C O M M O D I T Y F U T U R E S T R A D I N G C O M M I S S I O N

F i s c a l Y e a r 2 0 0 7

Performance and

Accountability Rep
C O M M O D I T Y F U T U R E S 

T R A D I N G C O M M I S S I O N

Walter L. Lukken

Acting Chairman 

Madge Bolinger Gazzola

Executive Director

Mark Carney

Chief Financial Officer

November 2007

This report is in the public domain. Authorization to reproduce it in whole or in part is granted. 

While permission to reprint this publication is not necessary, the citation should be: 

Commodity Futures Trading Commission, FY 2007 Performance and Accountability Report, Washington, D.C., 20581.

All photographs in this document are proprietary and prior permission from the 

photographer is required for any use or reproduction of the photographs.
Certificate of Excellenc

Accountability Repor

C O M M O D I T Y F U T U R E S T R A D I N G C O M M I S S I O N

“In recognition of your outstanding efforts in preparing the 

Commodity Futures Trading Commission Performance and 

Accountability Report for the fiscal year ended September 30, 2006”

Association of Government Accountants (AGA)

Awards the
II 

Back row from left; Jill E. Sommers, Commissioner; Bart Chilton, Commissioner

Front row from left; Michael V. Dunn, Commissioner; Walter L. Lukken, Acting Chairman

Fiscal Year 2007 Commission
FY 2007 Commissioners II

A Message from the Chairman  

CFTC History at a Glance 2

How This Report is Organized  

M A N AG E M E N T ’ S D I S C U S S I O N A N D A N A LY S I S

Commission at a Glance  

Performance Highlights 20

Financial Highlights 30

Management Assurances  .

Forward Looking — Future Business Trends and Events  .

Inspector General’s FY 2007 Assessment 39

P E R F O R M A N C E S E C T I O N

Introduction to the Performance Section  .

Strategic Goal One: Economic Utility  .

Strategic Goal Two: Market User and Public 54

Strategic Goal Three: Industry 77

F I N A N C I A L S E C T I O N

A Message from the Chief Financial Officer 105

Limitations of Financial Statements . 

Principal Financial Statements 108

Notes to the Financial Statements . 

Report of the Independent Auditors . 

OT H E R AC C O M PA N Y I N G I N F O R M AT I O N

Management Challenges . 

Summary of Audit and Management Assurances 135

A P P E N D I X

FY 2007 Commissioners . 

Enforcement Litigation by Strategic Goals 140

CFTC Information Technology Systems 153

Glossary of Abbreviations and Acronyms 154

Table of Content
In the Tradition of Quality Reporting,

the Commodity Futures Trading Commission

Proudly Presents the FY 2007

Performance and Accountability Report
CFTC

A Message from the Chairm

I

am pleased to present this Performance and Accountability Report, which chronicles our mission accomplishments over Fiscal Year (FY) 2007.

In recent years, commodity futures and options have grown 

to be trillion dollar markets, with massive economic force, 

having grown faster than almost any other asset class. These

markets are expanding steadily in both volume and new 

users and their complexity is rapidly evolving with new 

technologies, globalization, product innovation, and 

greater competition. The Commodity Futures Trading

Commission (CFTC or Commission) oversees the 

commodity futures and option markets in the United 

States. These markets are the key source of commodity price

discovery and are used as a tool by participants in the global 

economy to offset price risk. Although how the CFTC

operates has dramatically evolved along with these dynamic 

markets, our mission is the same today as it was at our 

inception in 1974: We protect market users and the public from 

fraud, manipulation, and abusive practices related to the sale of 

commodity and financial futures and options, and foster open, 

competitive, and financially sound futures and option markets.

