX 

ATS 

9

WBOT 9 9 9 9

WXL 9 9 9 9 9

Intrade 9 9

TOTAL 0 1 2 3 5 6 

Table 7: Exempt Boards of Trade 

 

6 Refer to the CFTC Glossary in Appendix 6 for full names of organizations. 
FY 2008 President’s Budget & Performance Plan 

10 Customer Funds in Futures Commission Merchants Accounts 

Customer Funds in Futures Commission Merchants Accounts 

The amount of customer funds held at futures commission merchants has more 

than quadrupled in the last decade. 

Figure 4: Customer Funds in FCM Accounts 

$33.0

$38.7

$47.5

$54.1 $56.7 $59.7

$64.3

$75.6

$94.5

$116.7

$138.0

1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006

Amount in Billions
FY 2008 President’s Budget & Performance Plan

 

Overview of Planned Outcomes by Strategic Goal 11 

Overview of Planned Outcomes by Strategic 

Goal

Introduction 

The futures industry is experiencing a period of tremendous growth. Volume has 

more than doubled since 2002 and reached a record level of 2.4 billion contracts 

traded in 2006. The Commission’s mission in the futures industry is to foster 

competitive and financially sound markets, to protect market users and the public 

from fraud, manipulation and abusive trading practices and to foster open, competitive, and financially sound markets. 

The Commission requests $116 million in FY 2008 to fund its efforts to reach its 

three strategic goals: 

$37.9 Million

Goal One: Ensure 

the economic 

vitality of the 

commodity futures

and option 

markets.

33%

$44.4 Million

Goal Two: Protect

market users and 

the public.

38%

$33.6 Million

Goal Three: 

Ensure market 

integrity in order

to foster open, 

competitive, and 

financially sound

markets.

29%

Figure 5: Budget & Performance Estimate by Strategic Goal 

To achieve the planned outcomes for FY 2008, the Commission will allocate the 

$116 million request among six programs: Enforcement; Clearing & Intermediary 

Oversight; Market Oversight; Chief Economist; Proceedings; and General Counsel. There is one support program: Executive DirectionF

7 . 

Enforcement

26%

Proceedings

2%

General Counsel

8%

Executive 

Direction &

Support

26%

Clearing & 

Intermediary

Oversight

15%

Market Oversight

20%

Chief Economist

3%

Figure 6: $116 Million Budget Estimate by Program

 

7 Includes information technology in support of all programs. 
FY 2008 President’s Budget & Performance Plan

12 Overview of Planned Outcomes by Strategic Goal 

FY 2008 Outcomes by Goal 

Goal One: Ensuring Economic Vitality of Commodity Futures & Option Markets 

In seeking to fulfill its mission, a substantial portion of the Commission’s resources are devoted to daily oversight of registered exchanges, intermediaries, 

and derivatives clearing organizations (DCOs). In 1974, when the Commission 

was founded, the vast majority of futures trading took place in the agricultural 

sector. 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 futures industry has experienced increased complexity. While 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, new and highly complex financial contracts, based on such 

things as interest rates, foreign currencies, Treasury bonds, and stock market indices have now far outgrown agricultural contracts in trading volume. Latest statistics show that approximately eight percent of on-exchange derivatives activity 

is in the agricultural sector, while financial derivatives make up approximately 82 

percent; and other contracts, such as those on metals and energy products, make 

up about 10 percent. 

In FY 2008, the Commission requests $37.9 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 2008 performance goal of zero price manipulations that 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 2008 performance goal of improving effectiveness and efficiency of market surveillance. 

Breakout of Goal One Request by Outcome 

FY 2007 FY 2008 Change 

 $ (000) FTE $ (000) FTE $ (000) FTE 

 

GOAL ONE: Ensure economic vitality of commodity futures and option markets. 

Outcomes 

1.1 Futures and option markets that 

accurately reflect the forces of supply 

and demand for the underlying commodity and are free of disruptive activity. 

$25,797 125 $30,697 130 $4,900 5

1.2 Markets that can be monitored to 

ensure early warning of potential problems or issues that could adversely 

affect their economic vitality. 

5,781 27 7,231 29 1,450 2

Total Goal One $31,578 152 $37,928 159 $6,350 7

Table 8: Breakout of Goal One by Outcome 
 FY 2008 President’s Budget & Performance Plan 

 

Overview of Planned Outcomes by Strategic Goal 13 

Goal Two: Protecting Market Users and the Public 

While our country reaps the rewards of an explosive futures industry, never has 

the risk of fraud and manipulation been higher for market users and the public. 

The trend toward electronic trading platforms as well as the expanding complexity of trading instruments has challenged the Commission to reconfigure its ability to identify, investigate, and prosecute all parties involved in violating applicable laws and regulations. Typically, the Commission has over 100 investigations 

open at any particular time. If evidence of criminal activity is found, matters can 

and will be referred to state or Federal authorities for prosecution under criminal 

statutes. 

Over the years, the Commission has prosecuted a number of cases involving manipulations or attempted manipulations of commodity prices. The Sumitomo 

copper case and the Hunt brothers silver case are well-known examples. Furthermore, during the last three years, the Commission charged over 40 individuals and companies for attempting to manipulate, or for manipulating energy 

markets. A variety of administrative sanctions are available to the Commission, 

such as bans on futures trading, civil monetary penalties, and restitution orders. 

The Commission may also seek Federal court injunctions, asset freezes, and orders to disgorge ill-gotten gains. 

In FY 2008, the Commission requests $44.4 million to fund its efforts to reach 

the following outcomes of Strategic Goal Two: 

• Violations of Federal commodities laws are detected and prevented⎯with an 

FY 2008 performance goal of increasing the probability of violators being detected and sanctioned. 

• Commodity professionals meet high standards⎯with an FY 2008 performance goal of zero unregistered, untested, or unlicensed commodity professionals, unless they qualify for exemption from registration. 

• Customer complaints against persons or firms registered under the Act are 

handled effectively and expeditiously⎯with an FY 2008 performance goal of 

resolving customer complaints within one year from the date filed and resolving appeals within six months. 

Breakout of Goal Two Request by Outcome 

FY 2007 FY 2008 Change 

 $ (000) FTE $ (000) FTE $ (000) FTE

GOAL TWO: Protect markets users and the public.

Outcomes 

2.1 Violations of Federal commodities laws are detected and 

prevented. 

$29,599 135 $33,692 135 $4,093 0

2.2 Commodities professionals 

meet high standards. 

4,741 22 6,921 29 2,180 7

2.3 Customer complaints against 

persons or firms falling within the 

jurisdiction of the Commodity 

Exchange Act are handled effectively and expeditiously. 

3,206 15 3,817 15 611 0

Total Goal Two $37,546 172 $44,430 179 $6,884 7

Table 9: Breakout of Goal Two by Outcome 
FY 2008 President’s Budget & Performance Plan

14 Overview of Planned Outcomes by Strategic Goal 

Goal Three: Ensuring Market Integrity in Order to Foster Open, Competitive, 

and Financially Sound Markets 

The Commission also focuses on issues of market integrity, seeks to protect the: 

economic integrity of the markets so that they may operate free from manipulation; financial integrity of the markets so that the insolvency of a single participant does not become a systemic problem affecting other market participants; 

and operational integrity of the markets so that transactions are executed fairly 

and that proper disclosures are made to existing and prospective customers.

In FY 2008, the Commission requests $33.6 million to fund its efforts to reach 

the following outcomes of Strategic Goal Three: 

• Clearing organizations and firms holding customer funds have sound financial practices⎯with FY 2008 performance goals of zero loss of customer 

funds as a result of firms’ failure to adhere to regulations and zero customers 

prevented from transferring funds from failing firms to sound firms. 

• Commodity futures and option markets are effectively self-regulated⎯with 

an FY 2008 performance goal of zero loss of funds resulting from failure of 

self-regulatory organizations (SROs) to ensure compliance with their rules. 

• Markets are free of trade practice abuses. 

• Regulatory environment is flexible and responsive to evolving market conditions. 

Breakout of Goal Three Request by Outcome 

 FY 2007 FY 2008 Change 

$ (000) FTE $ (000) FTE $ (000) FTE

GOAL THREE: Ensure market integrity in order to foster open, competitive, and financially sound 

markets.

Outcomes 

3.1 Clearing organizations and firms 

holding customer funds have sound financial practices. 

$5,292 24 $6,356 26 $1,064 2

3.2 Commodity futures and option markets are effectively self-regulated. 12,915 60 15,002 60 2,087 0

3.3 Markets are free of trade practice 

abuses. 

5,297 24 6,044 25 747 1

3.4 Regulatory environment responsive 

to evolving market conditions. 

5,381 26 6,240 26 859 0

TOTAL $28,885 134 $33,642 137 $4,757 3

Table 10: Breakout of Goal Three by Outcome 
 FY 2008 President’s Budget & Performance Plan 

 

Overview of Planned Outcomes by Strategic Goal 15 

Summary of CFTC Mission Statement, Strategic Goals & Outcomes 

Mission Statement 

The mission of the CFTC is to protect market users and the public from fraud, manipulation, and abusive 

practices related to the sale of commodity futures and options, and to foster open, competitive and financially 

sound commodity futures and option markets.

Goal One

Protect the economic functions of the commodity futures and option markets.

Outcomes 

1. Markets that accurately reflect the forces of supply and demand for the underlying commodity and are 

free of disruptive activity. 

2. Markets that are effectively and efficiently monitored to ensure early warning of potential problems or 

issues that could adversely affect their economic vitality. 

Goal Two

Protect market users and the public.

Outcomes 

1. Violations of Federal commodities laws are detected and prevented. 

2. Commodities professionals meet high standards. 

3. Customer complaints against persons or firms falling within the jurisdiction of the Commodity Exchange 

Act are handled effectively and expeditiously. 

Goal Three

Ensure market integrity in order to foster open, competitive, and financially sound markets.

Outcomes 

1. Clearing organizations and firms holding customer funds have sound financial practices. 

2. Commodity futures and option markets are effectively self-regulated. 

3. Markets are free of trade practice abuses. 

4. Regulatory environment is responsive to evolving market conditions. 

Table 11: Summary of CFTC Mission, Goals, and Outcomes 
FY 2008 President’s Budget & Performance Plan

16 Commission Strategies to Influence Outcomes 

Commission Strategies to Influence Outcomes 

Strategic Goal One - Ensure the Economic Vitality of the Commodity Futures and Option Markets. 

Background and Context 

In order for commodity futures and option markets to fulfill their vital role in the 

national and global economy, they must operate efficiently, accurately reflect the 

forces of supply and demand, and serve market users by fulfilling an economic 

need, typically price discovery or risk management. Through direct market and 

trade practice surveillance, and through oversight of the surveillance efforts of 

the exchanges themselves, the Commission works to ensure that markets operate 

free of manipulation or congestion. 

The heart of the Commission’s direct market surveillance is a large-trader reporting system, under which clearing members of exchanges, FCMs, and foreign brokers electronically file daily reports with the Commission. These reports show all 

trader positions above specific reporting levels set by CFTC regulations. Because 

a trader may carry futures positions through more than one FCM, and due to the 

possibility that a customer may control more than one account, the Commission 

routinely collects information that enables its surveillance staff to aggregate information across FCMs for related accounts. 

Using these reports, the Commission’s surveillance staff closely monitors the futures and option market activity of all traders whose positions are large enough to 

potentially impact the orderly operation of a market. For contracts, which at expiration are settled through physical delivery -- such as contracts in the energy 

complex -- staff carefully analyze the adequacy of potential deliverable supply. In 

addition, staff monitor futures and cash markets for unusual movements in price 

relationships, such as cash/futures basis relationships and inter-temporal futures 

spread relationships, which often provide early indications of a potential problem. 

The Commissioners and senior staff are kept apprised of market events and potential problems at weekly surveillance meetings, and more frequently when necessary. At these meetings, surveillance staff briefs the Commission on broad economic and financial developments and on specific market developments in futures and option markets of particular concern. 

If indications of attempted manipulation are found, the Commission investigates 

and prosecutes alleged violations of the CEA or regulations. Subject to such actions are all individuals who are or should be registered with the Commission, 

those who engage in trading on any domestic exchange, those who engage in illegal cash market activities that affect or could affect the futures markets, and 

those who improperly market commodity futures or option contracts. The Commission has available to it a variety of administrative sanctions against wrongdoers, including revocation or suspension of registration, prohibitions on futures 

trading, and cease and desist orders. The Commission may seek Federal court 

injunctions, restraining orders, asset freezes, receiver appointments, and disgorgement orders. In both administrative and federal court actions, the Commission can seek civil monetary penalties and restitution if evidence of criminal activity is found, and may refer matters to state authorities or the Department of 

Justice (DOJ) for prosecution of violations not only of the Act, but also of state or 

Federal criminal statutes such as mail fraud, wire fraud, and conspiracy. Over the 

years, the Commission has brought numerous enforcement actions and imposed 
FY 2008 President’s Budget & Performance Plan

 

Commission Strategies to Influence Outcomes 17 

sanctions against firms and individual traders for attempting to manipulate 

prices, including the well-publicized attempted manipulation cases by several 

energy companies and the market power manipulation of worldwide copper 

prices. 

*** 
FY 2008 President’s Budget & Performance Plan

18 Commission Strategies to Influence Outcomes 

CFTC Strategy Mapping 

FY 2008 Goal One Resource Investment by Outcome Objective 

Figure 7: Goal One Resource Strategy Mapping 

Outcome Objectives and Annual Performance Goals 

Outcome 1.1 – Markets that accurately reflect the forces of supply and demand for underlying commodity and are free of disruptive activity. 

F Annual Performance Goal: No price manipulation or other disruptive activities that would cause loss of confidence or negatively affect price discovery or 

risk shifting. 

Outcome 1.2 – Markets that are effectively and efficiently monitored so that 

the Commission receives early warning of potential problems or issues that 

could adversely affect their economic vitality. 

F Annual Performance Goal: To have an effective and efficient market surveillance program. 

0

5

10

15

20

25

30

35

40

45

50

55

0 20 40 60 80 100 120 140 160 180 200 220

FULL TIME EQUIVALENTS

MILLIONS 

Outcome 1.1 - Markets Accurately Reflect Supply and Demand

Outcome 1.2 - Markets That Can be Monitored

 25% Investment 

5% Investment 
FY 2008 President’s Budget & Performance Plan

 

Commission Strategies to Influence Outcomes 19 

Means and Strategies for Achieving Objectives 

Means: 

• Directly monitor the markets to detect and protect against price manipulation and abusive trading practices to ensure that the markets are performing the vital economic function of price discovery and risk transfer 

or hedging. 

• Perform market surveillance and trade practice oversight by conducting 

examinations of exchange programs to ensure that the exchange is appropriately monitoring daily trading activity, positions of large traders 

and the supply and demand factors affecting prices. 

• Review products listed by exchanges and rules and rule amendments 

submitted by exchanges to ensure compliance with the Act and to develop, implement and interpret regulations that are designed to protect 

the economic functions of the market, protect market participants, prevent trading abuses, and facilitate innovation. 

Strategies: 

• Collect and analyze trading data. On a daily basis, CFTC collects and 

analyzes U.S. futures and option data for all actively traded contracts to 

detect congestion and/or price distortion. Economists analyze the activities of traders, key price relationships, and relevant supply and demand 

conditions for nearly 1100 contracts representing major agricultural 

commodities, metals, energy, financial instruments, equity indices, and 

foreign currencies. CFTC staff also analyzes markets to determine how 

conditions and factors observed may impact individual registrants or the 

markets in general to deter potentially negative situations and to take 

appropriate action, responding quickly to potentially disruptive situations. 

• Review products and rules. Properly designed futures and option markets serve vital price discovery and hedging functions, which are essential 

to a healthy, capital-based economy. Business, agricultural, and financial 

enterprises use the futures markets for pricing information and to hedge 

against price risk. The participants in commercial transactions rely extensively on the prices established by futures markets that affect trillions 

of dollars in commercial activity. Moreover, the prices established by the 

futures markets directly or indirectly affect all Americans. They affect 

what Americans pay for food, clothing, and shelter, what we pay to heat 

our homes and fuel our cars, as well as other necessities. Deficiencies in 

the terms and conditions of futures and option contacts increase the likelihood of cash, futures, or option market disruptions, and also decrease 

the economic usefulness and efficiency of a contract. To meet its statutory mission of ensuring market integrity and customer protection, the 

Commission places greater reliance on its existing oversight authorities 

in permitting exchanges to list contracts for trading without prior Commission approval. Commission staff conducts a due diligence review of 

each contract to ensure compliance with the CEA and the Commission’s 

regulations, while the Commission relies on its authority to then alter, or 

supplement exchange rules or to take emergency action, as appropriate, 

if a violation is discovered. 
FY 2008 President’s Budget & Performance Plan

20 Commission Strategies to Influence Outcomes 

• Analyze markets and provide expert analysis. Each week, reports are 

prepared on special market situations and on market conditions for all 

contracts approaching their critical expiration periods. Potential problems detected in preparing these reports are shared with the Commissioners and senior staff. The Commission shares pertinent information 

with other regulatory agencies and works with the affected exchange to 

develop and to administer responsive measures as necessary. Economists 

and futures trading specialists track innovation in the marketplace in 

technology, trading strategies, trading instruments, and methods to ensure an understanding of how the markets are functioning and to develop 

a flexible, effective regulatory response to market conditions as they 

evolve. 

• Coordinate with other financial regulators. The Chairman participates 

in the President’s Working Group on Financial Markets to ensure coordination of information and efforts among U.S. financial regulators. The 

Working Group brings together the leaders of the federal financial regulatory agencies, including the Secretary of the Treasury, who chairs the 

group, and the chairs of the Board of Governors of the Federal Reserve 

System, the CFTC, and the Securities and Exchange Commission (SEC). 

In addition to the four primary financial regulators, the Working Group 

also includes the heads of the National Economic Council, the Council of 

Economic Advisors, the Office of the Comptroller of the Currency, the 

Federal Deposit Insurance Corporation, Federal Reserve Bank of New 

York, and the Office of Thrift Supervision. Issues considered by the 

Working Group and its staff have included individual and coordinated 

agency initiatives concerning risk assessment, capital requirements, internal controls, disclosure, accounting, market practices relating to trading in derivative instruments, bankruptcy law revisions, securities futures 

product (SFP) portfolio margining, futures on security indexes, and contingency planning for market emergencies. Every two weeks, Commission staff participates in the Steering Committee to discuss ongoing issues. 

• Provide information on the functions of the marketplace. Commission 

staff prepare and provide materials and information on the functions and 

utility of the markets to the public through public Commission meetings, 

public roundtables, advisory committee meetings, symposia, publications, press releases, advisories, and publication of the Commitment of 

Trader reports. Staff also participates as appropriate in seminars sponsored by other Federal and state government organizations and industrysponsored conferences. The Commission’s Web site plays a significant 

role in providing information to the public. 

• Investigate and prosecute wrongdoing. Commission attorneys and investigators conduct investigations and institute enforcement actions 

against potential violators. Violators are sanctioned. The sanctions are 

publicized and enforced. The administrative law judges hear and decide 

administrative enforcement cases brought by the Commission. 

• Review regulations and amend or abolish as appropriate. In order to 

ensure that the regulations enforced by the CFTC are reflective of the 

needs of the industry and the public, the Commission reviews and adapts 

its regulations with evolving conditions and changes in the industry. 
FY 2008 President’s Budget & Performance Plan

 

Commission Strategies to Influence Outcomes 21 

Resource Priorities and Return on Investment: 

• Reengineer the Commission’s trade practice surveillance system and 

modernize the market surveillance system so that they remain effective 

and robust as trading migrates from the floors to electronic platforms. 

Markets regulated by the Commission have experienced a dramatic shift 

from floor to screen-based trading over the past several years. The Chicago Board of Trade’s (CBOT) and the Chicago Mercantile Exchange’s 

(CME) screen-based volume currently accounts for approximately 75 

percent of total exchange volume. While electronic trading brings certain 

regulatory benefits, such as precise audit trails, it also increases the opportunity for certain types of abuses, such as trading ahead of customers. 

In order to re-engineer our systems, we have examined the electronic 

trading systems and automated surveillance systems used by U.S. designated contract markets, as well as those used by foreign futures exchanges that have significantly more experience in electronic trading. 

We are also incorporating changes in the Commission’s oversight systems and, where necessary, recommending alterations to systems of our 

designated contract markets to ensure the integrity of the markets and to 

ensure that customers continue to be protected against trading abuses 

and manipulations. 

• Continue collaborative regulatory efforts regarding SFPs. The Commission will continue in its efforts to coordinate with the SEC in implementing those sections of the CFMA related to the trading of SFPs. These 

areas include: SFP definitions; registration requirements and functions; 

treatment of customer funds; margin rules; the offering of foreign SFPs 

to U.S. customers; possible further exemptions for notice registrants; the 

listing of options; and coordinated clearing. The Commission will also respond to inquires from intermediaries, their counsel and accountants, 

and the general public concerning operational issues as the market for 

SFPs develops. Further, the Commission will work with the exchanges in 

developing sound business, financial and sales practices concerning the 

trading of SFPs. 

• Complete energy investigations. Since the fall of Enron, the Commission 

has conducted a significant number of investigations concerning potential misconduct by participants in the energy markets. To date, the Commission has filed 35 enforcement actions in this program area charging a 

total of 55 respondents/defendants (31 companies and 24 individuals). 

The Commission has obtained $303,413,500 in civil monetary penalties 

in settlement of these enforcement actions. Eight Commission energy 

market related enforcement actions remain in active litigation in Federal 

district court. The Commission is actively engaged in other energy sector 

investigations which may result in further prosecutions. The Commission’s aggressive enforcement actions in the energy sector reflect an approach to market oversight that emphasizes tough enforcement actions 

against wrongdoers without creating overly burdensome regulations. The 

Commission is fully committed to resolving the on-going energy investigations as expeditiously as possible so that, in addition to identifying 

wrongdoers, it can exonerate those who were not involved and allow 

these important risk management markets to work toward restoring the 

confidence of market participants and the public.

***
FY 2008 President’s Budget & Performance Plan

22 Commission Strategies to Influence Outcomes 

Summary of Goal One Performance Indicators 

Goal One: Ensure the economic vitality of the commodity futures and option markets.

Outcome 1.1: Futures and option markets that accurately reflect the forces of supply and demand for the 

underlying commodity and are free of disruptive activity.

Annual Performance Goal: No price manipulation of other disruptive activities that would cause loss of confidence 

or negatively affect price discovery or risk shifting. 

Performance Measures 

FY 2005 

Actual 

FY 2006 

Actual 

FY 2007 

Plan 

FY 2008 

Plan 

Percentage growth in market volume 

Percentage of novel or innovative market proposals or requests for CFTC action addressed within six months to accommodate new approaches to, or the expansion in, derivatives trading, enhance the price discovery process, or increase available risk management tools

Percentage increase in number of products traded

Percentage of new exchange and clearinghouse applications 

completed within expedited review period 

Percentage of new contract certification reviews completed 

within three months to identify and correct deficiencies in 

contract terms that make contracts susceptible to manipulation 

Percentage of rule change certification reviews completed 

within three months, to identify and correct deficiencies in 

exchange rules that make contracts susceptible to manipulation or trading abuses or result in violations of law 

26% 

100% 

36% 

100% 

54% 

84% 

26% 

 100% 

25% 

100% 

81% 

86%

25% 

100% 

10% 

100% 

75% 

85% 

25% 

100% 

10% 

100% 

80% 

90% 

Outcome 1.2: Markets are effectively and efficiently monitored to ensure early warning of potential 

problems or issues that could adversely affect their economic vitality.

Annual Performance Goal: To have an effective and efficient market surveillance program. 

Performance Measures 

FY 2005 

Actual 

FY 2006 

Actual 

FY 2007 

Plan 

FY 2008 

Plan 

Percentage of DCO applications demonstrating compliance 

with core principles 

Ratio of markets surveilled per economist 

Percentage of contract expirations without manipulation 

100% 

11 

99.9% 

N/AF

8

12 

99.9% 

100% 

13 

99.9% 

100% 

13 

99.9% 

 

8 Not applicable, no applications for registration as a DCO were received in FY 2006. 
FY 2008 President’s Budget & Performance Plan

 

Commission Strategies to Influence Outcomes 23 

Breakout of Goal One Request by Program Activity 

FY 2007 FY 2008 Change 

 $ (000) FTE $ (000) FTE $ (000) FTE

Market Oversight $13,055 67 $15,217 68 $2,162 1

Clearing & Intermediary 

Oversight 

775 4 926 4 151 0

Chief Economist 2,183 9 3,796 14 1,613 5

Enforcement 5,133 23 5,816 23 683 0

Proceedings 0 0 0 0 0 0

General Counsel 1,467 6 1,872 7 405 1

Executive Direction & 

Support 

8,965 43 10,301 43 1,336 0

TOTAL: $31,578 152 $37,928 159 $6,350 7

Table 12: Breakout of Goal One Request by Program Activity 

Enforcement

15%

General Counsel

5%

Executive Direction & 

Support

27%

Market Oversight

41%

Chief Economist

10%

Clearing & 

Intermediary 

Oversight

2%

Figure 8: Breakout of Goal One Request by Program Activity 
FY 2008 President’s Budget & Performance Plan

24 Commission Strategies to Influence Outcomes 

Breakout of Goal One Request by Outcome Objective 

FY 2007 FY 2008 Change 

 $ (000) FTE $ (000) FTE $ (000) FTE 

 

GOAL ONE: Ensure economic vitality of commodity futures and option markets. 

Outcomes 

1.1 Futures and option markets that 

accurately reflect the forces of supply 

and demand for the underlying commodity and are free of disruptive activity. 

$25,797 125 $30,697 130 $4,900 5

1.2 Markets that can be monitored to 

ensure early warning of potential 

problems or issues that could adversely affect their economic vitality. 

5,781 27 7,231 29 1,450 2

Total Goal One $31,578 152 $37,928 159 $6,350 7

Table 13: Breakout of Goal One by Outcome 

Outcome Objective 

1.2

19%

Outcome Objective 1.1

81%

Figure 9: Breakout of Goal One Request by Outcome Objective 
FY 2008 President’s Budget & Performance Plan

 

Commission Strategies to Influence Outcomes 25 

Strategic Goal Two – Protecting Market Users and the Public. 

Background and Context 

The focus of the second goal is protection of the firms and individuals—market 

users—who come to the marketplace to fulfill their business and trading needs. 

Market users must be protected from possible wrongdoing on the part of the 

firms and commodity professionals with whom they deal to access the marketplace, and they must be confident that the marketplace is free of fraud, manipulation, and abusive trading practices. 

The Commission has promulgated requirements that mandate appropriate disclosure and customer account reporting, as well as fair sales and trading practices 

by registrants. The Commission has also sought to maintain appropriate sales 

practices by screening the fitness of industry professionals and by requiring proficiency testing, continuing education, and supervision of these persons. Extensive record-keeping of all futures transactions is also required. Likewise, the 

Commission monitors compliance with those requirements and supervises the 

work of the exchanges and NFA in enforcing the requirements. 

The Commission plays an important role in deterring behavior that could affect 

market users’ confidence by investigating and taking action against unscrupulous 

traders, entities, and others who engage in a wide variety of illegal activity, including but not limited to manipulation and fraudulent sales practices. 

*** 

FY 2008 President’s Budget & Performance Plan

 

Commission Strategies to Influence Outcomes 27 

Means and Strategies for Achieving Objectives 

Means: 

• Detect and prevent violations of Federal commodities laws. 

• Require commodity professionals to meet high standards. 

• Handle effectively and expeditiously customer complaints against firms 

and persons registered under the Act. 

Strategies: 

• Investigate and prosecute wrongdoing. The Commission identifies and 

investigates possible fraudulent and other illegal activities relating to the 

commodity futures and option markets and their registrants and brings 

enforcement actions as necessary. 

• Inform the public concerning violators. Allegations of wrongdoing and 

associated legal actions are publicized and communicated to the industry 

and the public in order to ensure informed market users. 

• Provide a forum to bring complaints. The Commission provides a reparations program for commodities market users to resolve complaints 

concerning possible violations of the Act. Approximately 80 reparations 

cases are filed per year. The cases are maintained in the Reparations 

Case Tracking System (Repcase), which houses all filings relating to the 

complaints as well as reparations sanctions information. Information regarding the Reparations program is also available on the Commission’s 

Web site and information regarding the various reparations documents 

that have filed or issued by a Presiding Officer or Commission is available 

internally to Commission staff. 

• Oversee the NFA’s registration program. The Commission oversees the 

NFA’s registration program, requiring testing, licensing, and ethics training for commodities professionals. CFTC maintains a strong working relationship with the NFA, including joint representation on the Registration Working Group (RWG). 

• Review regulations and amend or abolish as appropriate. In order to 

ensure that the regulations enforced by the Commission are reflective of 

the needs of the industry and the public, the Commission reviews and 

adapts its regulations with the evolving conditions and changes in the industry. 

• Monitor media. The Internet and other media venues are monitored for 

fraudulent activities and other possible violations of the Act. 

• Maintain cooperative relationships. Strong working relationships with 

the exchanges, the NFA, other federal agencies, state governments and 

law enforcement entities, and foreign authorities maintain the Commission’s ability to gain information for law enforcement purposes and to 

provide enforcement assistance as necessary and appropriate. 
FY 2008 President’s Budget & Performance Plan

28 Commission Strategies to Influence Outcomes 

Resource Priorities and Return on Investment: 

• Complete energy investigations. Since the fall of Enron, the Commission 

has conducted a significant number of investigations concerning potential misconduct by participants in the energy markets. To date, the Commission has filed 35 enforcement actions in this program area charging a 

total of 55 respondents/defendants (31 companies and 24 individuals). 

The Commission has obtained $303,413,500 in civil monetary penalties 

in settlement of these enforcement actions. Eight Commission energy 

market related enforcement actions remain in active litigation in Federal 

district court. The Commission is actively engaged in other energy sector 

investigations which may result in further prosecutions. The Commission’s aggressive enforcement actions in the energy sector reflect an approach to market oversight that emphasizes tough enforcement actions 

against wrongdoers without creating overly burdensome regulations. The 

Commission is fully committed to resolving the on-going energy investigations as expeditiously as possible so that, in addition to identifying 

wrongdoers, it can exonerate those who were not involved and allow 

these important risk management markets to work toward restoring the 

confidence of market participants and the public. 

• Design and implement Project eLaw. The Commission will continue its 

effort to design and implement Project eLaw, an automated law office 

that seamlessly integrates technology and work processes to support 

managers and staff across the Commission in their investigative trial and 

appellate work. Driven by the Commission’s continued reliance on manual processes and automated tracking systems to manage cases and the 

millions of paper documents received or created annually, Project eLaw 

provides the automated tools to assist staff in performing their work 

more efficiently and effectively, both in the office and in the court room 

facing opposing counsel. Specifically, Project eLaw enables staff to: 

query and retrieve information about investigations and litigation provided to the Commission by outside parties, pursuant to subpoena or 

otherwise; develop documents in a collaborative electronic work environment across geographically dispersed locations; manage client contacts, investigation leads, and trial schedules; and present documentary 

and analytical evidence in court settings. The project achieved its final 

software application deployment throughout the Division of Enforcement 

in October 2006. In FY 2007, further enhancements will be implemented along with expansion to other offices within the Commission. 

• Upgrade training for Enforcement investigators. Expert enforcement 

investigators are vital to the effectiveness of the Commission’s Enforcement program. The Commission continues to upgrade the training of its 

enforcement investigators in order to ensure that their level of expertise 

keeps pace with the technological advancements, increasing cross-border 

participation in the financial markets, and new complex contracts and 

trading strategies. Training includes advanced investigative techniques, 

especially with respect to trade practice investigations of electronic exchanges, the tracking of international money flows, and in-depth analysis 

of growing markets with an emphasis on the over-the-counter (OTC) energy markets. 

• Coordinate with foreign regulatory authorities – cooperative enforcement. The number, duration and speed of regulatory issues related to financial crises and market abuses can be mitigated through the enhancement of international cooperation amongst regulators and market au-
FY 2008 President’s Budget & Performance Plan

 

Commission Strategies to Influence Outcomes 29 

thorities. It is therefore critical that the CFTC continue to foster productive and cooperative working relationships with these foreign counterparts. In particular, the Commission will continue to: 1) facilitate crossborder transactions through the removal or lessening of any unnecessary 

legal or practical obstacles; 2) endeavor to enhance the international supervisory cooperation and emergency procedures; 3) strengthen international cooperation for customer and market protection; 4) improve the 

quality and timeliness of international information sharing; and, 5) promote the development of internationally accepted regulatory standards of 

best practices. The CFTC will also continue to undertake measures to ensure that it maintains a high visibility in the international community 

and undertakes a leading role in the development of international financial policy affecting the futures and options markets. 

• Implement USA Patriot Act. The Commission has actively supported 

and assisted the U.S. Treasury Department in developing anti-money 

laundering (AML) rules to implement the mandate of the USA Patriot Act 

with respect to the futures industry. These include various proposed and 

final rules requiring, among other things: 1) FCMs and IBs to report suspicious transactions; 2) FCMs and IBs to establish customer identification and verification programs (CIPs); and 3) FCMs and IBs to establish 

due diligence programs for detecting and reporting money laundering 

through correspondent accounts for foreign financial institutions and 

private banking accounts for non-U.S. persons. In addition to finalizing 

AML rules that already have been proposed, the Commission and Treasury will continue to effectuate the full extent of the protections against 

money laundering mandated by Congress (for example, extending the 

CIP rules to cover other futures firms as well). To assure consistency 

throughout the financial services industry, AML rules are being developed by an inter-agency working group with representatives from Treasury, the CFTC, the SEC, and several Federal banking agencies. The 

Commission’s role includes making sure that futures industry registrants 

are not placed at a disadvantage relative to other financial service providers. Moreover, the Commission has been delegated AML examination 

authority with respect to FCMs and IBs. While much of the front-line examination work may be performed by NFA and other SROs, this delegation requires the implementation of an appropriate audit and compliance 

program and Commission oversight of the direct supervision by NFA and 

other SROs. The Commission also has repeatedly requested, and Treasury is considering, a similar delegation of Treasury’s AML enforcement 

authority to the Commission with respect to futures firms. This delegation would bring additional responsibilities to the Commission for investigating and pursuing charges against those who do not have proper supervision, reporting, and record-keeping programs in place to combat 

money laundering and terrorist financing. 

*** 
FY 2008 President’s Budget & Performance Plan

30 Commission Strategies to Influence Outcomes 

Summary of Goal Two Performance Indicators 

 

Goal Two: Protect market users and the public.

Outcome 2.1: Violations of Federal commodities laws are detected and prevented.

Annual Performance Goal: Violators have a strong probability of being detected and sanctioned. 

Performance Measures 

FY 2005 

Actual 

FY 2006 

Actual 

FY 2007 

Plan 

FY 2008 

Plan 

Number of enforcement investigations opened during the 

fiscal year 

Number of enforcement cases filed during the fiscal year 

Percentage of enforcement cases closed during the fiscal 

year in which the Commission obtained sanctions (e.g., 

civil monetary penalties, restitution and disgorgement, 

cease and desist orders, permanent injunctions, trading 

bans, and registration restrictions)

Cases filed by other criminal and civil law enforcement 

authorities during the fiscal year that included cooperative 

assistance from the Commission 

131 

69 

100% 

23 

123 

38 

100% 

23 

85 

40 

95% 

21 

95 

40 

95% 

22 

Outcome 2.2: Commodity professionals meet high standards. 

Annual Performance Goal: No unregistered, untested, or unlicensed commodity professionals. 

Performance Measures 

FY 2005 

Actual 

FY 2006 

Actual 

FY 2007 

Plan 

FY 2008 

Plan 

Percentage of SROs that comply with core principles

Percentage of DCOs that comply with core principles 

Percentage of professionals compliant with standards regarding testing, licensing, and ethics training (Professional 

compliance) 

Percentage of SROs that comply with requirement to enforce their rules 

Percentage of total requests receiving CFTC responses for 

guidance and advice 

100% 

100% 

100% 

100% 

90% 

100% 

100% 

100% 

100% 

95% 

100% 

100% 

100% 

100% 

95% 

100% 

100% 

100% 

100% 

95% 

Outcome 2.3: Customer complaints against persons or firms registered under the Act are handled effectively and expeditiously.

Annual Performance Goal: Customer complaints are resolved within one year from the date filed and appeals are 

resolved within six months. 

Performance Measures 

FY 2005 

Actual 

FY 2006 

Actual 

FY 2007 

Plan 

FY 2008 

Plan 

Percentage of filed complaints resolved within one year of 

the filing date 

Percentage of appeals resolved within six months 

50% 

46% 

39% 

46% 

50% 

50% 

50% 

75% 
FY 2008 President’s Budget & Performance Plan

 

Commission Strategies to Influence Outcomes 31 

Breakout of Goal Two Request by Program Activity 

FY 2007 FY 2008 Change 

 $ (000) FTE $ (000) FTE $ (000) FTE

Market Oversight $0 0 $0 0 $0 0

Clearing & Intermediary Oversight 4,503 21 6,308 26 1,805 5

Chief Economist 0 0 0 0 0 0

Enforcement 17,607 79 19,946 79 2,339 0

Proceedings 1,881 10 2,167 10 286 0

General Counsel 3,724 15 4,752 17 1,028 2

Executive Direction & 

Support 

9,831 47 11,257 47 1,426 0

TOTAL: $37,546 172 $44,430 179 $6,884 7

Table 14: Breakout of Goal Two Request by Program Activity 

Enforcement

45%

Proceedings

5%

General Counsel

11%

Clearing & 

Intermediary Oversight

14%

Executive Direction & 

Support

25%

 

Figure 11: Breakout of Goal Two Request by Program Activity 
FY 2008 President’s Budget & Performance Plan

32 Commission Strategies to Influence Outcomes 

Breakout of Goal Two Request by Outcome Objective 

FY 2007 FY 2008 Change 

 $ (000) FTE $ (000) FTE $ (000) FTE

GOAL TWO: Protect markets users and the public.

Outcomes 

2.1 Violations of Federal commodities laws are detected and 

prevented. 

$29,599 135 $33,692 135 $4,093 0

2.2 Commodities professionals 

meet high standards. 

4,741 22 6,921 29 2,180 7

2.3 Customer complaints against 

persons or firms falling within the 

jurisdiction of the Commodity 

Exchange Act are handled effectively and expeditiously. 

3,206 15 3,817 15 611 0

Total Goal Two $37,546 172 $44,430 179 $6,884 7

Table 15: Breakout of Goal Two by Outcome 

Outcome Objective

2.3

9%

Outcome Objective

2.2

16%

Outcome Objective

2.1

75%

Figure 12: Breakout of Goal Two Request by Outcome Objective 
FY 2008 President’s Budget & Performance Plan

 

Commission Strategies to Influence Outcomes 33 

Strategic Goal Three – Ensuring Market Integrity in Order to 

Foster Open, Competitive, and Financially Sound Markets. 

Background and Context 

In fostering open, competitive, and financially sound markets, the Commission’s 

priorities are to protect the markets from abusive trading practice and to avoid 

disruptions to the systems for trading, clearing, and settling contract obligations 

and to protect the funds that customers entrust to FCMs. Clearing organizations 

and FCMs are the backbone of the exchange system⎯ together, they protect 

against the financial difficulties of one trader becoming a systemic problem for 

other traders. Several aspects of the oversight framework help the Commission 

achieve this goal with respect to traders: 1) periodically reviewing exchanges’ 

compliance with statutory and regulatory requirements, 2) directly overseeing 

activity on exchanges to detect and prosecute abusive trading, 3) requiring that 

market participants post margin to secure their ability to fulfill obligations; 4) 

requiring participants on the losing side of trades to meet their obligations, in 

cash, through daily (sometimes intraday) margin calls; and 5) requiring FCMs to 

segregate customer funds from their own funds. 

The Commission devotes substantial resources to meet its oversight responsibility over futures industry SROs, including the NFA, and DCOs, to ensure their fulfillment of responsibilities for monitoring and ensuring the financial integrity of 

market intermediaries and the protection of customer funds. An important component of this effort is conducting risk-based reviews of SROs and DCOs to 

evaluate their compliance programs with applicable provisions of the Act and 

Commission regulations. In addition, financial and risk surveillance of market 

intermediaries is conducted by the Commission to monitor actual and potential 

implications of market events and conditions for the financial integrity of the 

clearing system and to follow up on indications of financial difficulty. The Commission also undertakes examinations of registrants such as FCMs to assess the 

adequacy of the SROs’ and DCOs’ compliance programs, to address compliance 

with specific Commission regulations, or on an as-needed basis. 

With respect to intermediary oversight, the Commission can investigate and 

prosecute FCMs alleged to have violated financial and capitalization requirements or to have committed other supervisory or compliance failures in connection with the handling of customer business. Such cases result in substantial remedial changes in the supervisory structures and systems of FCMs, and can influence the way particular firms conduct business. This is an important part of 

fulfilling the Commission’s responsibility for ensuring that sound practices are 

followed by FCMs, and to ensure that markets remain financially sound. The 

Commission also seeks to ensure market integrity by investigating a variety of 

trade and sales practice abuses. For example, the Commission brings actions alleging unlawful trade allocations, trading ahead of customer orders, misappropriating customer trades, and non-competitive trading. 

*** 

FY 2008 President’s Budget & Performance Plan

 

Commission Strategies to Influence Outcomes 35 

Means and Strategies for Achieving Objectives 

Means: 

• Oversee market intermediaries and the self-regulatory programs and 

compliance activities of the futures industry SROs, which include the 

U.S. commodity exchanges, the NFA, and DCOs. 

• Protect market users and financial intermediaries by developing regulations including requirements related to registration, record-keeping and 

reporting, financial adequacy, sales practices protection of customer 

funds, and clearance and settlement activities. 

• Address cross-border transactions, the coordination of policy with foreign market authorities, systemic risk, anti-money laundering programs, 

and procedures to address extraordinary events such as firm defaults. 

• Monitor market movements for potential financial impact on clearing 

firms and DCOs. 

• Monitor trading activity to detect abusive trading practices through examinations of audit trail data. 

Strategies: 

• Maintain a flexible regulatory environment responsive to evolving 

market conditions. In an effort to ensure that the regulatory framework 

under which futures and option contracts are traded remains current, 

Commission staff will continue to review the Commission’s regulations 

with the intention of: eliminating obsolete regulations; streamlining and 

coordinating regulations across markets; and fostering efficiency and 

competitiveness while assuring customer protection, sound financial 

practices, and market integrity. The Commission will also respond to requests for exemptions and other relief from regulatory requirements to 

address situations in which additional flexibility is warranted. The Commission also will issue advisories and other guidance concerning the application of Commission regulations. 

• Oversight of SROs and DCOs. A key aspect of effective self-regulation is 

oversight by the Commission of SROs, NFA, and DCOs to ensure their 

fulfillment of responsibilities for monitoring and ensuring the financial 

integrity of market intermediaries and the protection of customer funds. 

This oversight program involves conducting risk-based reviews and examinations of SROs, NFA, and DCOs to evaluate their compliance programs with applicable provisions of the Act and Commission regulations. 

• Conduct Financial Surveillance. An important component of oversight 

of DCOs and SROs is the conduct of financial surveillance of market intermediaries by using automated tools for collecting, analyzing, and reporting upon the financial condition and risk exposures of FCMs and 

clearing organizations. Monitoring of broad-based stock-index futures 

and security futures margins was added to the financial surveillance 

functions now performed. 

• Enhance risk assessment. To address changes in the operations and 

structures of multinational, multi-product financial firms, the Commission has implemented a risk assessment program by obtaining better in-
FY 2008 President’s Budget & Performance Plan

36 Commission Strategies to Influence Outcomes 

formation on such firms in the form of required organizational charts 

and internal control filings, consolidated and consolidating financial 

statements, identification of other regulators to whom such firms report, 

and descriptions of procedures in place to control risks associated with 

clearing of trades for affiliates of the regulated firm. 

• Develop global cooperation to enhance financial safeguards. Internationally, recent market issues with global market impact have underscored the importance of developing international standards of best practice. The Commission has increased its efforts to achieve greater international coordination, and thereby enhance the effectiveness of financial 

safeguards applicable to U.S. markets and market participants, as well as 

those applicable internationally. 

• Review SRO rule submissions. New rules and rule changes submitted by 

the exchanges, DCOs, and NFA to the Commission are reviewed with a 

view towards ensuring compliance with core principles and regulatory 

standards in order to maintain the fairness and integrity of the markets, 

protect customers, and accommodate and foster innovation and efficiency in self-regulation consonant with the Commission’s statutory 

mandates. Many of the rule submissions present complex new trading 

and clearing procedures, market structures, and financial arrangements 

that present novel issues and, in some cases, require amendments or interpretations by the Commission to facilitate implementation of the 

SRO’s rule changes. The Commission has adapted its requirements to 

ensure, when approval is requested, quicker implementation of rule 

changes. 

• Respond to globalization of the markets. Electronic technology is rapidly integrating the world’s commodities markets. These technologydriven changes will increase cross-border trading volume, cross-border 

participation, and cross-border exchange linkages. Markets, intermediaries, and customers demand efficient access to these global markets 

with a minimum of regulatory borders. Because no one regulator will 

have the information or geographic reach to address regulatory and practical issues related to cross-border access, the Commission will increase 

its cooperative efforts with global regulators. 

• Investigate and prosecute wrongdoing. In order to foster open, competitive, and financially sound markets, the Commission can investigate 

and brings enforcement cases involving trade practice abuses, financial 

capitalization and segregation violations, and supervision and compliance failures by registrants authorized to handle customer business. The 

Administrative Law Judges will continue to hear and decide administrative enforcement cases brought by the Commission against persons or 

firms charged with violating the Act or Commission rules and regulations. 
FY 2008 President’s Budget & Performance Plan

 

Commission Strategies to Influence Outcomes 37 

Resource Priorities and Return on Investment: 

• Implement risk-based oversight reviews of SROs and DCOs. The Commission will refine its risk-based approach to conducting reviews and examinations of SROs and DCOs. This approach involves conducting cyclical reviews of SROs and DCOs with an identification of their activities 

and risks, followed by an assessment of the appropriateness and adequacy of the systems and procedures that are relied upon by the SROs 

and DCOs to fulfill their responsibilities under the Act and Commission 

regulations. This approach tailors oversight efforts to the relative probability and severity of potential risks. 

• Implement risk-based oversight of DSROs. The Commission will fully 

implement its risk-based approach to the oversight of designated selfregulatory organizations (DSROs) in which Commission staff approach 

the cyclical review of each DSRO with an identification of its activities 

and potential risks, followed by an assessment of the appropriateness 

and adequacy of the systems, procedures, and practices that the DSRO 

relies upon to fulfill its responsibilities under the core principles set forth 

in the CFMA. This risk-based approach, already being utilized by other 

Federal financial regulators and international counterparts such as the 

U.K. Financial Services Authority, promises to make more effective use of 

Commission resources by tailoring oversight efforts to the relative probability and severity of potential risks to market integrity and to market 

participants. 

• Establish a financial surveillance unit and fully implement financial 

surveillance information system (FSIS). With the establishment of a financial surveillance unit, the Commission has an enhanced capability to 

monitor market information, evaluate the impact of market moves on the 

financial integrity of market participants, and anticipate and act upon indications of financial difficulty. This capability is built upon the implementation and use of the new FSIS component systems, including the 

RSR Express system that compiles FCM financial statements, the SPARK 

system that utilizes large trader information to allow the tracking of risk 

at market, firm, and account levels, and the SPAN Risk Manager system 

that will permit “what if” analyses. 

• Develop and implement a new Commission trade surveillance system. 

The Commission has two electronic oversight systems – one to monitor 

for trading abuses (such as trading ahead of customers and trading 

against customers and one to monitor for market manipulation utilizing 

the large trader reports). The first of these two systems is woefully out of 

date, and the Commission has concluded that the demands of today’s futures marketplace require development and implementation of a new 

approach. By supporting the Commission’s efforts to protect market participants from abusive trading practices and the integrity of the markets 

as a price discovery mechanism, the Commission trade practice investigation program helps the Commission maintain public confidence in the 

markets and in the Commission as their regulator. 