During the last year, the Commission focused its resources 

on accomplishing its mission across three strategic goals, 

each focusing on a vital area of regulatory responsibility

The goals are: to ensure the economic vitality of the 

commodity futures and option markets; to protect market 

users and the public; and to ensure market integrity in 

order to foster open, competitive, and financially sound 

markets. Key undertakings by the Commission included:

taking action against energy companies in response to allegations of manipulation; actively addressing how to best 

detect and prevent abusive behavior in our markets; and 

working internationally to engage our regulatory counterparts to share information and coordinate market oversight.

We also worked very hard in the area of accountability 

during the past fiscal year. I am pleased to report that in

FY 2007, the CFTC had no material weaknesses to declare

Our auditor, the public accounting firm, KPMG LLP, on 

behalf of our Inspector General, was able to affirm that the 

financial statements, included in this report, were presented 

fairly, in all material respects, and in conformity with U.

generally accepted accounting principles (GAAP). Furthermore, we are pleased to confirm that the financial and

performance data presented in this report are fundamentally reliable and complete. You can read about the operation of our internal controls in the Financial Section of this

report, which also highlights key management assurances.

We hope you will join us in applauding the important 

contributions made daily by the dedicated staff of the 

Commission.

Walter Lukken

Acting Chairman

November 15, 2007
CF

Significant Dates in CFTC History — 1970s

October 23-24, 1974—Congress passes the Commodity 

Futures Trading Commission Act of 1974, and it is signed by 

President Gerald Ford. The bill overhauls the CEA and creates 

the CFTC, an independent agency with exclusive jurisdiction over 

futures.

April 21, 1975—Authority for the regulation of futures trading is 

transferred from the Commodity Exchange Authority, an agency in 

the USDA, to the CFTC. 

September 11, 1975—

The CFTC approves the first 

futures contract on a financial 

instrument—the CBOT 

Government National Mortgage 

Association (Ginnie Mae) 

certificates futures contract. 

April 28, 1977—The CFTC 

asks the U.S. District Court 

in Chicago to order seven 

members of the Hunt family 

of Dallas, and a related 

company, to liquidate 

positions that exceed the 

three million bushel speculative position 

limit for soybean futures on the CBOT. 

June 1, 1978—The CFTC suspends 

most commodity options transactions in 

the U.S. because of pervasive fraud in 

so-called “London options” and dealer 

options on physical commodities. 

March 16, 1979—In an emergency 

action, the CFTC votes to prohibit further 

trading in the CBOT March wheat futures 

contract, the first time the Commission 

orders a market closed in the interest 

of preventing a price manipulation. 

September 12, 1979—The Court of Appeals for the Seventh 

Circuit affirms the CFTC’s authority to act during market 

emergencies. 

Significant Dates in CFTC History — 1980s

January 6, 1980—In an emergency action, the CFTC orders the 

suspension of futures trading for two days for wheat, corn, oats, 

soybean meal, and soybean oil on four exchanges after President 

Carter announces an embargo on the sale of certain agricultural 

goods to the Soviet Union that includes substantial amounts of grain. 

January 21, 1980—COMEX orders trading for liquidation only 

in its silver futures contract.

September 8, 1981—The CFTC adopts a comprehensive set 

of regulations to govern exchange-trading of options on futures 

contracts under a controlled and monitored three-year pilot program.

September 22, 1981—The CFTC grants registration to the 

NFA as a self-regulatory futures association and approves its 

articles, bylaws, and rules. NFA begins to hire staff and commences 

operations on October 1, 1982. 

December 7, 1981—The CFTC and the SEC jointly announce 

a basic jurisdictional agreement on the regulatory responsibility of 

each agency for a variety of financial instruments, in particular stock 

index futures. This agreement was known as the Shad-Johnson 

Accord and later became part of the CEA. 

February 16, 1982—The CFTC approves the first futures 

contract based on a stock index, the Value Line Index Average 

traded on the KCBT. 