The Commission seeks an approach that will allow identification of interexchange violations that individual exchanges lack the capacity to detect, 

allow quicker access to and more sophisticated and customizable analysis 

of the full range of data supplied by exchanges with respect to electronic 

as well as open outcry trading, and enable meaningful Commission 

evaluation of the exchanges’ own electronic surveillance systems. 
FY 2008 President’s Budget & Performance Plan

38 Commission Strategies to Influence Outcomes 

• Continue collaborative regulatory efforts regarding SFPs. The Commission will continue in its efforts to coordinate with the SEC in implementing those sections of the CFMA related to the trading of SFPs. These 

areas include: SFP definitions; registration requirements and functions; 

treatment of customer funds; margin rules; the offering of foreign SFPs 

to U.S. customers; possible further exemptions for notice registrants; the 

listing of options; and coordinated clearing. The Commission will also respond to inquires from intermediaries, their counsel and accountants, 

and the general public concerning operational issues as the market for 

SFPs develops. Further, the Commission will work with the exchanges in 

developing sound business, financial and sales practices concerning the 

trading of SFPs. 

• Coordinate with foreign regulatory authorities – cooperative enforcement. The number, duration and speed of regulatory issues related to financial crises and market abuses can be mitigated through the enhancement of international cooperation amongst regulators and market authorities. It is therefore critical that the CFTC continue to foster productive and cooperative working relationships with these foreign counterparts. In particular, the Commission will continue to: 1) facilitate crossborder transactions through the removal or lessening of any unnecessary 

legal or practical obstacles; 2) endeavor to enhance the internal supervisory cooperation and emergency procedures; 3) strengthen international 

cooperation for customer and market protection; 4) improve the quality 

and timeliness of international information sharing; and, 5) promote the 

development of internationally accepted regulatory standards of best 

practices. The CFTC will also continue to undertake measures to ensure 

that it maintains a high visibility in the international community and undertakes a leading role in the development of international financial policy affecting the futures and options markets. 

• Reengineer the Commission’s trade practice surveillance system and 

update the market surveillance system so that they remain effective and 

robust as trading migrates from the floors to electronic platforms. Markets regulated by the Commission have experienced a dramatic shift from 

floor to screen based trading over the past several years. The CBOT’s and 

the CME’s screen-based volume currently accounts for about 75 percent 

of total exchange volume. While electronic trading brings certain regulatory benefits, such as more precise audit trails, it also increases the opportunity for certain types of abuses, such as trading ahead of customers. 

In order to re-engineer our systems, we have examined the electronic 

trading systems and automated surveillance systems used by U.S. designated contract markets as well as those used by foreign futures exchanges 

that have significantly more experience in electronic trading. We are also 

incorporating changes in the Commission’s oversight systems and, where 

necessary, recommending alterations to systems of our designated contract markets to ensure that customers continue to be protected against 

trading abuses and manipulations. 

• Finalize rules for intermediaries. The Commission continues its efforts 

to modernize the rules affecting futures commission merchants, managers of pooled investment vehicles or individual accounts, and other intermediaries in the futures markets. Through hearings, studies, and 

roundtables, the Commission has, as directed by Congress, undertaken a 

concerted examination of the rules currently imposed on intermediaries, 

and we have adopted several rule changes⎯such as 1) providing financial 

institutions that are primarily overseen by another regulator (such as 
FY 2008 President’s Budget & Performance Plan

 

Commission Strategies to Influence Outcomes 39 

banks, insurance companies, and mutual funds) with an opportunity to 

use the risk management tools offered in the futures markets without 

subjecting themselves to unnecessary duplicative regulation; 2) providing 

appropriate registration relief to managers of pooled investment vehicles 

that restrict participation to highly sophisticated persons who use futures 

on a limited basis; and 3) affording FCMs greater operational flexibility 

so that they can provide their customers with more efficient trade executions. The Commission will continue with efforts to enhance an effective 

oversight framework for intermediaries, as envisaged by the CFMA. 

• SRO Study – Request for Comments on Proposed Acceptable Practices 

for Core Principle 15. On July 7, 2006, the Commission published and 

sought public comment on proposed Acceptable Practices for Section 

5(d)(15) of the Act (Core Principle 15), which requires that exchanges 

minimize conflicts of interest in their decision-making processes. The 

proposed Acceptable Practices, the first for Core Principle 15, emphasize 

exchange governance and boards of directors as a means of mitigating 

conflicts of interest between exchanges’ regulatory responsibilities and 

their commercial activities. The proposals are based on the Commission’s three-year study of self-regulation and self-regulatory organizations in the U.S. futures industry (SRO Study), launched in 2003. They 

respond to recent changes in the industry, including the demutualization 

of exchanges, their conversion to for-profit business models, and increased competition among exchanges and others. The comment period 

on the proposed Acceptable Practices closed on September 7, 2006. 

• Implement USA Patriot Act. The Commission has actively supported 

and assisted the U.S. Treasury Department in developing AML rules to 

implement the mandate of the USA Patriot Act with respect to the futures 

industry. These include various proposed and final rules requiring, 

among other things: 1) FCMs and IBs to report suspicious transactions; 

2) FCMs and IBs to establish customer identification and verification 

programs (CIPs); and 3) FCMs and IBs to establish due diligence programs for detecting and reporting money laundering through correspondent accounts for foreign financial institutions and private banking accounts for non-U.S. persons. In addition to finalizing AML rules that already have been proposed, the Commission and Treasury will continue to 

effectuate the full extent of the protections against money laundering 

mandated by Congress (for example, extending the CIP rules to cover 

other futures firms as well). To assure consistency throughout the financial services industry, AML rules are being developed by an inter-agency 

working group with representatives from Treasury, the CFTC, the SEC, 

and several Federal banking agencies. The Commission’s role includes 

making sure that futures industry registrants are not placed at a disadvantage relative to other financial service providers. Moreover, the 

Commission has been delegated AML examination authority with respect 

to FCMs and IBs. While much of the front-line examination work may be 

performed by NFA and other SROs, this delegation requires the implementation of an appropriate audit and compliance program and Commission oversight of the direct supervision by NFA and other SROs. The 

Commission also has repeatedly requested, and Treasury is considering, 

a similar delegation of Treasury’s AML enforcement authority to the 

Commission with respect to futures firms. This delegation would bring 

additional responsibilities to the Commission for investigating and pursuing charges against those who do not have proper supervision, reporting, and record-keeping programs in place to combat money laundering 

and terrorist financing. 

*** 
FY 2008 President’s Budget & Performance Plan

40 Commission Strategies to Influence Outcomes 

Summary of Goal Three Performance Indicators 

Goal Three: Ensure market integrity in order to foster open, competitive, 

and financial sound markets.

Outcome 3.1: Clearing organizations and firms holding customer funds have sound financial practices.

Annual Performance Goal: No loss of customer funds as a result of firms’ failure to adhere to regulations. No customers prevented from transferring funds from failing firms to sound firms. 

Performance Measures 

FY 2005 

Actual 

FY 2006 

Actual 

FY 2007 

Plan 

FY 2008 

Plan 

Lost funds: 

a) Percentage decrease in number of customers who lose 

funds 

b) Amount of funds lost 

Number of rulemakings to ensure market integrity and financially sound markets

Percentage of self-regulatory organizations that comply with

requirement to enforce rules

0 

$0 

3 

100% 

0 

$0 

3 

100% 

0 

$0 

6 

100% 

0 

$0 

6 

100% 

Outcome 3.2: Commodity futures and option markets are effectively self-regulated.

Annual Performance Goal: No loss of funds resulting from failure of self-regulated organizations to ensure compliance with their rules. 

Performance Measures 

FY 2005 

Actual 

FY 2006 

Actual 

FY 2007 

Plan 

FY 2008 

Plan 

Percentage of intermediaries who meet risk-based capital 

requirements 

Percentage of clearing organizations that comply with requirement to enforce their rules 

100% 

100% 

100% 

100% 

100% 

100% 

100% 

100% 

Outcome 3.3: Markets are free of trade practice abuses. 

Annual Performance Goal: Minimize trade practice abuses. 

Performance Measures 

FY 2005 

Actual 

FY 2006 

Actual 

FY 2007 

Plan 

FY 2008 

Plan 

Percentage of exchanges deemed to have adequate systems 

for detecting trade practice abuses 

Percentage of exchanges that comply with requirement to 

enforce their rules

100% 

100% 

100% 

100% 

100% 

100% 

100% 

100%

Outcome 3.4: Regulatory environment is flexible and responsive to evolving market conditions. 

Annual Performance Goal: Rulemakings issued and requests responded to reflect the evolution of the markets and 

protect the interests of the public. 

Performance Measures 

FY 2005 

Actual 

FY 2006 

Actual 

FY 2007 

Plan 

FY 2008 

Plan 

Percentage of CFMA Section 126(b) objectives implemented 

Number of rulemakings, studies, interpretations, and guidance to ensure market integrity and exchanges’ compliance 

with regulatory requirements 

Percentage of requests for no-action or other relief completed within six months related to novel market or trading 

practices and issues to facilitate innovation 

Percentage of total requests receiving CFTC responses for 

guidance and advice 

100% 

6 

100% 

90% 

100% 

20 

100% 

95% 

100% 

18 

100% 

95% 

100% 

19 

100% 

95% 
FY 2008 President’s Budget & Performance Plan 

Commission Strategies to Influence Outcomes 41 

Breakout of Goal Three Request by Program Activity 

FY 2007 FY 2008 Change 

 $ (000) FTE $ (000) FTE $ (000) FTE

Market Oversight $6,963 33 $7,963 33 $1,000 0

Clearing & Intermediary Oversight 8,095 37 9,836 39 1,741 2

Chief Economist 0 0 0 0 0 0

Enforcement 3,973 18 4,500 18 527 0

Proceedings 188 1 217 1 29 0

General Counsel 1,763 7 2,250 8 487 1

Executive Direction & 

Support 

7,903 38 8,876 38 973 0

TOTAL $28,885 134 $33,642 137 $4,757 3

Table 16: Breakout of Goal Three by Program Activity 

Market Oversight

24%

Executive Direction & 

Support

26%

Enforcement

13%

Proceedings

1%

General Counsel

7%

Clearing & Intermediary 

Oversight

29%

Figure 14: Breakout of Goal Three Request by Program Activity 
FY 2008 President’s Budget & Performance Plan

42 Commission Strategies to Influence Outcomes 

Breakout of Goal Three Request by Outcome Objective 

 FY 2007 FY 2008 Change 

$ (000) FTE $ (000) FTE $ (000) FTE

GOAL THREE: Ensure market integrity in order to foster open, competitive, and financially sound markets.

Outcomes 

3.1 Clearing organizations and firms 

holding customer funds have sound 

financial practices. 

$5,292 24 $6,356 26 $1,064 2

3.2 Commodity futures and option 

markets are effectively self-regulated. 

12,915 60 15,002 60 2,087 0

3.3 Markets are free of trade practice 

abuses. 

5,297 24 6,044 25 747 1

3.4 Regulatory environment responsive 

to evolving market conditions. 

5,381 26 6,240 26 859 0

TOTAL $28,885 134 $33,642 137 $4,757 3

Table 17: Breakout of Goal Three Request by Outcome 

Outcome Objective 3.3

18%

Outcome Objective 3.4

19%

Outcome Objective 3.1

19%

Outcome Objective 3.2

44%

Figure 15: Breakout of Goal Three Request by Outcome Objective 
FY 2008 President’s Budget & Performance Plan 

Justification of the FY 2008 President’s Budget & Performance Plan 43 

Justification of the FY 2008 Budget & Performance Estimate 

Breakout of $116.0 Million Budget Estimate by Program 

 FY 2008 FY 2008 

FY 2006 FY 2007 Current Svcs. Request 

FTE $ (000) FTE $ (000) FTE $ (000) FTE $ (000)

Market Oversight 103 $20,473 100 $20,018 100 $23,250 101 $23,180

Clearing & Intermediary Oversight 64 $12,722 62 $13,373 62 $15,313 69 $17,070

Chief Economist 8 $1,590 9 $2,183 9 $2,485 14 $3,796

Enforcement 132 $26,245 120 $26,713 120 $30,669 120 $30,262

Proceedings 13 $2,584 11 $2,069 11 $2,421 11 $2,384

General Counsel 31 $6,163 28 $6,954 28 $7,895 32 $8,874

Exec. Direction & Support 139 $27,620 128 $26,699 128 $30,866 128 $30,434

Total 490 $97,397 458 $98,009 458 $112,899 475 $116,000

Table 18: Budget Estimate by Program 

Enforcement

26%

Proceedings

2%

General Counsel

8%

Executive 

Direction &

Support

26%

Clearing & 

Intermediary

Oversight

15%

Market Oversight

20%

Chief Economist

3%

Figure 16: $116.0 Million Budget Estimate by ProgramF

9

 

 

9 Includes information technology in support of all programs. 
FY 2008 President’s Budget & Performance Plan

44 Executive Summary⎯CFTC Mission Statement & Agency Goals 

Breakout of $116.0 Million Budget Estimate by Object Class 

FY 2006 FY 2007 FY 2008

($000) ($000) ($000)

11.1 Full-Time Perm. Compensation $58,318 $55,849 $60,356

11.5 Other Personnel Compensation 1,379 1,851 1,888

11.8 Special Pers. Serv. Payments 3 22 22

11.9 Subtotal, Personnel Comp. 59,700 57,722 62,266

12.1 Personnel Benefits: Civilian 14,619 14,707 16,068

13.0 Benefits for Former Personnel 3 34 35

21.0 Travel & Transportation of Persons 1,168 1,411 1,540

22.0 Transportation of Things 52 88 88

23.2 Rental Payments to Others 10,990 11,701 12,362

23.3 Comm., Utilities & Miscellaneous 2,208 2,836 4,427

24.0 Printing and Reproduction 327 401 433

25.0 Other ServicesF

10 7,026 7,153 13,783

26.0 Supplies and Materials 595 803 866

31.0 Equipment 680 1,087 4,066

32.0 Building/Fixed Equipment 18 66 66

42.0 Claims/Indemnities 11 0 0

99.0 Subtotal, Direct Obligations 97,397 98,009 116,000

99.0 Reimbursable 23 100 100

99.0 Total Obligations $97,420 $98,109 $116,000

Table 19: Budget Estimate by Object Class 

Compensation &

Benefits

71%

Space Rental

9%

All Other

12%

Equipment

3%

Communications &

Utilities

3%

Supplies &

Printing

1%

Travel & 

Transportation

1%

Figure 17: $116.0 Million Budget Estimate by Object Class 

 

10 Includes costs for Enforcement investigations, information technology modernizations, operations & 

maintenance, and advisory & assistance services. 
FY 2008 President’s Budget & Performance Plan 

Justification of the FY 2008 President’s Budget & Performance Plan 45 

Crosswalk from FY 2007 to FY 2008 

FY 2007 

Budget 

 FY 2008

Request Change

 

Budget Authority ($000) $98,000 $116,000 $18,000

Full-Time Equivalents (FTEs) 458 475 17

 

Explanation of Change FTEs

Dollars

($000)

 

Current Services Increases: (Adjustments to FY 2007 Base) 

To provide for the following changes in personnel compensation: 

 -- Estimated July 2007 2.2% pay increase (annualization of) 1,132

 -- Estimated July 2008 2.6% pay increase 331

 --Within-grade increases 525

 --To provide for increased costs of personnel benefits 784

 --To provide employee performance awards 37

To provide for the following changes in non-personnel costs: 12,085

 --Travel/Transportation ($129) 

 --Space Rental/Communications/Utilities ($2,252) 

 --Supplies/Printing ($95) 

 --All Services ($6,630) 

 -- Equipment ($2,979) 

Program Increase: (Adjustments to FY 2008 Current Services)

 --To provide for salaries and expenses for 17 more FTEs +17 3,106

Total Increases +17 $18,000

Table 20: Crosswalk from FY 2007 to FY 2008 
FY 2008 President’s Budget & Performance Plan

46 FY 2008 President’s Budget & Performance Plan⎯Market Oversight 

Market Oversight 

Total Budget: $23,180,000 101 FTEs 

Total Change: $ 3,162,000 1 FTE 

All Other 

Programs

80%

Market 

Oversight

20%

Market 

Oversight

21%

All Other 

Programs

79%

Figure 18: Market Oversight 

Percentage of Total Budget Dollars 

Figure 19: Market Oversight 

Percentage of Total Budget FTEs 

Justification of the FY 2008 President’s Budget & Performance Plan 

The primary responsibility of the Market Oversight program is to foster markets 

that accurately reflect the forces of supply and demand for the underlying commodity and are free of disruptive activity. By detecting and protecting against 

price manipulation and abusive trading practices, this program assists the markets in performing the vital economic functions of price discovery and risk transfer (hedging). The Market Oversight program will initiate and carry out the 

Commission’s surveillance and oversight programs for these markets. The program also will conduct trade practice surveillance and reviews of exchange rule 

amendments and submissions. In addition, the program will develop, implement, 

and interpret regulations that protect customers, prevent trading abuses, and 

assure the integrity of the futures markets. 

In FY 2008, the Market Oversight program requests 101 full-time equivalents 

(FTEs), an increase of one FTE over the FY 2007 level. The three subprograms⎯Market Surveillance, Market and Product Review, and Market Compliance⎯are requesting 49 FTEs, 18 FTEs, and 34 FTEs, respectively. 

Market Surveillance. Futures prices are generally quoted and disseminated 

throughout the U.S. and abroad. Business, agricultural, and financial enterprises 

use the futures markets for pricing information and for hedging against price 

risk. The participants in commercial transactions rely extensively on prices established by the futures markets, which affect trillions of dollars in commercial activity. Moreover, the prices established by the futures markets directly or indirectly affect all Americans. They affect what Americans pay for food, clothing, and 

shelter, what we pay to heat our homes and fuel our cars, as well as other necessities. Since futures and option prices are susceptible to manipulation and excessive volatility, and producers and users of the underlying commodities can be 

harmed by manipulated prices, preventive measures are necessary to ensure that 

market prices accurately reflect supply and demand conditions. 

Actions to detect and prevent price manipulation are taken by economists who 

monitor all active futures and option contracts for potential problems. The FTEs 
 FY 2008 President’s Budget & Performance Plan 

 

FY 2008 President’s Budget and Performance Plan⎯Market Oversight 47 

requested for the Market Oversight program will work on investigating possible 

manipulation and other trading abuses, analyze routine reports of large trader 

activity, conduct rule enforcement reviews, and work to detect and prevent 

threats of price manipulation or other major market disruptions caused by abusive trading practices. 

Price manipulation prevention activities of Market Surveillance economists are 

enhanced by support personnel, such as futures trading specialists, futures trading assistants, and statisticians. Their activities include operating an extensive 

daily data-gathering and verification system and collecting reports from exchanges, futures industry firms, and traders. The reports provide current market 

information on the size of futures and option positions held by large traders as 

well as other background information that is necessary to enforce Commission 

and exchange speculative limits. 

Market and Product Review. In order to serve the vital price-discovery and 

hedging functions of futures and option markets, exchanges must provide consumers safe marketplaces that have appropriate protections in place and provisions for ensuring the fairness of the market and the integrity of contracts traded. 

Exchanges must list products for trading that are not readily susceptible to manipulation and do not lead to price distortions or disruptions in the futures or 

option markets, or in the underlying cash markets. Adherence to the approval 

criteria, core principles, and appropriate contract design minimizes market disruptions and the susceptibility of the contracts to manipulation or price distortion. 

The Market and Product Review subprogram, in cooperation with other offices of 

the Commission, reviews exchanges’ applications for approval as a contract market 

or as a Derivatives Transaction Execution Facility (DTEF) to ensure that the exchange is in compliance with approval criteria and core principles and Commission 

regulations. The subprogram also reviews filings by exempt markets and, as required, analyzes these entities to ascertain whether they comply with statutory requirements. 

The subprogram reviews requests from exchanges for approval of new contracts and 

rule amendments to existing contracts to ensure that contracts are in compliance 

with statutory and regulatory anti-manipulation requirements. It also conducts reviews of new products and rule changes of economic significance submitted under 

certification procedures to provide information about the markets and product design features, and to ensure that contracts and rules comply with statutory requirements as well as the Commission’s rules and policies. The reviews foster markets 

free of disruptions, or price manipulation, provide essential information to conduct 

effective market surveillance, and address regulatory and public interest issues. In 

this regard, deficiencies in the terms and conditions of futures and option contracts 

increase the likelihood of cash, futures, or option market disruptions and decrease 

the economic usefulness and efficiency of contracts. 

The subprogram also reviews new rules and rule amendments for current markets. To ensure compliance with core principles and regulatory standards in order to maintain fairness and integrity, protect customers, and accommodate and 

foster innovation and efficiency in self-regulation consonant with the Commission’s statutory mandates. The reviews consider complex new trading procedures 

and market structures that present novel issues and, in some cases, require 

amendments or interpretations by the Commission to facilitate implementation 

of the SRO’s rule changes. In this regard, deficiencies in the new programs or 

changes to existing programs increase the likelihood of trading abuses, inconsistent market oversight, or implementation of market or governance changes that 

create conflicts of interest or raise other regulatory concerns. 
FY 2008 President’s Budget & Performance Plan

48 FY 2008 President’s Budget & Performance Plan⎯Market Oversight 

Market Compliance. The Market Compliance subprogram oversees the regulatory and oversight activities of all designated contract markets in furtherance of 

the Commission’s primary goals of ensuring customer protection and market integrity. The oversight program consists of examinations of exchange selfregulatory programs on an ongoing, routine basis to assess their continuing compliance with applicable core principles under the Act and the Commission’s regulations. The examinations result in rule enforcement review reports that evaluate 

an exchange’s compliance and surveillance capabilities. The reports set forth recommendations for improvement, where appropriate, with respect to an exchange’s trade practice surveillance, market surveillance, disciplinary, audit trail, 

record-keeping, and dispute resolution programs. These periodic reviews promote and enhance continuing effective self-regulation and ensure that exchanges 

rigorously enforce compliance with their rules. 

The Market Compliance subprogram also monitors trading activity on all exchanges in order to detect and prevent possible trading violations. This type of 

oversight is conducted through the use of automated surveillance and floor surveillance, and it fosters markets that are free of trading abuses. The identification 

of potential trading violations results in referrals to relevant exchanges and to the 

Commission’s Division of Enforcement. In addition, the Market Compliance subprogram reviews and analyzes proposed exchange trading platforms, rule enforcement programs, and disciplinary procedures in conjunction with new designated contract market applications. The subprogram also conducts special studies of exchange rules, procedures, and trading practices as issues arise affecting a 

particular exchange. This serves to promote orderly trading and facilitates open 

and competitive markets. 

The growth of electronic trading and increased competition has expanded the 

scope of trade-monitoring beyond the initial review of trading platforms. Reviews of front-end data entry systems and back-end account processing systems 

are being developed. Analysis of side-by-side trading in electronic and open outcry markets, as well as trading in related contracts on multiple exchanges, is becoming increasingly important. 

Consequence of Not Receiving Requested Level of Resources 

The growth in the number and different types of facilities that trade a wider array 

of derivatives products, including single-stock futures, futures on OTC instruments, contracts based on events or occurrences and novel approaches to derivatives trading, requires an increased and more sophisticated level of surveillance, 

data collection, analysis, reporting, and research to conduct effective oversight 

and develop the necessary expertise to monitor these developments. Surveillance 

and oversight of exchanges and product design involves monitoring an increasing 

number of innovative and often complex futures and option contracts to detect or 

prevent potential problems, price manipulation, and other major market disruptions caused by abusive trading practices or contract design flaws. 

In FY 2008, the Market Oversight staff will be required to monitor a large and 

diverse array of markets and will continue to carry out the Commission’s program of surveillance and oversight of single-stock futures. The Commission anticipates that a large number of new contracts, including contracts based on 

broad-based debt indexes and SFPs based on debt instruments, will be listed for 

trading on futures exchanges. The number of energy futures contracts is also expected to continue to grow. Also, exchanges have indicated an interest in listing a 

large number of contracts, including new kinds of contracts, based on events that 

raise core issues regarding the extent of the Commission’s jurisdiction. Furthermore, the Commission anticipates that new technology and a number of new 

market plans and new trade execution methods will be adopted by exchanges. In 

large part, the growth in the number of exchanges, products, and product types 
 FY 2008 President’s Budget & Performance Plan 

 

FY 2008 President’s Budget and Performance Plan⎯Market Oversight 49 

resulted from the more flexible regulatory environment created by the CFMA. In 

addition, the development new of technology, side-by-side trading, and directly 

competitive markets creates new types of abuses across markets as well as abuses 

that utilize these newly-available capabilities. 

Without adequate resources, in FY 2008 the Market Oversight program of surveillance, exchange oversight, new exchange reviews, and studies to enhance understanding of the markets and new technology will not be commensurate with 

the growth in new types of exchanges, new trading execution methods in futures 

markets, and the initiation of trading in new innovative complex products that 

require detailed analysis and raise substantive legal and policy questions. Thus, 

some price manipulations and abusive trading practices will go undetected or 

detected too late to permit amelioration or intervention. In particular, there is a 

substantial risk that abusive trading in energy futures markets will go undetected, 

potentially costing American consumers hundreds of millions of dollars in additional energy costs. Further, the efficacy of exchange self-regulatory programs 

will not be evaluated as effectively or on a timely basis. By lengthening the time 

between reviews, staff will not be able to ensure that exchanges are effectively 

fulfilling their self-regulatory responsibilities with respect to customer protection 

and market integrity, and as a result, traders will suffer direct economic harm 

from an increase in illegal trading activity. In addition, the Commission recently 

proposed acceptable practices for Core Principle 15 relating to exchange governance and conflicts of interest. Without adequate resources, staff will not be able 

to conduct necessary reviews to ensure that exchanges adequately address potential conflicts of interest between their self-regulatory functions and responsibilities and their commercial interests. 

The additional staff person will help the Market Oversight program meet its oversight and surveillance responsibilities especially in connection with its goal of 

monitoring electronic trading, which is rapidly growing in importance. However, 

even with this additional resource, staff may not be able to maintain its ability to 

promptly process requests from foreign boards of trade to permit direct trading 

access to U.S. market users. Any such delays would have a detrimental impact on 

the ability of U.S. market users to avail themselves of foreign liquidity pools and 

would generally impede the accelerating rate of globalization in the futures industry. 

In addition, staff may not be able to review all new contracts and rule change 

submissions for approval within statutory time frames, and will not be able to 

appropriately review all new contract and rule change certifications in a timely 

manner. In the absence of a timely new contract review, it is possible that a contract market might inadvertently list for trading a flawed contract that does not 

meet statutory or regulatory requirements. In the absence of a timely rule 

amendment review, a contract market might create a violation of the CEA or the 

Commission’s regulations. This could result in direct economic harm to producers, consumers, and other users of the underlying commodities and indirect harm 

to the economy as a whole because market prices may not accurately reflect supply and demand conditions. 

*** 
FY 2008 President’s Budget & Performance Plan

50 FY 2008 President’s Budget & Performance Plan⎯Market Oversight 

Market & Product

Review

Market 19%

Surveillance

46%

Market 

Compliance

35%

Table 21: Market Oversight Request by Subprogram 

FY 2007 FY 2008 Change 

 $ (000) FTE $ (000) FTE $ (000) FTE

Market Compliance $7,209 34.00 $8,228 34.00 $1,019 0.00

Market & Product Review 3,561 17.00 4,372 18.00 811 1.00

Market Surveillance 9,248 49.00 10,580 49.00 1,332 0.00

TOTAL $20,018 100.00 $23,180 101.00 $3,162 1.00

Figure 20: Market Oversight FY 2008 Budget by Subprogram 
FY 2008 President’s Budget & Performance Plan

 

FY 2008 President’s Budget and Performance Plan⎯Market Oversight 51 

Table 22: Market Oversight Request by Goal 

FY 2007 FY 2008 Change 

 $ (000) FTE $ (000) FTE $ (000) FTE

GOAL ONE: Protect the economic functions of the commodity futures and 

option markets. 

Outcomes 

1.1 Futures and option markets that accurately 

reflect the forces of supply and demand for the 

underlying commodity and are free of disruptive activity. 

$11,627 60.00 $13,572 61.00 $1,945 1.00

1.2 Markets that can be monitored to ensure 

early warning of potential problems or issues 

that could adversely affect their economic 

vitality. 

1,428 7.00 1,645 7.00 217 0.00

Subtotal Goal One $13,055 67.00 $15,217 68.00 $2,162 1.00

GOAL TWO: Protect market users and the public. 

None 

GOAL THREE: Foster open, competitive, and financially sound markets. 

Outcomes 

3.2 Commodity futures and option markets 

are effectively self-regulated. 

$4,846 23.00 $5,543 23.00 $697 0.00

3.3 Markets are free of trade practice abuses. 1,908 9.00 2,178 9.00 270 0.00

3.4 Regulatory environment responsive to 

evolving market conditions. 

209 1.00 242 1.00 33 0.00

Subtotal Goal Three $6,963 33.00 $7,963 33.00 $1,000 0.00

TOTAL $20,018 100.00 $23,180 101.00 $3,162 1.00

Goal Three

33%

Goal One

67%

Figure 21: Market Oversight FY 2008 Budget by Goal 

 
FY 2008 President’s Budget & Performance Plan 

52 FY 2008 President’s Budget & Performance Plan⎯Clearing & Intermediary Oversight 

Clearing & Intermediary Oversight 

Total Budget: $17,070,000 69 FTEs 

Total Change: $3,697,000 7 FTEs 

Clearing & 

Intermediary

Oversight

15%

All Other 

Programs

85%

Figure 22: Clearing & Intermediary Oversight 

Percentage of Total Budget Dollars 

Figure 23: Clearing & Intermediary Oversight 

Percentage of Total Budget FTEs 

Justification of the FY 2008 President’s Budget & Performance Plan 

In FY 2008, the Clearing and Intermediary Oversight (DCIO) program requests 

69 FTEs, an increase of seven FTEs over the FY 2007 level. The requested level is 

necessary for the Clearing and Intermediary Oversight program to meet its regulatory oversight responsibilities. Of the seven additional FTEs, four FTEs will be 

allocated to the Clearing Policy and Review subprogram, and three FTES will be 

allocated to the Audit and Financial Review subprogram. 

The Act, as amended in December 2000 by the CFMA, sets forth several purposes 

for which the Clearing and Intermediary Oversight program has direct responsibility: 

• To ensure the financial integrity of all transactions subject to the Act 

and the avoidance of systemic risk; and 

• To protect all market participants from fraudulent or other abusive 

sales practices and misuses of customer assets. 

The futures markets have grown rapidly since passage of the CFMA, with customer funds on deposit having more than doubled between 2000 and 2006 to 

approximately $138 billion. In addition, Congress gave the Commission direct 

oversight responsibility over DCOs. DCOs, as the central counterparties in the 

futures markets, are key to the financial integrity of the futures markets by centralizing counterparty credit risk exposures. Their proper supervision requires 

the Commission to devote substantial resources to developing new competencies 

and implementing and executing new oversight programs. DCIO currently has 

direct supervisory responsibility for 11 DCOs. 

The DCIO program also requires substantial Commission resources to meet its 

oversight responsibility over SROs to ensure their fulfillment of responsibilities 

for monitoring and ensuring the financial integrity of market intermediaries, enforcing appropriate sales practice standards for the protection of customers and 

the public, and protecting customer funds. This is accomplished by conducting 

risk-based examinations of SROs, including the NFA, to evaluate their compliAll Other 

Programs

85%

Clearing & 

Intermediary

Oversight

15%
FY 2008 President’s Budget & Performance Plan

 

FY 2008 President’s Budget & Performance Plan⎯Clearing & Intermediary Oversight 53 

ance programs over registrants with respect to applicable provisions of the Act 

and Commission regulations concerning requirements such as fitness, net capital, 

segregation of customer funds, disclosure, reporting, sales practices, and related 

recordkeeping. In addition, financial and risk surveillance of market intermediaries is conducted as part of the DCIO program of oversight of SROs and DCOs. 

The DCIO program responsibilities further include oversight of DCOs, intermediaries holding customer funds, and other market participants in their efforts to 

compete in dynamically evolving markets without sacrificing customer protections. Rapid market and product evolution will require that existing regulations 

be reviewed, refined, and applied in a manner that facilitates competitiveness 

while preserving core safeguards. The globalization of the markets, the blurring 

of distinctions among financial institutions, and the explosive growth of technology have made it essential that the Commission adapt its regulations continually 

and appropriately to changing market conditions. 

Clearing Policy and Review. A Clearing Policy and Review subprogram level of 

18 FTEs in FY 2008 would represent an increase of four FTEs over the FY 2007 

level. The higher level is needed to enable the Clearing Policy and Review subprogram to address its current and additional responsibilities in a satisfactory 

manner, particularly with respect to the assessment of new DCOs seeking to clear 

for domestic markets, the execution of risk-based oversight and examination of 

DCOs, and the expansion and enhancement of financial and risk surveillance 

functions of the DCIO program. 

The Clearing Policy and Review subprogram is responsible for reviewing applications for registration as DCOs and rule submissions submitted by DCOs, and for 

conducting risk-based oversight and examinations of DCOs to evaluate their 

compliance with applicable provisions of the Act and Commission regulations, 

including Core Principles with regard to financial resources, risk management, 

default procedures, protection of customer funds, and system safeguards. In addition, financial and risk surveillance of market intermediaries is conducted as 

part of the DCIO program of oversight of DCOs. 

Effective oversight must help to ensure financial integrity and adequate risk 

management within the FCMs and DCOs that are the backbone of the futures 

clearing system. This requires examination of both the clearinghouses themselves and assessments of how well they in turn monitor the activities of their 

clearing members. Two of the four FTEs allocated to the Clearing Policy and Review subprogram will be used to staff additional positions in the Major Review 

unit that is responsible for executing risk-based examinations of DCOs. 

The Clearing Policy and Review subprogram also has responsibility for monitoring, through both traditional supervisory methods and evolving financial surveillance efforts using automated quantitative analysis tools, the adequacy, reliability, and resilience of the clearing system (consisting of both DCOs and FCMs) to 

protect against: 1) the financial problems of a single market participant becoming 

systemic problems that could affect other market participants or other markets; 

2) customer funds being misused or exposed to inappropriate risks of loss; and 3) 

abusive sales practices that harm customers and undermine market integrity. 

The Financial Surveillance unit was formed to focus, enhance, and expand the 

subprogram’s utilization of automated tools and systems to gather, combine, and 

analyze information from monthly financial reports filed by FCMs, large trader 

position information, and other relevant market and financial information so as 

to provide ongoing surveillance of actual or potential financial risks facing firms 

and clearinghouses and to anticipate emerging problems that may pose systemic 

risks. The unit acquired the responsibility of monitoring broad-based stockindex futures and security futures margins. Two of the four FTEs allocated to the 
FY 2008 President’s Budget & Performance Plan

54 FY 2008 President’s Budget & Performance Plan⎯Clearing & Intermediary Oversight 

Clearing Policy and Review subprogram will be used to staff additional positions 

in the Financial Surveillance unit. 

Audit and Financial Review. An Audit and Financial Review subprogram level of 

41 FTEs in FY 2008 would represent an increase of three FTEs over the FY 2007 

level. The higher level is needed in order to enable the Audit and Financial Review subprogram to address its current and anticipated additional responsibilities in a satisfactory manner. The increase in resources also will allow subprogram staff to respond to the multitude of accounting and regulatory issues relating to the Commission’s minimum capital regulations and to address potential 

changes vis-à-vis the SEC’s capital regulations, to monitor the financial integrity 

of individual registrants and the markets generally, and to improve SRO oversight programs. 

The Audit and Financial Review subprogram encompasses the activities of the 

chief accountant who is responsible for, among other things, developing and interpreting the Commission’s regulations in such areas as minimum net capital 

and segregation requirements for futures firms. One of the three FTEs will be 

used to fill an associate chief accountant position that will support the chief accountant and meet the need to respond to the increasing number of inquiries for 

regulatory and accounting interpretations of the Commission’s capital and segregation regulations, and to address potential major changes to the Commission’s 

and SEC capital regulations resulting from the SEC’s adopting a new capital requirement for certain broker-dealers that elect to submit to consolidated supervision by the SEC. The associate chief accountant would assume a significant role 

in the oversight of consolidated supervised entities, a new class of the largest broker-dealer/FCMs that use complex mathematical models to compute regulatory 

capital. 

Another Audit and Financial Review subprogram priority is the enhancement of 

its risk-based oversight program of SROs, and focusing more resources on the 

examinations of registrants, particularly foreign currency (Forex)-only FCMs and 

mid-level FCMs whose sales practices have raised concerns. Two of the three 

FTEs would be allocated to the regional office in Kansas City to better enable the 

Audit and Financial Review subprogram to increase Commission oversight of 

Forex-only FCMs and other FCMs of interest, and to augment the pool of auditor 

resources that could be devoted to examinations of SROs. 

Compliance and Registration. A Compliance and Registration subprogram level 

of 10 FTEs in FY 2008 will represent the same level of staffing as the FY 2007 

level. A lower level would not enable the Compliance and Registration subprogram to address its current and anticipated responsibilities in a satisfactory manner. 

The Compliance and Registration subprogram is responsible for providing policy 

advice and recommendations to the Commission, other staff units, the public, 

and the industry concerning the activities of futures industry intermediaries with 

respect to, among other things, registration, disclosure, reporting, sales practices, 

and record-keeping. The subprogram is engaged in an ongoing regulatory modernization effort to keep the Commission’s regulatory framework abreast of market developments. This requires the subprogram to develop or modernize regulations and interpretations that are flexible, effective, and efficient and that respond to further industry innovation and enhancements. Subprogram staff work 

closely with the staff of NFA and other industry groups to effectively address issues that arise in connection with the business practices of intermediaries. 

More specifically, in FY 2008, the ongoing responsibilities of the Compliance and 

Registration subprogram will include: 1) addressing regulatory issues and im-
FY 2008 President’s Budget & Performance Plan

 

FY 2008 President’s Budget & Performance Plan⎯Clearing & Intermediary Oversight 55 

plementing a regulatory modernization program for intermediaries; 2) examining 

the regulations relating to, and working with the Enforcement program concerning firms engaged in, retail off-exchange Forex transactions; 3) assisting in the 

Commission’s participation with the Treasury Department, the Financial Crimes 

Enforcement Network, and other financial regulators to develop and promulgate 

regulations to implement the AML requirements of the USA PATRIOT Act; 4) 

continuing to effectively supervise the NFA and its fulfillment of CFTC-delegated 

responsibilities; 5) continuing to evaluate the regulations covering registration of 

and reporting and disclosure by CPOs and CTAs, some of which may operate or 

advise “hedge funds;” 6) addressing any additional matters presented as a result 

of the current reauthorization process; 7) continuing to coordinate with the SEC 

with respect to the trading of SFPs, including addressing issues related to trading 

of foreign SFPs and foreign index products by U.S. customers; and 8) managing 

the Commission’s Part 30 program that helps to ensure the protection of U.S. 

customers who trade on foreign boards of trade and through foreign intermediaries, and to preserve appropriate supervisory capabilities for the Commission. 

Consequences of Not Receiving Requested Level of Resources 

The DCIO program must at all times maintain an effective supervisory system 

that is responsive to technological development, business changes, increasing 

globalization, increasing trading volume, and other evolutionary changes in the 

markets and the clearing process. 

Without the requested resources, the DCIO program will not meet its established 

and evolving responsibilities. The increased level of resources requested is necessary for the DCIO program to meet the responsibilities assigned to it by Congress 

through the CFMA and any further changes to the CEA resulting from the Commission’s current reauthorization process, and to help keep pace with the rapid 

growth in futures and option trading volume and the profound changes resulting 

from global competition, innovations in derivative contracts, innovations in 

clearing practices, new clearing organizations, advances in technology, and new 

market practices. The DCIO program also is responsible for ensuring that Commission registrants comply with the requirements of the USA PATRIOT Act, and 

the program staff expects that additional resources will be needed to address 

AML concerns. The volume and nature of retail off-exchange foreign currency 

transactions also will require increased resources. 

The increase in staff resources will enable the program to ensure that it meets its 

responsibilities of effective supervision of SROs, intermediaries, and DCOs, as 

well as other compliance and investigative support activities performed by staff to 

ensure the integrity of the marketplace. In addition, the increased level of resources requested is necessary for the DCIO program to provide appropriate 

guidance to industry professionals, customers, and other market users regarding 

compliance with an increasingly changing business and regulatory environment 

as promptly and effectively as possible, which will facilitate innovation and market growth and improve the environment for the international competitiveness of 

the U.S. futures industry. The consequence of not receiving the DCIO program’s 

requested level of resources is that the program would not be able to adequately 

fulfill its oversight and audit functions over DCOs, SROs, and FCMs, thereby increasing the possibility that a misappropriation or insolvency could harm customers and consumers, compromise the integrity of the futures markets, and create systemic instability. 

*** 
FY 2008 President’s Budget & Performance Plan

56 FY 2008 President’s Budget & Performance Plan⎯Clearing & Intermediary Oversight 

Table 23: Clearing & Intermediary Oversight Request by Subprogram 

 FY 2007 FY 2008 Change 

 $ (000) FTE $ (000) FTE $ (000) FTE

 Clearing Policy & Review $1,988 14.00 $3,304 18.00 $1,316 4.00

 Compliance & Registration 2,063 10.00 2,330 10.00 267 0.00

Audit & Financial Review 9,322 38.00 11,436 41.00 2,114 3.00

TOTAL $13,373 62.00 $17,070 69.00 $3,697 7.00

Figure 24: Clearing & Intermediary Oversight FY 2008 Budget by Subprogram 

Compliance &

Registration

14%

Audit & Financial

Review

67%

Clearing Policy &

Review

25%
 FY 2008 President’s Budget & Performance Plan

 

FY 2008 President’s Budget & Performance Plan⎯Clearing & Intermediary Oversight 57 

Table 24: Clearing & Intermediary Oversight Request by Goal 

 FY 2007 FY 2008 Change 

 $ (000) FTE $ (000) FTE $ (000) FTE

GOAL ONE: Protect the economic functions of the commodity futures and option 

markets. 

Outcomes 

1.1 Futures and option markets that 

accurately reflect the forces of supply and demand for the underlying 

commodity and are free of disruptive activity. 

$387 2.00 $463 2.00 $76 0.00

1.2 Markets that can be monitored 

to ensure early warning of potential 

problems or issues that could adversely affect their economic vitality. 

388 2.00 463 2.00 $75 0.00

Subtotal Goal One $775 4.00 $926 4.00 $151 0.00

GOALTWO: Protect market users and the public.

Outcomes 

2.1 Violations of Federal commodities laws are detected and prevented. $1,226 5.50 $1,415 5.50 $189 0.00

2.2 Commodities professionals meet 

high standards. 

 3,033 14.50 4,614 19.50 1,581 5.00

2.3 Customer complaints against 

persons or firms falling within the 

jurisdiction of the Commodity Exchange Act are handled effectively. 

 244 1.00 279 1.00 35 0.00

Subtotal Goal Two $4,503 21.00 $6,308 26.00 $1,805 5.00

GOAL THREE: Foster open, competitive, and financially sound markets. 

Outcomes 

3.1 Clearing organizations and firms 

holding customer funds have sound 

financial practices. 

$1,685 8.50 2,175 9.50 $490 1.00

3.2 Commodity futures and option 

markets are effectively selfregulated. 

4,945 21.00 5,946 22.00 1,001 1.00

3.4 Regulatory environment responsive to evolving market conditions. 1,465 7.50 1,715 7.50 250 0.00

Subtotal Goal Three $8,095 37.00 $9,836 39.00 $1,741 2.00

TOTAL $13,373 62.00 $17,070 69.00 $3,697 7.00

Goal Three

56%

Goal Two

39%

Goal One

5%

Figure 25: Clearing & Intermediary Oversight FY 2008 Budget by Goal 
FY 2008 President’s Budget & Performance Plan

58 FY 2008 President’s Budget and Performance Plan⎯Enforcement 

Enforcement 

Total Budget: $30,262,000 120 FTEs 

Total Change: $ 3,549,000 0 FTE 

All Other 

Programs

74%

Enforcement

26%

All Other 

Programs

75%

Enforcement

25%

Figure 26: Enforcement Percentage 

of Total Budget Dollars 

Figure 27: Enforcement Percentage 

of Total Budget FTEs 

Justification of the FY 2008 President’s Budget & Performance Plan 

The primary responsibility of the Enforcement program is to police for conduct 

that violates the CEA and Commission regulations. Such conduct undermines the 

integrity of the market and the confidence of market participants. 

In FY 2008, the Enforcement program requests 120 FTEs, resulting in no increase over the FY 2007 level. This stability in FTEs is vitally needed by the Enforcement program to address the following developments: 

• Trading strategies have become more complex, crossing product lines and 

markets, which has required the Enforcement program to expand the scope 

of its investigations concerning fraud, market manipulation, and other abusive trading practices. A striking example is the program’s intensive investigations and litigations energy-related market abuses. Due to their complexity, the Enforcement program must devote significantly more resources to 

these investigations in order to analyze voluminous trading data, hire experts, and to examine the activities of multiple energy market participants. 

• The Enforcement program anticipates an increase in the number of large, 

complex investigations and trials during FY 2007 and FY 2008. To adequately address these complex matters will require the Enforcement program 

to commit expenditures, especially with respect to transcripts and experts, 

that exceed its historical usage. 

• The Enforcement program continues to battle the pervasive fraudulent sale 

of illegal, off-exchange futures and options foreign currency contracts to retail customers. The Enforcement program expects that recent successful challenges to the Commission’s jurisdictional authority will require additional resources to enforce against this area of fraud. The Enforcement program also 

focuses resources against other types of off-exchange fraud. 

• Matters involving fraud by registered and unregistered pool operators and 

trading advisors typically require immediate action using the Enforcement 

program’s “quick strike” capability to freeze assets belonging to customers 
FY 2008 President’s Budget & Performance Plan

 

FY 2008 President’s Budget & Performance Plan⎯Enforcement 59 

and preserve books and records.F

11 The Enforcement program anticipates 

that it will need to devote additional resources to investigate CPO and CTA 

activity. 

• Violative Internet solicitations continue to increase and, therefore, require 

additional resources to investigate and prosecute. 

• The dramatic increase in electronic trading poses additional challenges to the 

Enforcement program in terms of potential novel violations (or adaptations 

of traditional trade practice violations) and potential audit trail gaps. These 

challenges will require additional resources not only for investigation and 

prosecution but also for Enforcement staff training. 

Responding to Violative Conduct. When an enforcement investigation indicates 

that violative conduct has occurred, the Commission either files an administrative or civil injunctive enforcement action against the alleged wrongdoers. In administrative actions, wrongdoers found to have violated the CEA or Commission 

regulations or orders can be prohibited from trading and, if registered, have their 

registrations suspended or revoked. Violators also can be ordered to cease and 

desist from further violations, to pay civil monetary penalties of up to $130,000 

per violation or triple their monetary gain, and to pay restitution to those persons 

harmed by the misconduct. In civil injunctive actions, defendants can be enjoined 

from further violations, their assets can be frozen, and their books and records 

can be impounded. Defendants also can be ordered to disgorge all illegally obtained funds, make full restitution to customers, and pay civil penalties. 

As detailed above, violations prosecuted by the Enforcement program may arise 

from commodity futures or option trading on U.S. exchanges, from manipulative 

trading in the OTC markets that affect, or tend to affect, the futures or options 

markets, or from the sale of illegal futures or option contracts not traded on trading facilities designated or registered by the Commission. The Enforcement program addresses various types of violative conduct including conduct that threatens the economic functions of the markets. 

Protecting Market Users. The Enforcement program works to protect market 

users and the public by promoting compliance with and deterring violations of 

the CEA and Commission regulations. The bulk of the work in this area involves 

investigating and prosecuting enforcement actions in matters involving fraud, 

and imposing sanctions against wrongdoers. These actions send a message to 

industry professionals about the kinds of conduct that will not be tolerated. 

The Commission also pursues actions involving false or misleading advertising. 

Over the past several years, there has been substantial false and deceptive advertising of commodity-related investment products, often by unregistered persons 

and entities through various forms of mass media, such as cable television, radio, 

and the Internet. The Enforcement program has worked aggressively to detect 

and stop such advertising by filing enforcement actions. Similarly, the Enforcement program pursues cases charging illegal futures and options, often in Forex 

and precious metals. Such cases typically involve unregistered “boiler rooms” 

selling illegal futures contracts and options to the general public. Again, the most 

likely victims are individual retail investors. 

Supervision and Compliance Failures. The Enforcement program investigates 

and prosecutes cases involving supervision and compliance failures by registrants 

handling customer business. Such violations can threaten the financial integrity 

of registered firms holding customer funds and can, in certain circumstances, 

 

11 “Quick-strike” enforcement actions are those that the Commission files within four months of opening an investigation. 
FY 2008 President’s Budget & Performance Plan

60 FY 2008 President’s Budget & Performance Plan⎯Enforcement 

threaten the financial integrity of clearing organizations. Diligent supervision by 

registered firms also protects markets from abusive trading practices, including 

manipulation and wash sales. 

Cooperative Enforcement Efforts. The Enforcement program works cooperatively with both domestic and foreign authorities to maximize its ability to detect, 

deter, and bring sanctions against wrongdoers involving U.S. markets, registrants, and customers. 

On the domestic level, this includes sharing information with, and on occasion 

providing testimony or other assistance to, state regulators and other Federal 

agencies, such as the DOJ, the Federal Bureau of Investigation, the SEC, the Federal Energy Regulatory Commission, and Federal banking regulators. The Commission may also file injunctive actions jointly with state authorities with concurrent jurisdiction. These cooperative efforts bolster the effectiveness of the Enforcement program by allowing it to investigate and litigate more efficiently. 

Similarly, in the international realm, the Commission has entered into more than 

a dozen formal information-sharing arrangements and numerous other informal 

arrangements with foreign authorities. These arrangements permit information 

sharing and cooperative assistance among regulators. Such arrangements benefit 

all nations involved and greatly enhance the ability of the Enforcement program 

to investigate matters that involve foreign entities and/or, individuals or transfers 

of tainted funds to foreign jurisdictions. 

Consequences of Not Receiving Requested Level of Resources 

The markets continue to grow in volume and complexity as increasingly sophisticated instruments are employed across markets. An ever-larger segment of the 

population has money at risk in the futures markets, either directly or indirectly 

through pension funds or ownership of shares in publicly held companies that 

participate in the markets. 

The Enforcement program will utilize the FTEs requested for FY 2008 in targeting certain program areas, for example: 1) allegations of manipulation, trade 

practice violations, and false reporting; 2) fraud and other illegal conduct committed by registered entities; 3) off-exchange fraud, involving illegal futures and 

options contracts by, among others, unregulated boiler rooms and bucket shops 

targeting the general public; and 4) unregistered and registered CTA/CPO fraud. 

The requested FTEs also will enable the Enforcement program to maintain full 

staff levels for its litigation teams, continue its commitment both to cooperative 

enforcement activities, and provide additional skilled staff to properly investigate 

and litigate complex matters. 

Without the requested resources, the Enforcement program will not meet established responsibilities. Without adequate staffing, the Enforcement program 

must be more selective in the matters it investigates, potentially leaving serious 

wrongdoing unaddressed. Furthermore, investigations will take longer to complete, particularly when increasing litigation draws resources away from investigations. Likewise, domestic and international cooperative enforcement activities 

will be undermined, adversely affecting not only the mission of the Commission, 

but also that of its domestic and international counterparts. 

Over each of the past three fiscal years, through the effective use of productivity 

and efficiency measures and a reorganization that occurred in October 2002, the 

program filed more actions than at any other time in Enforcement’s history. 

However, active litigation has increased by approximately 40 percent over the 

last five years, therefore requiring a shift of resources from investigations. Similarly, the number of litigated cases per FTE has increased approximately 60 per-
FY 2008 President’s Budget & Performance Plan

 

FY 2008 President’s Budget & Performance Plan⎯Enforcement 61 

cent over the same time period. Enforcement staff are operating at full capacity 

and shifting resources from important investigations to ongoing and future litigation demands, limiting the ability to pursue new investigations. If the Enforcement program is unable to bring actions because of insufficient resources, other 

authorities will not be available to step in and fill the void. SROs can take action 

only against their own members, and their sanctions cannot affect conduct outside their jurisdiction or markets. In addition, other Federal regulators and state 

regulators have limited jurisdiction and expertise in handling futures-related 

misconduct. Finally, while criminal prosecutions by the DOJ are an important 

adjunct to effective enforcement of the CEA, cooperative enforcement still requires the active use of Commission FTEs to assist criminal authorities in their 

prosecutions. 

*** 
FY 2008 President’s Budget & Performance Plan

62 FY 2008 President’s Budget & Performance Plan⎯Enforcement 

Table 25: Enforcement Request 

FY 2007 FY 2008 Change 

 $ (000) FTE $ (000) FTE $ (000) FTE

Enforcement $26,713 120.00 $30,262 120.00 $3,549 0.00

TOTAL $26,713 120.00 $30,262 120.00 $3,549 0.00
FY 2008 President’s Budget & Performance Plan

 

FY 2008 President’s Budget and Performance Plan⎯Enforcement 63 

Table 26: Enforcement Request by Goal 

FY 2007 FY 2008 Change 

 $ (000) FTE $ (000) FTE $ (000) FTE

GOAL ONE: Protect the economic functions of the commodity futures and option markets. 

Outcomes 

1.1 Futures and option markets that 

accurately reflect the forces of supply 

and demand for the underlying commodity and are free of disruptive activity. 

$4,580 20.57 $5,188 20.57 $608 0.00

1.2 Markets are effectively and efficiently monitored to ensure early warning of potential problems or issues that 

could adversely affect their economic 

vitality. 

553 2.49 628 2.49 75 0.00

Subtotal Goal One $5,133 23.06 $5,816 23.06 $683 0.00

GOAL TWO: Protect market users and the public. 

Outcomes 

2.1 Violations of Federal commodities 

laws are detected and prevented. 

$17,500 78.61 $19,824 78.61 2,324 0.00

2.2 Commodities professionals meet 

high standards. 

107 0.48 122 0.48 15 0.00

Subtotal Goal Two $17,607 79.09 $19,946 79.09 $2,339 0.00

GOAL THREE: Foster open, competitive, and financially sound markets. 

Outcomes 

3.1 Clearing organizations and firms 

holding customer funds have sound 

financial practices. 

$1,838 8.25 $2,079 8.25 $241 0.00

3.2 Commodity futures and option markets are effectively self-regulated. 17 0.08 20 0.08 3 0.00

3.3 Markets are free of trade practice 

abuses. 

1,598 7.18 1,811 7.18 213 0.00

3.4 Regulatory environment responsive 

to evolving market conditions. 

520 2.34 590 2.34 70 0.00

Subtotal Goal Three $3,973 17.85 $4,500 17.85 $527 0.00

TOTAL $26,713 120.00 $30,262 120.00 $3,549 0.00

Figure 28: Enforcement FY 2008 Budget by Goal 

Goal Three

15%

Goal Two

66%

Goal One

19%
FY 2008 President’s Budget & Performance Plan 

64 FY 2008 President’s Budget and Performance Plan⎯Office of the Chief Economist 

Office of the Chief Economist 

Total Budget: $ 3,796,000 14 FTEs 

Total Change: $ 1,613,000 5 FTEs 

Chief 

Economist

3%

All Other 

Programs

97%

Chief 

Economist

3%

All Other 

Programs

97%

Figure 29: Chief Economist 

Percentage of Total Budget Dollars 

Figure 30: Chief Economist 

Percentage of Total Budget FTEs 

Justification of the FY 2008 President’s Budget & Performance Plan 

As innovation in the futures and option markets continues, the ability of staff to 

conduct thorough market research is vital to achieving Commission goals. Innovations in trading technology and trading instruments create significant regulatory challenges that require economic research and analysis in the form of: 

• Participation in the development of flexible and effective regulatory responses to evolving market conditions; 

• Review and analysis of new market trading structures and new trading products; 

• Continuous support to the Commission’s Enforcement program in the form 

of economic and statistical analysis or expert testimony to promote compliance with and deter violations of commodity laws; 

• Development of educational materials on futures and option trading for dissemination to producers, market users, and the general public; and 

• Review and analysis of the futures industry’s financial safeguard system, including evaluation of risk management processes employed by DCOs and intermediaries, and evaluation of new clearing processes. 

In FY 2008, the Office of the Chief Economist (OCE) program requests 14 FTEs, 

an increase of five FTEs over the FY 2007 level. 

The growth in the number of markets that trade and clear a wider array of complex derivative products requires analysis and research to determine the appropriate regulatory approach to these markets and products. In FY 2008, staff of 

the OCE will be required to monitor a large and diverse array of markets, including new energy products, new types of “event-related” markets, such as corporate 

actions, derivatives on economic statistics, and derivatives on exchange-traded 

commodity funds. The Commission anticipates that a large number of these con-
FY 2008 President’s Budget & Performance Plan

 

FY 2008 President’s Budget and Performance Plan⎯Office of the Chief Economist 65 

tracts will be listed for trading, both on futures and securities exchanges. In addition, management and parsing of the huge amounts of trading data, both transaction data and order book data, as a result of the continued expansion of electronic trading and the noted increase in products traded requires involvement of 

OCE staff as principal users of such data. 

With the requested level of resources, analysis to enhance understanding of the 

markets will keep pace with, but in very few cases anticipate, the growth in new 

types of exchanges and the initiation of trading in new products. Moreover, at the 

requested level, the staff will be able to monitor most but not all developments in 

derivatives trading and market innovations. In this regard, innovations in technology and derivative instruments and trading methods in futures markets create 

many challenging economic and regulatory issues. The performance of derivative 

markets has a potentially large impact on the stability of international and domestic financial markets. Market research and effective monitoring of these developments help ensure that the Commission has in place sound regulatory policies to reduce systemic risk in financial markets and protect the economic function of the markets without undermining innovation and the development of new 

approaches to risk management. 

Consequence of Not Receiving Requested Level of Resources 

If the OCE does not receive the requested level of resources it will not be able to 

conduct market research and analysis commensurate with the growth in new 

types of exchanges, new trading execution methods in futures markets, and the 

initiation of trading in the array of new products noted above. Moreover, staff 

efforts to monitor developments in derivatives trading and market innovation 

will be delayed at a lower level of resources. This will undermine the ability of the 

Commission to keep its regulatory policies in line with new developments in the 

industry, which could impede innovation, lead to systemic risk in financial markets, and adversely affect the economic function of the markets. 

The development of new technology brought about by electronic trading in existing yet growing markets and in new markets generate a huge amount of trading 

data. This requires additional management of the data and, importantly, the 

ability to effectively analyze the data. Without the additional resources, the OCE 

will be unable to keep pace with this growth, meet its established and developing 

responsibilities, stay abreast of market developments, and would be unable to 

adequately provide effective and timely support to the other divisions within the 

Commission. Also, the lack of additional resources will undermine the ability of 

OCE to monitor and analyze the large and diverse array of markets, including 

new energy products, new types of “event-related” markets, such as corporate 

actions, derivatives on economic statistics, and derivatives on exchange-traded 

commodity funds. 

Without the requested level of resources OCE will be unable to provide effective 

economic and statistical analysis to the enforcement and surveillance programs, 

and review the financial safeguard system. This may result in substantial time 

delays in critical market research, which may adversely affect the economic function of the markets and may lead to systemic risk across the broader financial 

market system. 

*** 
FY 2008 President’s Budget & Performance Plan

66 FY 2008 President’s Budget & Performance Plan⎯Office of the Chief Economist 

Table 27: Office of the Chief Economist Request 

FY 2007 FY 2008 Change 

 $ (000) FTE $ (000) FTE $ (000) FTE

Chief Economist $2,183 9.00 $3,796 14.00 $1,613 5.00

TOTAL $2,183 9.00 $3,796 14.00 $1,613 5.00

 
FY 2008 President’s Budget & Performance Plan

 

FY 2008 President’s Budget & Performance Plan⎯Office of the Chief Economist 67 

Table 28: Office of the Chief Economist Request by Goal 

FY 2007 FY 2008 Change 

 $ (000) FTE $ (000) FTE $ (000) FTE

GOAL ONE: Protect the economic functions of the commodity futures and 

option markets. 

Outcomes 

1.1 Futures and option markets that 

accurately reflect the forces of supply 

and demand for the underlying commodity and are free of disruptive activity. 

$1,213 5.00 $2,169 8.00 956 3.00

1.2 Markets that can be monitored to 

ensure early warning of potential problems or issues that could adversely affect 

their economic vitality. 

970 4.00 1,627 6.00 657 2.00

Subtotal Goal One $2,183 9.00 $3,796 14.00 $1,613 5.00

GOAL TWO: Protect market users and the public. 

None. 

GOAL THREE: Foster open, competitive, and financially sound markets. 

None 

TOTAL $2,183 9.00 $3,796 14.00 $1,613 5.00
FY 2008 President’s Budget & Performance Plan

68 FY 2008 President’s Budget & Performance Plan⎯Office of Proceedings 

Office of Proceedings 

Total Budget: $ 2,384,000 11 FTEs 

Total Change: $ 315,000 0 FTE 

Proceedings

2%

All Other 

Programs

98%

All Other 

Programs

98%

Proceedings

2%

Figure 31: Proceedings Percentage of 

Total Budget Dollars 

Figure 32: Proceedings Percentage of 

Total Budget FTEs 

Justification of the FY 2008 President’s Budget & Performance Plan 

The Office of Proceedings is responsible for providing an inexpensive, impartial, 

and expeditious forum for handling customer complaints against persons or 

firms registered under the CEA. In FY 2008, the Office of Proceedings program 

requests 11 FTEs, resulting in no increase over the FY 2007 level. 

The Complaints section of the Office of Proceedings receives and prepares customer claims for action by appropriate officials, dismissing those that are outside 

the jurisdiction of the Commission or are pending in another forum. The Hearings section includes judgment officers (JOs), who decide reparations complaints 

in voluntary and summary proceedings and administrative law judges (ALJs), 

who conduct formal proceedings. 

The ALJs also decide administrative enforcement cases brought by the Commission against persons or firms responsible for violating the CEA or Commission 

regulations. 

The Office of Proceedings receives 80 cases per year and will respond to 6,500 

telephone inquiries and requests. Inquiries from members of the public include 

questions from those considering investing in commodity futures and options, 

and questions about specific firms and whether or not they have had customer 

complaints filed against them. Information is also provided about how to utilize 

the CFTC complaints process. 

The Office of Proceedings maintains a case-tracking system that tracks the progress of each case from receipt of complaint through disposition, including any 

appeal to the Commission or Federal court. The case-tracking system not only 

assists with case management within the Commission, but it also enables the Office of Proceedings to provide current information on the status of cases in response to public inquiries. 

The Office of Proceedings maintains the Reparations Sanctions in Effect List

publication, a record of individuals and firms that have not paid reparations 

awards. This document is published annually and as needed. The office also 
FY 2008 President’s Budget & Performance Plan

 

FY 2008 President’s Budget & Performance Plan⎯Office of Proceedings 69 

maintains the Administrative Sanctions in Effect List publication, a record of 

individuals and firms that have outstanding against them enforcement sanctions, 

such as trading prohibitions. This document is published annually and updated 

quarterly. These lists are made available to the public and are distributed to the 

exchanges, the NFA, the Futures Industry Association, the National Association 

of Securities Dealers, and the SEC for use in their compliance efforts. 

Consequence of Not Receiving Requested Level of Resources 

The Office of Proceedings’ ability to perform its activities in a timely fashion depends on the requested level. If the requested level is not received, the Office of 

Proceedings will experience time delays in the performance of its activities. These 

time delays will have several deleterious effects: they will directly impact citizens 

seeking a timely and responsive forum for resolving their complaints, many of 

whom are without other options for seeking relief; they will impact the Commission’s ability to meet legal deadlines for processing Commission orders; and finally, they will prevent citizens from gaining timely background information on 

the commodity firms and professionals, impacting their ability to make sound 

business and investment decisions. 

*** 
FY 2008 President’s Budget & Performance Plan

70 FY 2008 President’s Budget and Performance Plan⎯Office of Proceedings 

Table 29: Proceedings Request by Subprogram 

FY 2007 FY 2008 Change 

 $ (000) FTE $ (000) FTE $ (000) FTE

Enforcement $752 4.00 $867 4.00 $115 0.00

Reparations 1,317 7.00 1,517 7.00 200 0.00

TOTAL $2,069 11.00 $2,384 11.00 $315 0.00

Enforcement

29%

Reparations

71%

Figure 33: Proceedings FY 2008 Budget by Subprogram 
FY 2008 President’s Budget & Performance Plan 

 

FY 2008 President’s Budget and Performance Plan⎯Office of Proceedings 71 

Table 30: Proceedings Request by Goal 

FY 2007 FY 2008 Change 

 $ (000) FTE $ (000) FTE $ (000) FTE

GOAL ONE: Protect the economic functions of the commodity futures and 

option markets. 

None 

GOAL TWO: Protect market users and the public. 

Outcomes 

2.1 Violations of Federal commodities laws 

are detected and prevented. 

$940 5.50 $1,084 5.50 $144 0.00

2.2 Require commodities professionals to 

meet high standards. 

94 0.50 108 0.50 14 0.00

2.3 Customer complaints against persons or 

firms falling within the jurisdiction of the 

Commodity Exchange Act are handled effectively and expeditiously. 

847 4.50 975 4.50 128 0.00

Subtotal Goal Two $1,881 10.00 $2,167 10.00

$286

0.00

GOAL THREE: Foster open, competitive, and financially sound markets. 

Outcomes 

3.3 Markets are free of trade practice 

abuses. 

188 1.00 217 1.00 29 0.00

Subtotal Goal Three $188 1.00 $217 1.00 $29 0.00

TOTAL $2,069 11.00 $2,384 11.00 $315 0.00

 

Figure 34: Proceedings FY 2008 Budget by Goal 

Goal Two

93%

Goal Three

7%
FY 2008 President’s Budget & Performance Plan

72 FY 2008 President’s Budget and Performance Plan⎯Office of the General Counsel 

Office of the General Counsel 

Total Budget: $ 8,874,000 32 FTEs 

Total Change: $ 1,920,000 4 FTEs 

General

Counsel

7%

All Other 

Programs

93%

General

Counsel

6%

All Other 

Programs

94%

Figure 35: Percentage of 

Total Budget Dollars 

Figure 36: Percentage of 

Total Budget FTEs 

Justification of the FY 2008 President’s Budget & Performance Plan 

The Office of General Counsel (OGC) provides legal services and support to the 

Commission and its programs. These services include: 1) engaging in defensive, 

appellate, and amicus curiae litigation; 2) assisting the Commission in the performance of its adjudicatory functions; 3) providing legal advice and support for 

Commission programs; 4) drafting and assisting other program areas in preparing Commission regulations; 5) interpreting the CEA; 6) providing advice on legislative and regulatory issues; and 7) providing exemptive, interpretive, and noaction letters and opinions to the public. In FY 2008, the OGC program requests 

32 FTEs, an increase of four FTEs over the FY 2007 level. 

OGC is the legal advisor to the Commission, and a large portion of its workload is 

reactive in nature. The Office: 

• Reviews all substantive regulatory, legislative, and administrative matters 

presented to the Commission and advises it on the application and interpretation of the CEA and other pertinent administrative and legislative issues; 

• Assists the Commission in performing its adjudicatory functions through its 

Opinions Program; 

• Represents the Commission in appellate litigation and certain trial-level 

cases, including bankruptcy cases involving futures industry professionals; 

• Provides legal support to Commission administrative programs, such as compliance with the Freedom of Information, Privacy, Government in the Sunshine, Regulatory Flexibility, Paperwork Reduction, Small Business Paperwork Reduction, and Federal Advisory Committee Acts; 

• Monitors, reviews, and comments on proposed legislation affecting the 

Commission or the futures industry, prepares draft legislation as requested 

by members of Congress or their staff, and provides liaison with other Federal regulators as necessary on specific projects; 

• Provides Commission support to the President’s Working Group; 

• Counsels other Commission staff on legal aspects of various issues arising 

during the course of Commission business; 
FY 2008 President’s Budget & Performance Plan

 

FY 2008 President’s Budget & Performance Plan⎯Office of the General Counsel 73 

• Provides written interpretations of Commission statutory and regulatory authority to members of the public and, where appropriate, provides exemptive, 

interpretive, or no-action letters to regulatees and potential regulatees of the 

Commission; 

• Advises the Commission on personnel, labor, contract, and employment law 

matters, including cases arising under Title VII of the Civil Rights Act of 1964 

and Merit Protection Board cases arising under the Civil Service Reform Act 

of 1978; and 

• Advises the Commission with respect to all matters related to the Commission’s ethics standards and compliance with its Code of Conduct as well as 

with government-wide ethics regulations promulgated by the Office of Government Ethics, including the requirement of annual ethics training for 

Commission employees. 

OGC’s activities, programs, and support contribute to all of the outcomes and 

functions of the Commission and have a direct and significant impact on the ability of the Commission to perform its mission. In particular, OGC’s services and 

expertise are increasingly in demand as a consequence of added enforcement and 

other litigation activities in, among other areas, exempt commercial markets 

(primarily energy commodities) and with respect to collective investment vehicles (such as domestic and offshore hedge funds) that now play an expanding role 

in nearly every market that falls within the Commission's mission. Moreover, 

exchange-traded contracts and other newer derivatives platforms continue to 

experience explosive growth and, as a consequence of the flow-through from increased activities in these markets, the Commission's surveillance and enforcement resources are increasingly stressed. This heightened deployment of enforcement resources, in turn, spurs demand for readily available legal services 

from experienced legal talent within OGC. As a direct consequence, OGC's appellate practice and its other litigation dockets (including subpoena enforcement, 

complex document review, and personnel-related matters) require added resources. 

Commission Reauthorization 

The authorization for the Commission’s appropriations expired at the end of 

FY 2005. The Commission’s seventh reauthorization is raising some particularly 

complex issues, in part because it is the first reauthorization after the enactment 

of the CFMA and comes as energy and international issues are becoming an increasing focus of congressional attention. The House of Representatives passed a 

reauthorization bill in mid-December, 2005; the Senate Agriculture Committee 

has reported a different reauthorization bill, but the timing of full Senate consideration of the issue is unknown at this time. OGC will continue to assist the 

Commission in analyzing, and taking the necessary actions to implement, the 

legislative proposals that Congress enacts in reauthorization. 

Consequence of Not Receiving Requested Level of Resources 

The Commodity Exchange Act provides that the Commission “shall have a General Counsel” who “shall report directly to the Commission and serve as its legal 

advisor.” In that role, the Office of General Counsel reviews all proposed Commission actions to assure their legal sufficiency under the CEA and any other applicable statues, e.g., the Administrative Procedure Act, the Freedom of Information Act, and others. The Office is the Commission’s appellate advocate, and also 

acts as the Commission’s trial lawyer in a range of administrative proceedings 

and federal district court matters. It assists the Commission in resolving adjudicatory matters, reviews proposed legislation for its likely impact on the futures 

industry, and suggests needed legislative reforms. In addition, the General 
FY 2008 President’s Budget & Performance Plan

74 FY 2008 President’s Budget & Performance Plan⎯Office of the General Counsel 

Counsel serves as the Commission’s Designated Agency Ethics Officer, and in 

that capacity assures that the agency, the Commission and its employees comply 

with federal ethics rules and regulations. 

The volume and complexity of the futures and derivatives markets have grown 

exponentially while the General Counsel’s office has shrunk. This imbalance between resources and need has led to legal advice regarding the sufficiency of proposed actions and the interpretation of the CEA being offered by staff outside 

OGC. When decision-making and legal analysis become inappropriately balkanized, the Commission runs the risk of reaching inconsistent outcomes based on 

ad hoc analysis. The Commission wants, and needs, to centralize its legal advisory services in the Office of General Counsel, where Congress placed that function. This requires a substantial increase in OGC’s staff. The four new positions 

requested will go far toward enabling OGC to perform its statutory functions with 

efficiency and authority. 

*** 
FY 2008 President’s Budget & Performance Plan

 

FY 2008 President’s Budget & Performance Plan⎯Office of the General Counsel 75 

Table 31: General Counsel Request 

FY 2007 FY 2008 Change 

 $ (000) FTE $ (000) FTE $ (000) FTE

General Counsel $6,954 28.00 $8,874 32.00 $1,920 4.00

TOTAL $6,954 28.00 $8,874 32.00 $1,920 4.00
FY 2008 President’s Budget & Performance Plan

76 FY 2008 President’s Budget & Performance Plan⎯Office of the General Counsel 

Table 32: General Counsel Request by Goal 

 FY 2007 FY 2008 Change 

 $ (000) FTE $ (000) FTE $ (000) FTE

GOAL ONE: Protect the economic functions of the commodity futures and option markets. 

Outcomes 

1.1 Futures and option markets that accurately reflect the forces of supply and demand for the underlying commodity and 

are free of disruptive activity. 

$1,373 5.53 $1,752 6.32 $379 0.79

1.2 Markets that can be monitored to ensure early warning of potential problems or 

issues that could adversely affect their 

economic vitality. 

94 0.38 120 0.43 26 0.05

Subtotal Goal One $1,467 5.91 $1,872 6.75 405 0.84

GOAL TWO: Protect market users and the 

public. 

Outcomes 

2.1 Violations of Federal commodities laws 

are detected and prevented. 

$2,203 8.87 $2,811 10.14 $608 1.27

2.2 Commodities professionals meet high 

standards. 

437 1.76 558 2.01 121 0.25

2.3 Customer complaints against persons 

or firms falling within the jurisdiction of 

the Commodity Exchange Act are handled 

effectively and expeditiously. 

1,084 4.36 1,383 4.99 299 0.63

Subtotal Goal Two $3,724 14.99 $4,752 17.14 $1,028 2.15

GOAL THREE: Foster open, competitive, and financially sound 

markets. 

Outcomes 

3.1 Clearing organizations and firms holding customer funds have sound financial 

practices. 

$445 1.78 $567 2.04 $122 0.26

3.2 Commodity futures and option markets 

are effectively self-regulated. 

188 0.76 240 0.87 52 0.11

3.3 Markets are free of trade practice 

abuses. 

428 1.73 547 1.97 119 0.24

3.4 Regulatory environment responsive to 

evolving market conditions. 

702 2.83 896 3.23 194 0.40

Subtotal Goal Three $1,763 7.10 $2,250 8.11 487 1.01

TOTAL $6,954 28.00 $8,874 32.00 $1,920 4.00

Goal Three

35%

Goal Two

44%

Goal One

21%

Figure 37: General Counsel FY 2008 Budget by Goal 
FY 2008 President’s Budget & Performance Plan

 

FY 2008 President’s Budget & Performance Plan⎯Executive Direction & Support 77 

Executive Direction & Support 

Total Budget: $30,434,000 128 FTEs 

Total Change: $ 3,735,000 0 FTE 

All Other 

Programs

74%

Executive

Direction

26%

All Other 

Programs

73%

Executive

Direction 

27%

Figure 38: Percentage of 

Total Budget Dollars 

Figure 39: Percentage of 

Total Budget FTEs 

Justification of the FY 2008 President’s Budget & Performance Plan 

Agency Direction. The Commission develops and implements agency policy in 

furtherance of the purposes of the CEA. This policy is designed to foster the financial integrity and economic utility of commodity futures and option markets 

for hedging and price discovery, to conduct market and financial surveillance, 

and to protect the public and market participants against manipulation, fraud, 

and other abuses. Agency Direction is administered by the Chairman and Commissioners and includes the following offices of the Chairman: 1) External Affairs; 2) the Secretariat; 3) the Inspector General; and 4) International Affairs.

The Commission continues to implement the CFMA. The legislation, signed by 

President Clinton in December 2000: 1) repealed the ban on single-stock futures 

and implemented a regulatory framework for these instruments based on the 

agreement between the Commission and SEC; 2) enacted the principal provisions 

of the Commission’s new regulatory framework; 3) brought legal certainty to bilateral and multilateral trading in OTC financial markets; 4) confirmed the 

Commission’s jurisdiction over certain aspects of the retail market in foreign currency trading; and 5) gave the Commission authority to regulate clearing organizations. 

In FY 2008, the Agency Direction program requests a total of 39 FTEs, resulting 

in no increase over the FY 2007 level. 

Administrative Management and Support. Administrative Management and 

Support is provided by the Office of the Executive Director (OED), which is responsible for policy development and implementation of the management and 

administrative functions of the Commission. Administrative Management and 

Support is administered by the Chief of Staff and Executive Director and includes 

the following offices of the Executive Director: 1) Human Resources (OHR); 2) 

Financial Management (OFM); 3) Information and Technology Services (OITS); 

4) Management Operations (OMO); and 5) the Library. OED staff: 

• Formulate budget and resource authorization strategies; 

• Supervise the allocation and utilization of agency resources; 

• Promote management controls and financial integrity; 
FY 2008 President’s Budget & Performance Plan

78 FY 2008 President’s Budget & Performance Plan⎯Executive Direction & Support 

• Manage administrative support offices; 

• Manage the Commission’s technical and information infrastructure; 

• Manage human capital resource strategies; 

• Oversee the development and implementation of the Commission’s automated information systems; and 

• Oversee the library services of the Commission. 

In addition, the staffs of OED and subordinate offices oversee Commission-wide 

compliance with Federal requirements enacted by Congress and imposed by the 

Office of Management and Budget (OMB), the U.S. Treasury, the Government 

Accountability Office (GAO), and the Office of Personnel Management. 

In FY 2008, the Administrative Management and Support subprogram requests a 

total of 89 FTEs, resulting in no increase over the FY 2007 level. 

Consequence of Not Receiving Requested Level of Resources 

Agency Direction. Without the requested level of resources, the Offices of the 

Commissioners and Chairman will suffer a diminution in the administrative and 

regulatory responsiveness of the Commission. For example, public outreach, and 

responsiveness to Congress, other government agencies, the futures industry, and 

other public inquiries may be slower, or administrative and technical review of 

Commission memoranda, correspondence, or official actions, such as responding 

to Freedom of Information Act requests, may take longer. 

Our markets are global and the Commission needs resources to cooperate with 

our foreign regulatory counterparts. Any diminution in resources will also severely affect the ability of the Commission to continue its existing international 

cooperation and coordination program. Cutbacks in the Commission‘s relatively 

lean international program could require the Commission to reduce its participation in standard-setting international organizations, restrict its ability to engage 

in bilateral meetings with foreign regulatory authorities that are increasingly necessary to address important cross-border issues (e.g., electronic markets), and 

restrict our ability to respond positively to requests by the U.S. Treasury to participate in international dialogues where Commission contributions are requested (e.g., U.S.-China dialogue). 

Administrative Management & Support. Without the requested level of resources, the Administrative Management and Support subprogram will impair its 

ability to manage the: 1) increased complexity associated with novel programs 

under pay parity and directives related to the President’s Management Agenda; 

2) accelerated modernization of the Commission’s human capital programs, such 

as pay for performance and pay banding; 3) workforce/succession planning 

needed to address the anticipated retirement of 33 percent of the CFTC total 

workforce and 41 percent of the leadership positions through 2009, plus nonretirement attrition; 4) the increased regulatory and administrative responsibilities imposed by GAO, GSA, OMB, the U.S. Treasury and legislative mandates 

such as the Government Performance and Results Act, Government Information 

Security Reform Act, Federal Managers’ Financial Integrity Act, and the Tax Accountability Act; 5) in-house expertise needed to assist major programs in the 

monitoring, audit, and investigation of increasingly sophisticated and technologically driven markets; 6) coordination and implementation of the agency asset 

management initiative as identified in the FY 2004 KPMG financial audit statement as an internal control weakness; and 7) preparedness and readiness of the 

Commission and staff in the event of an emergency. 
FY 2008 President’s Budget & Performance Plan

 

FY 2008 President’s Budget & Performance Plan⎯Executive Direction & Support 79 

Table 33: Executive Direction & Support Request by Subprogram 

FY 2007 FY 2008 Change 

 $ (000) FTE $ (000) FTE $ (000) FTE

Agency Direction $8,212 39.00 $9,352 39.00 $1,140 0.00

Admin. Mgmt. & Supp. 18,487 89.00 21,082 89.00 2,595 0.00

TOTAL $26,699 128.00 $30,434 128.00 $3,735 0.00

Admin. Mgmt.

& Support

68%

Agency 

Direction

32%

Figure 40: Executive Direction & Support FY 2008 Budget by Subprogram
FY 2008 President’s Budget & Performance Plan 

80 FY 2008 President’s Budget & Performance Plan⎯Executive Direction & Support 

Table 34: Executive Direction & Support Request by Goal 

FY 2007 FY 2008 Change 

 $ (000) FTE $ (000) FTE $ (000) FTE

GOAL ONE: Protect the economic functions of the commodity futures and option markets. 

Outcomes 

1.1 Futures and option markets that 

accurately reflect the forces of supply and demand for the underlying 

commodity and are free of disruptive activity. 

$644 3.10 $734 3.10 $90 0.00

1.2 Oversee markets which can be 

used effectively by producers, processors, financial institutions, and 

other firms for the purposes of price 

discovery and risk shifting. 

1,049 5.05 1,195 5.05 146 0.00

Subtotal Goal One $1,693 8.15 $1,929 8.15 $236 0.00

GOALTWO: Protect market users and the public. 

Outcome 

2.1 Violations of Federal commodities laws are detected and prevented.$1,267 6.10 $1,446 6.10 $179 0.00

2.3 Customer complaints against 

persons or firms falling within the 

jurisdiction of the Commodity Exchange Act are handled effectively 

and expeditiously. 

322 1.55 368 1.55 $46 0.00

Subtotal Goal Two $1,589 7.65 $1,814 7.65 $225 0.00

GOAL THREE: Foster open, competitive, and financially sound markets. 

Outcomes 

3.1 Clearing organizations and firms 

holding customer funds have sound 

financial practices. 

$135 0.65 $154 0.65 $19 0.00

3.2 Commodity futures and option 

markets are effectively selfregulated. 

103 0.50 118 0.50 15 0.00

3.4 Regulatory environment responsive to evolving market conditions. 1,263 6.00 1,439 6.00 176 0.00

Subtotal Goal Three $1,501 7.15 $1,711 7.15 $210 0.00

Unallocated 

Unallocated & Prorated 21,916 105.05 24,980 105.05 3,064 0.00

Subtotal Unallocated $21,916 105.05 $24,980 105.05 $3,064 0.00

TOTAL $26,699 128.00 $30,434 128.00 $3,735 0.00

Unallocated

85%

Goal Two

5%

Goal Three

5%

Goal One

5%

Figure 41: Executive Direction & Support FY 2008 Budget by Goal
FY 2008 President’s Budget & Performance Plan

 

Appendix 1—The Commissioners 81 

APPENDIX 1 

The Commissioners 

Reuben Jeffery III, Chairman 

Reuben Jeffery III was nominated by President George W. Bush to serve as 

Chairman of the Commodity Futures Trading Commission. He was confirmed by 

the U.S. Senate on June 30, 2005, to a term expiring April 13, 2007. 

In his capacity as Chairman, Mr. Jeffery serves as a member of the President’s 

Working Group on Financial Markets along with the Secretary of the Treasury, 

the Chairman of the Board of Governors of the Federal Reserve, and the Chairman of the Securities and Exchange Commission. 

Prior to joining the CFTC, Mr. Jeffery was the Special Assistant to the President 

and Senior Director for International Economic Affairs at the National Security 

Council. He was previously the Representative and Executive Director of the Coalition Provisional Authority Office at the Pentagon, after having served as an advisor to Ambassador Bremer in Iraq. Before joining the Coalition Provisional Authority in May of 2003, Mr. Jeffery served as Special Advisor to the President for 

Lower Manhattan Development. In this capacity he helped coordinate ongoing 

federal efforts in support of the longer term recovery and redevelopment of 

Lower Manhattan in the aftermath of September 11, 2001. 

Mr. Jeffery spent eighteen years working for Goldman, Sachs & Co. where he was 

managing partner of Goldman Sachs in Paris (1997-2001) and of the firm’s European Financial Institutions Group (1992-1997) based in London. Mr. Jeffery has 

a broad range of international capital markets, corporate finance and merger and 

acquisition experience. 

Prior to joining Goldman Sachs, Mr. Jeffery was a lawyer with the New York firm 

of Davis Polk & Wardwell. He began his career as a commercial banker with the 

Morgan Guaranty Trust Company of New York. 

Mr. Jeffery received his BA degree in Political Science from Yale University in 

1975 and his Juris Doctor and Master of Business Administration degrees from 

Stanford University in 1981. He was admitted to the New York Bar in 1982. Mr. 

Jeffery lives with his wife, Robin and three children, Jocelyn, Ben and Bob in 

Washington, D.C. 

Walter L. Lukken, Commissioner 

Walter L. Lukken was sworn in on August 7, 2002 as a Commissioner of the 

CFTC. He was nominated by President George W. Bush on April 16, 2002, and 

confirmed by the Senate on August 2, 2002, to a term expiring April 13, 2005. 

On May 25, 2005, Mr. Lukken was nominated by President Bush to a second 

term as a Commissioner expiring April 13, 2010. The Senate confirmed that 

nomination on June 30, 2005. 

Commissioner Lukken was appointed in October 2003 to serve as Chairman and 

Designated Federal Official of the CFTC’s Global Markets Advisory Committee 

(GMAC). The GMAC was created by the Commission to provide a forum in which 

it can discuss the many complex and novel issues raised by the ever-increasing 

globalization of futures markets. Commissioner Lukken has also represented the 

CFTC before the International Organization of Securities Commissions (IOSCO), 

the European Union, and other foreign regulatory bodies. 
FY 2008 President’s Budget & Performance Plan

82 Appendix 1⎯The Commissioners 

In May 2003, CFTC Chairman James Newsome and SEC Chairman William 

Donaldson tasked Commissioner Lukken and SEC Commissioner Paul Atkins, 

respectively, to work together with agency staff on the completion of issues arising from the implementation of the Commodity Futures Modernization Act of 

2002 (H.R. 5660). Their efforts resulted in a memorandum of understanding 

between the agencies regarding security futures products in March 2004. 

Mr. Lukken joined the Commission after serving four years on the professional 

staff of the U.S. Senate Agriculture Committee under Chairman Richard Lugar 

(R-IN). While working for the committee, Mr. Lukken specialized in futures and 

derivatives markets, agricultural banking, and agricultural tax issues. In this capacity, Mr. Lukken was involved in the drafting of the Commodity Futures Modernization Act of 2002 (H.R. 5660) and the 2002 Farm Bill (H.R. 2646). 

Before joining the committee, Mr. Lukken worked for five years in the personal 

office of Senator Lugar as a legislative assistant specializing in finance and tax 

matters. 

A native of Richmond, Indiana, Mr. Lukken received his B.S. degree with honors 

from the Kelley School of Business at Indiana University, and his Juris Doctor 

degree from Lewis and Clark Law School in Portland, Oregon. Mr. Lukken is a 

member of the Illinois Bar. He is married to Dana Bostic Lukken of Morgan City, 

Louisiana, and they and their son William and daughter Genevieve reside in 

Washington, D.C. 

Michael V. Dunn, Commissioner 

Michael V. Dunn was nominated to a second term as a Commissioner of the Commodity Futures Trading Commission by President Bush on June 16, 2006, and 

confirmed by the Senate on August 3, 2006. Mr. Dunn has served as a Commissioner since December 6, 2004. On January 9, 2006, he was chosen by his colleagues to chair the Commission’s Agriculture Advisory Committee and on March 

13, 2006, he was appointed Chairman of the Commission’s Forex Task Force. 

Prior to joining the CFTC, Mr. Dunn served as Director, Office of Policy and 

Analysis at the Farm Credit Administration (FCA). Prior to this position, in 

January 2001 he served briefly as a member of the FCA Board. 

Prior to joining FCA, Mr. Dunn was the Under Secretary of Agriculture for Marketing and Regulatory Programs at the U.S. Department of Agriculture (USDA). 

He also served as the Acting Under Secretary for Rural Economic Community 

Development and as Administrator of the Farmers Home Administration 

(FmHA) at USDA. 

Mr. Dunn has had a long involvement in agricultural credit dating back to the late 

1970s, when he was the Midwest Area Director for the FmHA. He has been a 

loan officer and vice president of the Farm Credit Banks of Omaha and has served 

as a member of the Professional Staff of the Senate Agricultural Committee, specializing in agricultural credit. At the USDA, Mr. Dunn also served as a member 

of the Commodity Credit Corporation and Rural Telephone Bank Board. He is a 

past member of the Iowa Development Commission and has served as the 

Chairman of the State of Iowa’s City Development Board. 

A native of Keokuk, Iowa, and a current resident of Harpers Ferry, West Virginia, 

Mr. Dunn received his B.A. and M.A. degrees from the University of New Mexico. 
FY 2008 President’s Budget & Performance Plan

 

Appendix 2—Summary of Commission Goals, Outputs, and Business Processes 83 

APPENDIX 2 

Summary of Goals, Outcomes, and Business Processes 

Goal One: Ensure the economic vitality of the commodity futures and option 

markets.

Outcome Business Process 

1.1 Markets that accurately reflect the 

forces of supply 

and demand for 

the underlying 

commodity and 

are free of disruptive activity. 

1. Conduct financial surveillance 

2. Conduct market surveillance 

3. Conduct trade practice surveillance 

4. Conduct economic research 

5. Review trading facility filings and clearing organization contracts and rules 

6. Conduct cooperative enforcement 

7. Investigate violations 

8. File and prosecute cases 

9. Take appropriate remedial or punitive action 

1.2 Markets are effectively and efficiently monitored 

to ensure early 

warning of potential problems or 

issues that could 

adversely affect 

their economic vitality. 

1. Conduct financial surveillance 

2. Conduct market surveillance 

3. Conduct trade practice surveillance 

4. Conduct economic research 

5. Review trading facility filings and clearing organization contracts, and rules 

6. Investigate violations 

7. File and prosecute cases 

8. Share information externally 

9. Coordinate with domestic regulators 

Goal Two: Protect market users and the public.

Outcome Business Process 

2.1 Violations of Federal commodities 

laws are detected 

and prevented. 

1. Conduct financial surveillance 

2. Conduct cooperative enforcement 

3. Investigate violations 

4. File and prosecute cases 

5. Resolve administrative enforcement cases 

6. Resolve appeals 

7. Share information externally 

8. Take appropriate remedial or punitive action 

9. Represent Commission in litigation or other disputes 

10. Collect monetary penalties from violators. 

2.2 Commodity professionals meet 

high standards. 

1. Provide guidance, advice, and regulate business, financial,

and sales practices 

2. Review self-regulatory organizations and clearing organizations 

3. Investigate, file, and prosecute cases 
FY 2008 President’s Budget & Performance Plan

84 Appendix 2⎯Summary of Commission Goals, Outputs, and Business Processes 

Goal Two: Protect market users and the public. (Continued)

Outcome Business Process 

2.3 Customer complaints against persons or firms registered under the Act 

are handled effectively and expeditiously. 

1. Manage reparations program 

2. Resolve appeals 

3. Represent Commission in litigation or other disputes 

Goal Three: Ensure market integrity in order to foster open, competitive, 

and financial sound markets.

3.1 Clearing organizations and firms 

holding customer 

funds have sound 

financial practices. 

1. Conduct financial surveillance 

2. Provide guidance, advice, and regulate business, financial, and

sales practices 

3. Review self-regulatory organization enforcement 

4. Investigate violations 

5. File and prosecute cases 

6. Take appropriate remedial or punitive action 

3.2 Commodity futures 

and option markets 

are effectively selfregulated. 

1. Conduct financial surveillance 

2. Provide guidance, advice, and regulate business, financial, and

sales practices 

3. Review exchange applications, contracts, and rules 

4. Review self-regulatory organization enforcement 

3.3 Markets are free of 

trade practice 

abuses. 

1. Investigate violations 

2. File and prosecute cases 

3.4 Regulatory environment is flexible 

and responsive to 

evolving market 

conditions. 

1. Coordinate with domestic regulators 

2. Coordinate with foreign and international regulators 

3. Draft, review, and comment on legislation 

4. Provide guidance, advice, and regulate business, financial, and

sales practices 
FY 2008 President’s Budget & Performance Plan

 

Appendix 3⎯President’s Management Agenda 85 

APPENDIX 3 

Management Initiatives Supporting the President’s Management Agenda 

Strategic Management of Human Capital 

The framework of the PMA supported OHR in remaining focused on building 

agency capacity to manage its human capital strategically. The goal is to build 

and refine complementary tools and self-reinforcing business processes that work 

together to form an enduring basis for strategic resource management. This 

overall agency competency relies on the direct input of the invaluable expertise of 

all the individuals that form the human capital foundation for our mission readiness. By conducting the second annual online SWP Survey of employee job competencies and enhancing the capacity of that system to provide quantitative data 

in support of management decision makers, CFTC reinforced the message that 

every employee has a role in attaining and effectively managing the missioncritical competencies needed over the life of the CFTC strategic plan. Putting enhanced tools and processes in place to support employees and managers in realizing that potential allowed CFTC to continue its self rating of green on the standards for success under this goal on the Executive Branch Management Scorecard. Specific actions underway to strengthen our response to each standard and 

the basis for the overall green light rating include: 

• Strategy aligned with mission, goals, and organizational objectives. By establishing a permanent Pay Parity Governance Committee (PPGC) with representatives from every major agency subdivision, the CFTC has a resource 

dedicated to studying and recommending options for human capital programs aligned with agency objectives. The PPGC has relied on a best practice 

model in developing a compensation philosophy that will guide our human 

capital strategy. These general goals help focus specific program choices on 

making the most efficient and effective use of CFTC authority, under the 

Farm Security and Rural Investment Act of 2002, to provide pay and benefits 

parity with other Federal financial regulators as we compete for missioncritical talent. 

• Citizen-centered organizational structure. By providing impartial insight 

into the availability and utilization of the agency’s human capital, our online 

inventory of job competencies allows responsive organizational alignment of 

resources with stakeholder needs as financial markets rapidly evolve. The 

SWP Survey system not only projects how the required competency mix will 

change in response to industry trends, it identifies the nature, level, and 

probable point in time for loss to retirement or other turnover of the skills 

held by each current employee. This knowledge supports the flexible matrix 

planning and management of agency resources required by the oversight 

rather than front-line regulator role assigned to the agency by the CFMA. 

• Sustains performance, utilizes flexibilities, and plans succession. In order to 

maintain our mission-readiness, CFTC has acted to train replacements for 

the 40 percent of managers projected to retire by 2009. A major resource is 

the custom suite of online management training from Harvard Business 

School Press now available at each supervisor’s desktop. To strengthen our 

skills base at all levels, CFTC is also rolling out the online SkillSoft product 

for all employees. In view of the projected loss of 70 percent of all staff by 

2009, these agency-wide initiatives will help close the gaps identified by 

means of the talent management action plan templates that managers and 

employees use to identify strategies to close anticipated shortfalls in organizational or individual skills sets. 
FY 2008 President’s Budget & Performance Plan

86 Appendix 3⎯President’s Management Agenda 

• Meet mission-critical skill needs. Several initiatives have reinforced the message that each employee must take an active role in developing, maintaining, 

and applying the specific skills needed by the agency now and over time. 

Providing access to a library of job competencies that are ranked for current 

and future importance to the agency mission allows employees to assess their 

skills against agency needs. The annual all-employee online survey of training needs encourages employees to participate in their self-development. As 

part of the development of a new performance appraisal system, all employees have had opportunities via focus groups, online surveys, a Webinar, and 

town hall meetings to discuss ways by which a revised system could encourage demonstration of knowledge by producing results that are important to 

the agency. These measures help encourage a culture that values the creation 

and management of knowledge and is suited to our professional workforce. 

• Reward performance. In March of 2006, the PPGC was assigned responsibility to develop specific recommendations for revised CFTC compensation 

and performance management systems. The goal is enhanced ability to effectively take into account achievement of agency results when setting the total 

rewards of CFTC employment, including a pay-for-performance system. 

Based on input from all agency employees on how to improve our performance management approach to better support a merit-based system of rewards, our revised Performance Management Program took effect October 1, 

2006. Implementation included initial and refresher training for managers 

and employees in how to successfully fulfill their roles, to prepare all staff for 

the July 1, 2007, effective date of our pay-for-performance system. 

• Workforce emphasizes E-government and competition. OHR has continued 

its actions to adopt available e-government programs promptly, in order to 

gain efficiencies and enhance service levels. It has entered into the assessment phase of conversion to electronic Official Personnel Folders (eOPF) under the OPM Enterprise Human Resources Integration program. To support 

continued sharing of knowledge through the agency’s popular in-house training program, OHR advises the CFTC Training Advisory Group in conducting 

online surveys of employee training needs. Managers now have online 

courses available at their desktop and employees are about to receive the 

same capability. We continue to make full use of the e-government facilities 

in the area of employee security and suitability determinations, including a 

planned update to our existing electronic fingerprinting capability that allows 

efficient prescreening of employment candidates. Several initiatives discussed here have benefited from efficient program development support secured through competitive bidding. 

In line with the OED emphasis on the strategic perspective embodied in the PMA, 

OHR plans its activities around building programs and operational processes that 

deliver information and services to support effective management analysis and 

decisions. These programs enlist the skills of all our employees in order to meet 

agency goals, fully realize the standards for success in human capital management, and maintain the overall green light rating. 

Expanding Electronic Government 

The Commission continues to review, access, and improve its overall web presence in support of E-Government. In FY 2006, the Commission embarked upon 

a new initiative to redesign and restructure its Internet Web site based upon standards and best practices. This initiative will improve the Commission’s overall 

web presence, improve usability of the Web site, and provide a consistent customer experience. 
FY 2008 President’s Budget & Performance Plan

 

Appendix 3⎯President’s Management Agenda 87 

Competitive Sourcing 

The Commission continues incorporating the elements of performance-based 

service contracting in its service contracts, as appropriate. 

Budget and Performance Integration 

The Commission continues to make steady progress toward achieving the accelerated financial reporting requirements of the President’s Management Agenda. 

During the FY 2006 reporting cycle, the Commission issued its third Performance and Accountability Report by the mid-November due date. In FY 2007, we 

are conforming to the accelerated reporting requirement. 

In addition we continue to make progress with respect to each of the standards 

for success associated with the President’s goal of budget and performance integration as outlined below: 

• Creation, implementation, and monitoring of an integrated performance 

plan/budget. The FY 2008 President’s budget request and the Annual Performance Plan are integrated—with the budget showing the request broken 

out by object class, by program, and by strategic goal and planned outcome. 

To further demonstrate the Commission’s progress, the Office of Financial 

Management has begun working to restructure the financial management 

system to align the monitoring of spending with that of budgeting or planning for spending. On October 1, 2006, the Commission migrated towards a 

new financial management system, Delphi. OFM took full advantage of the 

new capabilities Delphi offers and also migrated its work measurement system, formally known as the Management Accounting Structure Code (MASC) 

system to Delphi’s Budget Program Activity Code (BPAC) system. 

This meant a complete overhaul of the agency’s work measurement system to 

better align it with the goals, outcomes, and business processes of the new 

strategic performance planning and measurement structure. A new coding 

structure was developed from six digits to 10 alpha-numeric characters and 

realigned from program activities to the agency’s strategic planning structure, as set forth in the CFTC’s 2004-2009 Strategic Plan. 

This restructuring of the financial management system and work measurement system will enable a better understanding by program staff of how their 

activities help the Commission reach its goals, outcomes, and performance 

targets. As a result, monitoring of resource expenditures⎯monetary and 

human⎯will become more successfully aligned as originally envisioned. 

• Full cost of outputs and programs is integrated with performance. The 

Commission’s fully integrated budget and performance estimate contain a 

cross-cutting analysis that demonstrates how the full cost of each budget request is fully integrated with planned performance. That is, the programbased and object class-based analyses of the request are augmented by a programmatic distribution of resources by each of the Commission’s strategic 

goals. Conversely, the goal-based analysis of request’s planned performance 

also disaggregates resources by program. This analysis was developed both to 

demonstrate that full costs were integrated with performance and to engender greater understanding among the public, the Congress, the Administration, market users, and the many other interested persons and entities regarding how resources contribute to the accomplishment of the Commission’s mission. 

• Agency documents program effectiveness, analyzes policies’ impact on outcomes, and demonstrates how results inform budget decisions. With the 

work of the senior staff to revamp the strategic performance planning and 

measurement system as well as the efforts of the Budget & Planning and Ac-
FY 2008 President’s Budget & Performance Plan

88 Appendix 3⎯President’s Management Agenda 

counting teams of OFM to align planning and monitoring of resource expenditure, the Commission will have the foundation in place to begin documenting program effectiveness, analyzing the impact of policy decisions on outcomes, and demonstrating how performance results affect budget decisions. 

Improved Financial Performance 

OFM continues to work toward improving its financial performance through increasing the efficiency of financial reporting, enhancing financial systems to improve functionality and strengthen regulatory compliance. Initiatives for improving the Commission’s financial performance to meet the core criteria for successful financial management standards include the following: 

• Financial management systems meet Federal financial management systems requirements and applicable Federal accounting and transaction 

standards. As a result of the passage of the Accountability of Tax Dollars Act 

of 2002 and the E-Government Act of 2002, the CFTC is even more strongly 

committed to delivering its mission in an effective and efficient manner. The 

agency is eager to adapt current business processes to leverage efficiencies 

that new technology brings. Moreover, the evolving nature of the commodity 

futures trading industry drive greater reliance on more sophisticated regulatory techniques, which in turn drive expectations within the CFTC for better 

technological systems to support its key activities. Meaningful data is needed 

now more then ever to evaluate program plans, budgets, and performance, as 

well as to support a broad array of management decisions. Meeting these 

expectations will require a transformation in the systems and processes the 

CFTC currently uses to record, collect, assemble, and analyze data. 

 In FY 2007, the agency migrated its core financial management system to the 

Department of Transportation’s Enterprise Services Center; an OMBapproved Center of Excellence. It will continue its efforts to integrate additional systems and business lines, such as acquisitions, asset management, 

and eTravel as part of an enterprise-wide financial management system in FY 

2008. 

• Integrated financial and performance management systems supporting 

day-to-day operations. In FY 2006, OFM completed an assessment of its 

current methods for producing financial and performance data from its systems. As a result, enhancements to the core financial system were made to 

provide better integration of cost and performance data. In future fiscal 

years, OFM will continue its effort to refine and improve the integration of financial and performance data to support better performance measurement 

and decision-making regarding the Commission’s resources. 

• Unqualified and timely audit opinions. The Accountability of Tax Dollars Act 

of 2002 required the Commission to comply with reporting requirements of 

the Chief Financial Officers Act of 1990 for FY 2004. Reporting requirements 

include submitting audited financial statements for fiscal year-end. In FY 

2007, the Commission received an unqualified, or clean opinion, on its audited financial statements. As a result, continued efforts and resources were 

committed to making improvements in the timeliness and integrity of financial reporting. These improvements included: 

• Producing financial reporting that was more timely, complete, and accurate by implementing a series of analytical controls, including trial balance and relationship tests, fluctuation analysis, computation validation, 

statement crosswalk balancing, and account and report reconciliation; 

• Meeting accelerated reporting deadlines of OMB and U.S. Treasury; 
FY 2008 President’s Budget & Performance Plan

 

Appendix 3⎯President’s Management Agenda 89 

• Documenting agency accounting events and business processes to include asset management, civil monetary sanctions, human resources, 

funds management, and financial reporting; 

• Conducting a series of management control reviews and validation of its 

financial activities; and 

• Improving integration of accountability reporting to reflect agency’s internal control framework and revised requirements of OMB Circular A123, Management’s Responsibility for Internal Control. 

OFM will continue to support the OED emphasis on improving financial performance as envisioned in the PMA, specifically by maintaining and sustaining 

controls to ensure an unqualified audit opinion and effective stewardship of the 

agency’s assets; ongoing implementation and integration of an enterprise-wide 

financial management system solution that provides valuable financial management tools to enhance and drive sound decision-making; and refining and expanding efficiency indicators to measure program results against performance. 

*** 
FY 2008 President’s Budget & Performance Plan

90 Appendix 4⎯Proposed Goal 4: Organizational and Management Excellence 

APPENDIX 4 

Proposed Goal 4: To facilitate Commission performance 

through organizational and management excellence, efficient 

use of resources, and effective mission support.

Background and Context 

The fulfillment of the Commission’s mission and the achievement of our 

goals are tied to a foundation of sound management and organizational excellence. This foundation is essential to support the work of the Commission 

in the Washington D.C. headquarters, two regional offices in New York and 

Chicago, and one field office in Kansas City. The Commission is committed 

to maintaining a well-qualified workforce supported by a modern support 

infrastructure that enables the Commission to achieve its programmatic 

goals. Building this foundation will require significant investment in people, 

Management Initiatives systems and facilities. 

Agency Direction. The Office of the Chairman and the Commissioners provide executive direction and leadership to the Commission – specifically as it 

develops and adopts agency policy that implements and enforces the Commodity Exchange Act and amendments to that Act including the CFMA. This 

policy is designed to foster the financial integrity and economic utility of 

commodity futures and option markets for hedging and price discovery, to 

conduct market and financial surveillance, and to protect the public and 

market participants against manipulation, fraud, and other abuses. Executive leadership, in this regard, is the responsibility of the Chairman and 

Commissioners and includes the offices of the Chairman: the Office of External Affairs, the Secretariat, the Office of Inspector General, the Office of International Affairs, and the Office of Equal Employment Opportunity.

The Commission continues to implement the CFMA passed by Congress and 

signed by President Clinton in December 2000. Specifically, the CFMA: 1) 

repealed the ban on single-stock futures and implemented a regulatory 

framework for these instruments based on the agreement between the Commission and SEC; 2) enacted the principal provisions of the Commission’s 

new regulatory framework; 3) brought legal certainty to bilateral and multilateral trading in over-the-counter financial markets; 4) confirmed the Commission’s jurisdiction over certain aspects of the retail market in foreign exchange trading; and 5) gave the Commission authority to regulate clearing 

organizations. The CFMA reauthorized the Commission through FY 2005. 

The Commission is currently working with the Administration and the Congress on issues related to the reauthorization of the Commission. 

Human Resources Management. The Commission, with less than 500 employees, performs a vital role in protecting the integrity of the futures and 

option markets – one of America’s most innovative and competitive financial 

services industries. To maintain the U.S. role as the world leader in setting 

the standard for ensuring market integrity and protection for market users, 

the Commission must have sufficient resources to attract, train, promote and 

retain a professional workforce. 

The Commission continues to pursue human resource initiatives aimed at 

building, developing and sustaining a knowledgeable, diverse and productive 

workforce. The Commission aims to have a workforce whose size, skills and 

composition react and adapt quickly to changes in the industry and technol-
FY 2008 President’s Budget & Performance Plan

 

Appendix 4─Proposed Goal 4: Organizational and Management Excellence 91 

ogy and/or statutory or regulatory developments. The Commission has embarked on a comprehensive Strategic Management of Human Capital Initiative with the goals of improving the ability to: plan for anticipated change in 

workforce composition, target and recruit employees to fill critical skill deficiencies, target developmental resources, identify and justify staff resources 

need to perform statutory mandates, and to implement the Title V-exempt 

CT pay plan as mandated by Section 10702 of Public Law 107-171, the Farm 

Security and Rural Investment Act of 2002. 

Information Technology Management. The Commission’s ability to fulfill its 

mission successfully depends on the collection, analysis, communication and 

presentation of information in forms useful to Commission employees and 

other interested parties, such as, the industry it regulates, as well as other 

Federal and state, and international agencies with which we cooperate, the 

Congress and the American public. A secure modern information technology 

infrastructure is a vital tool that enables the Commission to serve these stakeholders effectively. The Commission is making a concerted effort to use 

commercial best practices developing and maintaining its Information Technology (IT) systems, applications and infrastructure, deploying a modern 

messaging, archiving and document management system. 

This includes significant enhancements to the Integrated Surveillance System, the Commission’s primary mission critical application to support futures and option market surveillance, to address changes and growth in the 

futures industry; the Exchange Database System to improve the data collection technology and processes to provide a more efficient means of exchange 

data collection, resulting in more effective support for the Commission’s 

market oversight objectives. This effort will enable the Commission to 

strengthen its market oversight activities. 

Another significant project is the CFTC.gov redesign. This initiative will improve the Commission’s ability to communicate effectively with the public by 

providing mission-critical information in an easily accessible and usable 

manner. The redesign includes an assessment and review of the current content and structure of CFTC.gov to gain insight into the depth and breadth of 

the Web site, its navigation, and architecture. Based upon the needs of 

CFTC’s customers, work is being conducted to develop and implement a new 

information architecture design and high-level user-interface structure. This 

initiative also includes an assessment and evaluation of the current Web 

technology environment and identifying solutions to manage CFTC’s Internet 

presence. When complete, the redesigned CFTC.gov will improve the Commission’s Web presence, enhance usability, and provide a consistent customer experience. 

Other new systems are under development. The Filings and Actions System 

allows DMO and DCIO to manage the processing of submissions from regulated entities. Users can enter, modify and query data associated with Organizations, Products, Rules, and Foreign Filings and Actions. Project eLaw 

provides law office automation and modernization by seamlessly integrating 

technology and work processes to support managers and staff across the 

Commission in their investigative, trial, and appellate work. Project eLaw 

provides support in the areas of case planning, case management, litigation, 

and document management. 

Management Operations. The Office of Management Operations (OMO) 

provides support to Commission staff by ensuring the timely delivery of 

products and services, ensuring safety and security of all employees, and operations and maintenance of the facilities at Headquarters and in the regional 

offices. Many improvements in critical administrative service areas have oc-
FY 2008 President’s Budget & Performance Plan

92 Appendix 4⎯Proposed Goal 4: Organizational and Management Excellence 

curred during the last few years, with current goals of developing a property 

management system for non-capitalized, sensitive items, conducting testing, 

training and evaluation on all security programs, i.e., Occupant Emergency 

Plan, Shelter in Place, and Continuity of Operations (COOP). 

Financial Management. Improved accountability for performance, together 

with unquestionable fiscal integrity, serves as key mission delivery cornerstones. Effective financial management systems and services facilitate 

Commission performance, and earning unqualified audit opinions demonstrates financial accountability. Migration to Department of Transportation 

systems and services ensures that the financial resources entrusted to the 

Commission are well managed and judiciously deployed. The budget and 

Performance and Accountability Report permit the public to see how well 

programs perform, and the cost they incur to achieve that performance. 

*** 
FY 2008 President’s Budget & Performance Plan

 

Appendix 4─Proposed Goal 4: Organizational and Management Excellence 93 

Outcome Objectives and Annual Performance Goals 

Outcome 4.1 -- A productive, technically competent and diverse workforce that takes into account current and future technical and professional needs of the Commission. 

F Annual Performance Goal: Recruit, retain, and develop a skilled and diversified staff to keep pace with attrition and anticipated losses due to retirement. 

Outcome 4.2 -- A modern and secure information portfolio that reflects 

the strategic priorities of the Commission. 

F Annual Performance Goal: Link business decisions on IT resources to 

CFTC strategic goals by establishing a decision making and review process for allocation of IT resources. 

Outcome 4.3 -- An organizational infrastructure that efficiently and effectively responds to and anticipates both the routine and emergency 

business needs of the Commission. 

F Annual Performance Goal: A fully operational Contingency Planning Program to ensure the CFTC is prepared for emergencies and is fully capable 

of recovery and reconstitution. 

Outcome 4.4 -- Financial resources are allocated, managed and accounted for in accordance with the strategic priorities of the Commission. 

F Annual Performance Goal: A clean financial audit opinion for the CFTC. 

Outcome 4.5 -- The Commission’s mission is fulfilled and goals are 

achieved through sound management and organizational excellence 

provided by executive leadership. 

F Annual Performance Goal: Progress in completing the 16 priorities 

established in the Commission Strategic Plan for fiscal years 2004 

through 2009. 
FY 2008 President’s Budget & Performance Plan

94 Appendix 4⎯Proposed Goal 4: Organizational and Management Excellence 

Means and Strategies for Achieving Objectives 

Means: 

• Assess continually the external and internal issues and trends that 

may affect the mission and the way in which we must respond to 

meet it successfully. 

• Evaluate and adjust management and strategic plans to ensure that 

potential problems or weaknesses are managed before they develop 

into crises. 

• Develop and employ strategies which will focus on achieving results -

- strategies that will: define the basis for developing policies, making 

decisions, taking actions, allocating resources and defining program 

definition; clarify why the organization exists, what it does and why it 

does it—providing a bridge to understanding how the Commission 

connects to its environment. 

Strategies: 

• Plan for anticipated change in the workforce composition, improve 

ability to target recruitment to fill critical needs, and improve ability 

to identify and justify FTE resource needs. 

• Implement Farm Security and Rural Investment Act of 2002 mandates and benchmark CFTC/FIRREA comparability. 

• Manage newly implemented telework policy. 

• Link business decisions on IT resources to CFTC strategic goals and 

establish a decision making process for allocation of IT resources. 

• Build roadmap for all IT systems requirements to improve planning, 

resource allocation, systems development and capital planning. 

• Build/ensure robust information security program. 

• Ease access to information with a user centric Web site that provided 

current, consistent and accurate information. 

• Secure agency assets by ensuring appropriate internal controls on assets and providing a basis for life cycle management of assets. 

• Build/ensure archives management program that supports electronic 

records and improves handling, management and storage of records. 

• Improve IT customer service by improving linkage between program 

areas and short and long-term technology goals. 

• Create on-line CFTC legislative database to capture CFTC legislative 

history thereby providing an essential, efficient and permanent legal 

research tool to the Commission. 
FY 2008 President’s Budget & Performance Plan

 

Appendix 4─Proposed Goal 4: Organizational and Management Excellence 95 

• Build a Contingency Planning Program to ensure that the CFTC is 

prepared for emergencies and is fully capable of recovery and reconstitution. 

• Comply with U.S. Homeland Security directives and improve Federal 

identification procedures in the event of a disaster. 

• Standardize furniture assets and implement life-cycle management 

thereby improving financial planning, management and maintenance. 

• Manage events proactively to ensure effective application of scare resources and to improve customer service. 

• Create a permanent Office of Proceedings resource manual to ensure 

consistent guidance to new employees and to provide a performance 

framework to enable feedback to current employees. 

• Ensure a clean independent audit opinion of the agency’s financial 

statements by improving internal controls and improving financial 

reporting. 

• Execute an audit remediation plan to correct any deficiencies and/or 

implement recommendations. 

• Upgrade the Financial Management System to comply with Federal 

mandates to consolidate financial systems, to provide more meaningful data to evaluate program plans, budgets and performance and 

support resource management decision-making and to improve the 

ability to target resources to intended programmatic outcomes. 

• Integrate budget and performance information to improve management and performance of the Commission. 

• Undertake IT investments reviews to ensure the prudence of ongoing IT investments. 

Resource Priorities and Return on Investment: 

• Prepare for Commission reauthorization. The authorization for the 

Commission’s appropriations expired at the end of FY 2005. The 

Commission’s seventh reauthorization is raising some particularly 

complex issues, in part because it is the first reauthorization after the 

enactment of the CFMA and comes as energy and international issues are becoming an increasing focus of congressional attention. 

The House of Representatives passed a reauthorization bill in midDecember, 2005; the Senate Agriculture Committee has reported a 

different reauthorization bill, but the timing of full Senate consideration of the issue is unknown at this time.

• Develop and implement a new Commission trade surveillance system. The Commission has two electronic oversight systems – one to 

monitor for trading abuses (such as trading ahead of customers and 

trading against customers) and one to monitor for market manipulation utilizing the large trader reports). The first of these two systems 

is woefully out of date, and the Commission has concluded that the 

demands of today’s futures marketplace require development and 
FY 2008 President’s Budget & Performance Plan

96 Appendix 4⎯Proposed Goal 4: Organizational and Management Excellence 

implementation of a new approach. By supporting the Commission’s 

efforts to protect market participants from abusive trading practices 

and the integrity of the markets as a price discovery mechanism, the 

Commission trade practice investigation program helps the Commission maintain public confidence in the markets and in the Commission as their regulator. 

The Commission seeks an approach that will allow identification of 

inter-exchange violations that individual exchanges lack the capacity 

to detect, allow quicker access to and more sophisticated and customizable analysis of the full range of data supplied by exchanges 

with respect to electronic as well as open outcry trading, and enable 

meaningful Commission evaluation of the exchanges’ own electronic 

surveillance systems. 

• Continue collaborative regulatory efforts regarding SFPs. The 

Commission will continue in its efforts to coordinate with the SEC in 

implementing those sections of the CFMA related to the trading of 

SFPs. These areas include: SFP definitions; registration requirements and functions; treatment of customer funds; margin rules; the 

offering of foreign SFPs to U.S. customers; possible further exemptions for notice registrants; the listing of options; and coordinated 

clearing. The Commission will also respond to inquires from intermediaries, their counsel and accountants, and the general public 

concerning operational issues as the market for SFPs develops. Further, the Commission will work with the exchanges in developing 

sound business, financial and sales practices concerning the trading 

of SFPs. 

• Coordinate with foreign regulatory authorities – cooperative enforcement. The number, duration and speed of regulatory issues related to financial crises and market abuses can be mitigated through 

the enhancement of international cooperation amongst regulators 

and market authorities. It is therefore critical that the CFTC continue to foster productive and cooperative working relationships with 

these foreign counterparts. In particular, the Commission will continue to: 1) facilitate cross-border transactions through the removal 

or lessening of any unnecessary legal or practical obstacles; 2) endeavor to enhance the international supervisory cooperation and 

emergency procedures; 3) strengthen international cooperation for 

customer and market protection; 4) improve the quality and timeliness of international information sharing; and, 5) promote the development of internationally accepted regulatory standards of best practices. The CFTC will also continue to undertake measures to ensure 

that it maintains a high visibility in the international community and 

undertakes a leading role in the development of international financial policy affecting the futures and options markets. 

• Reengineer the Commission’s trade practice surveillance system 

and update the market surveillance system so that they remain effective and robust as trading migrates from the floors to electronic 

platforms. Markets regulated by the Commission have experienced a 

dramatic shift from floor to screen based trading over the past several years. The CBOT’s and the CME’s screen-based volume currently 

accounts for about 75 percent of total exchange volume. While electronic trading brings certain regulatory benefits, such as more precise audit trails, it also increases the opportunity for certain types of 

abuses, such as trading ahead of customers. In order to re-engineer 
FY 2008 President’s Budget & Performance Plan

 

Appendix 4─Proposed Goal 4: Organizational and Management Excellence 97 

our systems, we have examined the electronic trading systems and 

automated surveillance systems used by U.S. designated contract 

markets as well as those used by foreign futures exchanges that have 

significantly more experience in electronic trading. We are also incorporating changes in the Commission’s oversight systems and, 

where necessary, recommending alterations to systems of our designated contract markets to ensure that customers continue to be protected against trading abuses and manipulations. 

• Upgrade training for Enforcement investigators. Expert enforcement investigators are vital to the effectiveness of the Commission’s 

Enforcement program. The Commission continues to upgrade the 

training of its enforcement investigators in order to ensure that their 

level of expertise keeps pace with the technological advancements, 

increasing cross-border participation in the financial markets, and 

new complex contracts and trading strategies. Training includes advanced investigative techniques, especially with respect to trade 

practice investigations of electronic exchanges, the tracking of international money flows, and in-depth analysis of growing markets with 

an emphasis on the OTC energy markets. 

• Design and implement Project eLaw. The Commission will continue 

its effort to design and implement Project eLaw, an automated law 

office that seamlessly integrates technology and work processes to 

support managers and staff across the Commission in their investigative trial and appellate work. Driven by the Commission’s continued 

reliance on manual processes and automated tracking systems to 

manage cases and the millions of paper documents received or created annually, Project eLaw provides the automated tools to assist 

staff in performing their work more efficiently and effectively, both in 

the office and in the court room facing opposing counsel. Specifically, 

Project eLaw enables staff to: query and retrieve information about 

investigations and litigation provided to the Commission by outside 

parties, pursuant to subpoena or otherwise; develop documents in a 

collaborative electronic work environment across geographically dispersed locations; manage client contacts, investigation leads, and 

trial schedules; and present documentary and analytical evidence in 

court settings. The project achieved its final software application deployment throughout the Division of Enforcement in October 2006. 

In FY 2007, further enhancements will be implemented along with 

expansion to other offices within the Commission. 

• Establish a financial surveillance unit and fully implement FSIS. 

With the establishment of a financial surveillance unit, the Commission has an enhanced capability to monitor market information, 

evaluate the impact of market moves on the financial integrity of 

market participants, and anticipate and act upon indications of financial difficulty. This capability is built upon the implementation 

and use of the new FSIS component systems, including the RSR Express system that compiles FCM financial statements, the SPARK 

system that utilizes large trader information to allow the tracking of 

risk at market, firm, and account levels, and the SPAN Risk Manager 

system that will permit “what if” analyses. 

• Complete energy investigations. Since the fall of Enron, the Commission has conducted a significant number of investigations concerning potential misconduct by participants in the energy markets. 

To date, the Commission has filed 35 enforcement actions in this 
FY 2008 President’s Budget & Performance Plan

98 Appendix 4⎯Proposed Goal 4: Organizational and Management Excellence 

program area charging a total of 55 respondents/defendants (31 

companies and 24 individuals). The Commission has obtained 

$303,413,500 in civil monetary penalties in settlement of these enforcement actions. Eight Commission energy market related enforcement actions remain in active litigation in Federal district court. 

The Commission is actively engaged in other energy sector investigations which may result in further prosecutions. The Commission’s 

aggressive enforcement actions in the energy sector reflect an approach to market oversight that emphasizes tough enforcement actions against wrongdoers without creating overly burdensome regulations. The Commission is fully committed to resolving the on-going 

energy investigations as expeditiously as possible so that, in addition 

to identifying wrongdoers, it can exonerate those who were not involved and allow these important risk management markets to work 

toward restoring the confidence of market participants and the public. 

• Finalize rules for intermediaries. The Commission continues its efforts to modernize the rules affecting futures commission merchants, 

managers of pooled investment vehicles or individual accounts, and 

other intermediaries in the futures markets. Through hearings, studies, and roundtables, the Commission has, as directed by Congress, 

undertaken a concerted examination of the rules currently imposed 

on intermediaries, and we have adopted several rule changes⎯such 

as 1) providing financial institutions that are primarily overseen by 

another regulator (such as banks, insurance companies, and mutual 

funds) with an opportunity to use the risk management tools offered 

in the futures markets without subjecting themselves to unnecessary 

duplicative regulation; 2) providing appropriate registration relief to 

managers of pooled investment vehicles that restrict participation to 

highly sophisticated persons who use futures on a limited basis; and 

3) affording FCMs greater operational flexibility so that they can provide their customers with more efficient trade executions. The Commission will continue with efforts to enhance an effective oversight 

framework for intermediaries, as envisaged by the CFMA.

• Implement risk-based oversight of DSROs. The Commission will 

fully implement its risk-based approach to the oversight of DSROs in 

which Commission staff approach the cyclical review of each DSRO 

with an identification of its activities and potential risks, followed by 

an assessment of the appropriateness and adequacy of the systems, 

procedures, and practices that the DSRO relies upon to fulfill its responsibilities under the core principles set forth in the CFMA. This 

risk-based approach, already being utilized by other Federal financial 

regulators and international counterparts such as the U.K. Financial 

Services Authority, promises to make more effective use of Commission resources by tailoring oversight efforts to the relative probability 

and severity of potential risks to market integrity and to market participants. 

• Implement risk-based oversight reviews of SROs and DCOs. The 

Commission will refine its risk-based approach to conducting reviews 

and examinations of SROs and DCOs. This approach involves conducting cyclical reviews of SROs and DCOs with an identification of 

their activities and risks, followed by an assessment of the appropriateness and adequacy of the systems and procedures that are relied 

upon by the SROs and DCOs to fulfill their responsibilities under the 
FY 2008 President’s Budget & Performance Plan

 

Appendix 4─Proposed Goal 4: Organizational and Management Excellence 99 

Act and Commission regulations. This approach tailors oversight efforts to the relative probability and severity of potential risks. 

• SRO Study – Request for Comments on Proposed Acceptable Practices for Core Principle 15. On July 7, 2006, the Commission published and sought public comment on proposed Acceptable Practices 

for Section 5(d)(15) of the Act (Core Principle 15), which requires 

that exchanges minimize conflicts of interest in their decisionmaking processes. The proposed Acceptable Practices, the first for 

Core Principle 15, emphasize exchange governance and boards of directors as a means of mitigating conflicts of interest between exchanges’ regulatory responsibilities and their commercial activities. 

The proposals are based on the Commission’s three-year study of 

self-regulation and self-regulatory organizations in the U.S. futures 

industry (SRO Study), launched in 2003. They respond to recent 

changes in the industry, including the demutualization of exchanges, 

their conversion to for-profit business models, and increased competition among exchanges and others. The comment period on the 

proposed Acceptable Practices closed on September 7, 2006. 

• Increase staffing. The arrival of pay parity authority promises to 

greatly enhance the Commission’s opportunity to have planned organizational change by stemming the high attrition rate with more 

competitive salaries. The Commission is moving to utilize the newest 

flexibilities in Federal staffing, including category ranking, so that 

priority recruitments for any shift in program emphasis or unexpected losses begin immediately and conclude rapidly. At the same 

time, our pay rates now allow us to compete for a broader range of 

experience levels, which should help with succession planning. By 

developing revised competencies on a job function or series basis, 

such as with auditors moving to risk-based reviews, we are building a 

revised foundation of job requirements and skills analysis that makes 

both our near-term recruitment more targeted and our long-range 

workforce planning more efficient. Performing this agency-wide review of our staffing efforts is producing complementary effects in the 

form of a workforce with a broader range of the most needed training 

and skills, resulting in the most efficient and responsive market oversight activities presently feasible. 

• Achieve full funding for pay parity. With the implementation of a 

new pay schedule on April 20, 2003, CFTC closed the major part of 

the gap between its pay rates and those of the other Federal financial 

regulators. This transitional step has resulted in a substantive improvement in the agency recruitment and retention trends, including 

evident indicators of employee morale. To begin a corresponding 

upgrade in its benefits program, the Commission implemented an 

employee dental benefit in FY 2004. In terms of total compensation, 

the Commission’s conservative initial approach to using its authority 

to make these pay and benefits changes closed just under 80 percent 

of the gap in aggregate compensation relative to the benchmark 

agencies’ practices. However, due to budgetary constraints, the 

Commission delayed the FY 2004 and FY 2005 pay increases to September 2o04 and July 2005 respectively which further contributed to 

widen the pay gap. We expect the gap to grow without appropriate 

funding for pay and benefits increases, including variable compensation centered on the concept of pay for performance. Commission 

senior staff will continue to seek appropriate funding through discussions with oversight committees and OMB. 
FY 2008 President’s Budget & Performance Plan

100 Appendix 4⎯Proposed Goal 4: Organizational and Management Excellence 

• Implement USA Patriot Act. The Commission has actively supported 

and assisted the U.S. Treasury Department in developing AML rules 

to implement the mandate of the USA Patriot Act with respect to the 

futures industry. These include various proposed and final rules requiring, among other things: 1) FCMs and IBs to report suspicious 

transactions; 2) FCMs and IBs to establish customer identification 

and verification programs (CIPs); and 3) FCMs and IBs to establish 

due diligence programs for detecting and reporting money laundering through correspondent accounts for foreign financial institutions 

and private banking accounts for non-U.S. persons. In addition to 

finalizing AML rules that already have been proposed, the Commission and Treasury will continue to effectuate the full extent of the 

protections against money laundering mandated by Congress (for 

example, extending the CIP rules to cover other futures firms as 

well). To assure consistency throughout the financial services industry, AML rules are being developed by an inter-agency working group 

with representatives from Treasury, the CFTC, the SEC, and several 

Federal banking agencies. The Commission’s role includes making 

sure that futures industry registrants are not placed at a disadvantage relative to other financial service providers. Moreover, the 

Commission has been delegated AML examination authority with respect to FCMs and IBs. While much of the front-line examination 

work may be performed by NFA and other SROs, this delegation requires the implementation of an appropriate audit and compliance 

program and Commission oversight of the direct supervision by NFA 

and other SROs. The Commission also has repeatedly requested, and 

Treasury is considering, a similar delegation of Treasury’s AML enforcement authority to the Commission with respect to futures firms. 

This delegation would bring additional responsibilities to the Commission for investigating and pursuing charges against those who do 

not have proper supervision, reporting, and record-keeping programs in place to combat money laundering and terrorist financing. 

*** 
FY 2008 President’s Budget & Performance Plan

 

Appendix 4─Proposed Goal 4: Organizational and Management Excellence 101 

Summary of Goal Four Performance Indicators 

Goal Four: (Proposed) To facilitate Commission performance through organizational and 

management excellence, efficient use of resources, and effective mission support.

Outcome 4.1: A productive, technically competent, competitively compensated, and diverse workforce 

that takes into account current and future technical and professional needs of the Commission.

Annual Performance Goal: Recruit and retain a skilled and diversified staff to replace aging and retiring workforce.

Performance Measures 

FY 2005 

Actual 

FY 2006 

Est. Actual 

FY 2007 

Plan 

FY 2008 

Plan 

4.1.1 Met FY objectives for phased implementation of pay for 

performance system 

4.1.2 Percentage decrease in the time required to fill vacant 

positions, in comparison to previous FY 

4.1.3 Percentage decrease in employee turnover other than 

due to retirement, in comparison to previous FY 

4.1.4 Percentage increase in employees in mission-critical 

positions rating themselves at “extensive” or higher level of 

expertise on Strategic Workforce Planning Survey 

4.1.5 Percentage increase in underrepresented groups among 

new hires, in comparison to previous FY 

N/A 

N/A 

N/A 

N/A 

N/A 

TBD 

TBD 

TBD 

TBD 

TBD 

TBD 

TBD 

TBD 

TBD 

TBD 

TBD 

TBD 

TBD 

TBD 

TBD 

Outcome 4.2: A modern and secure information system that reflect the strategic priorities of the Commission. 

Annual Performance Goal: Link business decisions on IT resources to CFTC strategic goals by establishing a decision- making and review process for allocation of IT resources. 

Performance Measures 

FY 2005 

Actual 

FY 2006 

Est. Actual 

FY 2007 

Plan 

FY 2008 

Plan 

4.2.1 Percentage of Agency IT resources directly tied to Agency 

resource priorities as stated in the Strategic Plan 

4.2.2 Percentage of major IT investments having undergone 

an investment review within the last three years 

4.2.3 Percentage of Customer Support Center inquires resolved within established performance metrics 

4.2.4 Percentage of employees with network availability 

4.2.5 Percentage of employees who require remote network 

availability that have it 

 

4.2.6 Percentage of major systems and networks certified and 

accredited in accordance with NIST guidance 

4.2.7 Percentage of IT e-government initiatives on target for 

compliance with implementation schedule 

4.2.8 Percentage of network users who have completed annual 

security and privacy training 

N/A 

100% 

N/A 

100% 

N/A 

50% 

N/A 

N/A 

TBD 

100% 

N/A 

100% 

TBD 

28% 

TBD 

90% 

TBD 

100% 

85% 

100% 

95% 

50% 

100% 

95% 

100% 

100% 

99% 

100% 

100% 

100% 

100% 

95% 
FY 2008 President’s Budget & Performance Plan

102 Appendix 4⎯Proposed Goal 4: Organizational and Management Excellence 

Outcome 4.3: An organizational infrastructure that efficiently and effectively responds to and anticipates both the routine and emergency business needs of the Commission.

Annual Performance Goal: A fully operational Contingency Planning Program to ensure the CFTC is prepared for 

emergencies and is fully capable of recovery and reconstitution. 

Performance Measures 

FY 2005 

Actual 

FY 2006 

Est. Actual 

FY 2007 

Plan 

FY 2008 

Plan 

4.3.1 Number of hours required to deploy staff and begin 

mission essential functions at the COOP site

N/A N/A 24 18

Outcome 4.4: Financial resources are allocated, managed and accounted for in accordance with the strategic priorities of the Commission.

Annual Performance Goal: A clean audit opinion for CFTC. 

Performance Measures 

FY 2005 

Actual 

FY 2006 

Est. Actual 

FY 2007 

Plan 

FY 2008 

Plan 

4.4.1 Audit opinion of the Agency’s annual financial statements as reported by the Agency’s external auditors 

4.4.2 Number of material internal control weaknesses 

reported in the Performance & Accountability Report 

4.4.3 Number of non-compliance items disclosed in audit 

report; percentage of total items 

4.4.4 Percentage of open obligations that are from prior 

years as of September 30 

N/A 

N/A 

N/A 

N/A 

Unqualified 

0 

2/2% 

2% 

Unqualified 

0 

1/1% 

2% 

Unqualified 

0 

0/0% 

2% 

Outcome 4.5: The Commission’s mission is fulfilled and goals are achieved through sound management 

and organizational excellence provided by executive leadership.

Annual Performance Goal: Progress in achieving priorities for fiscal years 2007 through 2011 as established by the 

Strategic Plan. 

Performance Measures 

FY 2005 

Actual 

FY 2006 

Est. Actual 

FY 2007 

Plan 

FY 2008 

Plan 

4.5.1 Percentage of 16 strategic plan priorities that are on 

track to completion by FY 2011 

N/A N/A 100% 100% 
FY 2008 President’s Budget & Performance Plan

 

Appendix 4─Proposed Goal 4: Organizational and Management Excellence 103 

Breakout of Goal Four Request by Outcome Objective 

 FY 2007 FY 2008 Change 

$ (000) FTE $ (000) FTE $ (000) FTE

GOAL FOUR: To facilitate Commission performance through management excellence, efficient use of 

resources, and effective mission support.

Outcomes 

4.1 A productive, technically competent, competitively compensated, and 

diverse workforce that takes into account current and future technical and 

professional needs of the Commission. 

$3,739 18.00 $4,264 18.00 $415 0

4.2 A modern and secure information 

system that reflect the strategic priorities of the Commission. F

12

3,126 15.05 3,565 15.05 647 0

4.3 An organizational infrastructure 

that efficiently and effectively responds 

to and anticipates both the routine and 

emergency business needs of the Commission. 

3,531 17.00 4,027 17.00 392 0

4.4 Financial resources are allocated, 

managed and accounted for in accordance with the strategic priorities of the 

Commission. 

3,739 18.00 4,264 18.00 415 0

4.5 The Commission’s mission is fulfilled and goals are achieved through 

sound management and organizational 

excellence provided by executive leadership. 

7,780 37.00 8,860 37.00 1,070 0

TOTAL $21,915 105.05 $24,980 105.05 $2,939 0

Table 35: Breakout of Goal Four by Outcome 

Outcome Objective

4.2

14%

Outcome Objective

4.3

16%

Outcome Objective

4.4

17%

Outcome Objective

4.5

36%

Outcome Objective

4.1

17%

Figure 42: Breakout of Goal Four Request by Outcome Objective 

 

12 Represents Office of Information Technology Services dollars and staff resources not otherwise 

allocated to Goals 1, 2, or 3. 
FY 2008 President’s Budget & Performance Plan

104 Appendix 5─Privacy Policy for CFTC Web Site 

APPENDIX 5 

Privacy Policy for the CFTC Web Site 

The purpose of this policy statement is to describe how the CFTC handles 

information which we learn about you when you visit our Web site. The information we receive depends on how you use the Web site. You are not required to give us personal information to visit our Web site. 

If you visit the CFTC Web site to read or download information, such as press 

releases or publications, we will collect and store the following information: 

• the name of the domain (the machine or Web site) from which you 

access the Internet (for example, aol.com if you are connecting from 

an America Online account) and/or the name and Internet Protocol 

(IP) address of the server you are using to access the CFTC Web site. 

• the name and IP address of the CFTC server that received and logged 

the request. 

• the date and time the request was received. 

• the information which you are accessing (for example, which page or 

image you choose to read or download). 

• the name and version of the Web browser used to access the Web 

page. 

We use the information collected to measure the number of visitors to the 

different sections of our Web site and to help us make the Web site more useful to visitors. 

We do not enable "cookies." A "cookie" is a text file placed on your hard drive 

by a Web site that can be used to monitor your use of the site. 

If you complete a form or send a comment or e-mail, you may be choosing to 

send us information which personally identifies you. This information is used 

generally to respond to your request but may have other uses which are 

identified on each form. For example, if you send us a comment letter on 

a proposed regulation, that letter becomes part of the comment file and is 

available to the public. The comments are used to help CFTC and other 

members of the public evaluate proposed Commission actions. Other forms 

which you may choose to submit, such as Freedom of Information Act requests or requests for correction of information, contain information which is 

used by CFTC employees to track and respond to your request. Information 

provided on the enforcement questionnaire may be shared with other law 

enforcement agencies, if appropriate. 

If you have questions about CFTC’s privacy policy and information practices 

you can e-mail webmaster@cftc.gov H . 

Information on the Commission's systems of records maintained under the 

Privacy Act can be found under Section D of the CFTC Federal Register No- H

tices.
FY 2008 President’s Budget & Performance Plan

 

Appendix 6─Table of Acronyms 105 

APPENDIX 6 

Table of Acronyms 

AE The Actuarials Exchange, LLC 

ALJ Administrative Law Judge 

AML Anti-Money Laundering 

AP Associated Persons 

BTEX BrokerTex Futures Exchange 

CBT Chicago Board of Trade 

CCORP The Clearing Corporation 

CCFE Chicago Climate Futures Exchange 

CCX Chicago Climate Exchange, Inc. 

CDXCHANGE Commodities Derivative Exchange, Inc. 

CEA Commodity Exchange Act 

CFE CBOE Futures Exchange 

CFFE Cantor Financial Futures Exchange 

CFTC Commodity Futures Trading Commission 

CFMA Commodity Futures Modernization Act of 2000 

CIP Customer Identification and Verification Program 

CME Chicago Mercantile Exchange 

CME AM CME Alternative Marketplace, Inc. 

COMEX Commodity Exchange Division 

COOP Continuity of Operations Plan 

CPO Commodity Pool Operator 

CSCE Coffee Sugar and Cocoa Exchange 

CTA Commodity Trading Advisor 

DCIO Division of Clearing and Intermediary Oversight (CFTC) 

DCO Derivatives Clearing Organization 

DOJ Department of Justice 

DTEF Derivatives Transaction Execution Facility 

DSRO Designated Self-Regulatory Organization 

ECM Exempt Commercial Markets 

EOPF Electronic Office Personnel Folders 

EPFE Exchange Place Futures, LLC 

EUREX US U.S. Futures Exchange, LLC 

FB Floor Broker 

FCA Farm Credit Administration 

FCM Futures Commission Merchant 

FCOM FutureCom 

FIRREA Financial Institutions Reform, Recovery, and Enforcement Act 

FMHA Farmers Home Administration 

FT Floor Trader 

FTE Full-time Equivalent 

FSIS Financial Surveillance Information Service 

FY Fiscal Year 

GAO Government Accountability Office 

GCC Guaranty Clearing Corporation 

GMAC Global Markets Advisory Committee 

GSA General Services Administration 

HSE HoustonStreet Exchange, Inc. 

IB Introducing Broker 
FY 2008 President’s Budget & Performance Plan

106 Appendix 6─Table of Acronyms 

ICAP ICAP Commodity Derivatives Trading System 

ICAP ETC ICAP Electronic Trading Community 

ICAP HYDE ICAP HYDE, Ltd. 

ICC Intermarket Clearing Corporation 

ICE IntercontinentalExchange, Inc. 

IMAREX International Maritime Exchange 

INET INET Futures Exchange 

INTRADE Intrade Board of Trade 

IOSCO International Organization of Securities Commissions 

IT Information Technology 

JO Judgment Officer 

KCBT Kansas City Board of Trade 

LCH London Clearing House 

MACE MidAmerica Commodity Exchange 

MATCHBOXX Matchboxx Alternate Trading System 

 ATS 

ME Merchants Exchange 

MGE Minneapolis Grain Exchange 

NFA National Futures Association 

NGX Natural Gas Exchange 

NQLX NQLX LLC 

NTP NetThruPut 

NYBOT New York Board of Trade 

NYCC New York Clearing Corporation 

NYCE New York Cotton Exchange 

NYFE New York Futures Exchange 

NYMEX New York Mercantile Exchange 

OCC The Options Clearing Corporation 

OCX OneChicago Futures Exchange 

OED Office of the Executive Director (CFTC) 

OFM Office of Financial Management (CFTC) 

OGC Office of the General Counsel (CFTC) 

OHR Office of Human Resources (CFTC) 

OITS Office of Information and Technology Services (CFTC) 

OMB Office of Management and Budget 

OMO Office of Management Operations (CFTC) 

ONXCC OnExchange Clearing Corporation 

OPEX Optionable, Inc. 

OPM Office of Personnel Management 

OTC Other-the-Counter 

PBOT Philadelphia Board of Trade 

PMA President’s Management Agenda 

PPGC Pay Parity Governance Committee 

RSR Regulatory Statement Review 

RWG Registration Working Group 

SEC Securities and Exchange Commission 

SFP Security Futures Products 

SL Spectron Live.com Limited 

SPARK Stress Positions at Risk 

SRO Self-Regulatory Organization 

SWG Strategic Workforce Planning 

TCX TradeCapture Exchange 
FY 2008 President’s Budget & Performance Plan

 

Appendix 6─Table of Acronyms 107 

TFS Traditional Financial Services Pulp and Paper Division 

TFSE TFS Energy, LLC 

TS TradeSpark, LP 

US United States 

USA PATRIOT Uniting and Strengthening America by Providing Appropriate 

Tools Required to Intercept and Obstruct Terrorism 

USDA United States Department of Agriculture 

UK United Kingdom 

WBOT Weather Board of Trade 

WXL WeatherXchange Limited 

XBOT Exempt Boards of Trade 
FY 2008 President’s Budget & Performance Plan

108 Appendix 7─Mandatory Fee Proposal 

APPENDIX 7 

CFTC Mandatory Proposal: Futures & Options Transaction Fee 

Funding Summary 

(In millions of dollars) 

2008 2009 2010 2011 2012 2008-12 2008-17 

Proposed 

change from 

current 

law.......... 

-86 -89 -92 -95 -99 -461 -1,008 

Administration Proposal and Impact

The Administration will propose to collect a fee on all commodity futures and 

options contracts traded on approved futures and options exchanges. The 

Commodity Futures Trading Commission (CFTC) is the only Federal financial regulator that does not derive its funding from the specialized entities it 

regulates. The fees would be set at a level to equal the costs to the taxpayer of 

funding CFTC's Market Oversight and Clearing & Intermediary Oversight 

functions, about $86 million during 2008. Such fees are already imposed on 

futures exchanges to fund the programs of the futures industry's selfregulatory organization. The proceeds from the fees will be returned to the 

general fund of the Treasury, to be used to offset the deficit impact of funding 

the CFTC’s operations through direct appropriations. 

Background

The CFTC ensures the integrity and effectiveness of the U.S. futures and options markets through administration of the Commodity Exchange Act of 

1936 (CEA), as amended. Fees would facilitate increases in CFTC's proposed 

oversight activities, which have been held generally constant while trading 

volume has quadrupled over the last decade.