January 11, 1983—President Reagan signs the Futures Trading 

Act of 1982, renewing the CFTC’s mandate to regulate futures 

trading for four more years and clarifying Commission jurisdiction in 

a number of areas. Among other things, this act codified the ShadJohnson Accord (which gave the CFTC jurisdiction over broad-based 

stock index futures and banned single-stock and narrow-based 

stock index futures), and required the CFTC to act on new contract 

proposals and rule amendments within specified time periods. 

August 29, 1984—The CFTC approves amendments to CME 

rules that allow it to establish a trading link with the Singapore 

International Monetary Exchange, the first trading and clearing 

link between a domestic and a foreign exchange. 

September 28, 1984—The CFTC submits “A Study of 

the Nature, Extent and Effects of Futures Trading by Persons 

Possessing Material, Nonpublic Information” to its 

Congressional oversight committees. 

February 28, 1985—The CFTC 

concludes its silver investigation, alleging 

that Nelson Bunker Hunt, William 

Herbert Hunt, and other individuals and 

firms manipulated and attempted to 

manipulate silver prices in 1979 and 

1980. 

March 20, 1985—Volume 

Investors, Inc., a clearing member at 

COMEX, defaults on a margin call on 

options on gold futures. The funds of 

100 customers, mostly local traders, 

are affected by the default. This 

default causes the Commission to 

APPROPRIATION AND EMPLOYMENT HISTORY FY 1975-1985

FY 1975 FY 1976 FY 1977 FY 1978 FY 1979 FY 1980 FY 1981 FY 1982 FY 1983 FY 1984 FY 1985

502 533 495 474 482 465 485 484 493 500 520

$7 $10 $13 $13 $15 $16 $18 $20 $23 $26 $27

LEGEND: Actual FTE Approved Appropriation (in millions) 

C o m m o d i t y F u t u r e s r a d i n 
CFTC

consider numerous changes to its rules. 

Ultimately, improved surveillance, early 

warning, and margining procedures are 

developed. 

September 23, 1986—CFTC, SEC, and 

the U.K. Department of Trade and Industry announce the signing 

of an MOU, which will enhance cooperation and mutual assistance 

in securing compliance with and enforcement of securities and 

commodities laws in both countries. 

October 19, 1987—Biggest one-day price plunge in stock 

market history. No Commission-regulated systems fail, no firms 

default on obligations. 

May 16, 1988—The President’s Working Group (PWG) on 

Financial Markets, composed of CFTC, SEC, Treasury, and the 

Federal Reserve Board, presents its report on the October 1987 

stock market break to President Reagan. 

October 18, 1988—The CFTC approves proposals to amend 

daily price limits and trading halt provisions for stock index futures 

and option contracts traded on CME, CBOT, KCBT, and NYFE. 

These proposals were based on recommendations by the PWG. 

January 20, 1989—The news media report the disclosure of 

a two-year undercover investigation of the Chicago trading pits 

conducted by the FBI in cooperation with CFTC and DOJ. The CFTC 

takes a number of market integrity actions in the following months. 

February 2, 1989—The CFTC unanimously approves rules 

proposed by CME for the basic Globex system, the first international 

electronic trading system. Trading begins in June 1992. 

July 11, 1989—The CBOT institutes an emergency action 

concerning the July 1989 CBOT soybean futures contract. CBOT 

requires all large traders to reduce their positions prior to the 

expiration of the July contract. The contract expires in an 

orderly manner. 

Significant Dates in CFTC History — 1990s

November 1991—The CFTC and the SEC concurrently approve 

proposed rule changes by the OCC and the CME intended to 

improve coordination in the clearance and settlement of futures 

and options. The rule changes expand the existing cross-margining 

programs between the OCC and CME to permit clearing members 

to include intermarket futures and option positions held in certain 

non-proprietary accounts. 

October 28, 1992—President Bush signs the CFTC’s 

reauthorization legislation, The Futures Trading Practices Act of 1992 

(FTPA), expanding the CFTC’s regulatory authority and reauthorizing 

the agency until October 1994. The FTPA, among other things, 

granted the Commission the authority to OTC derivative and other 

transactions for CFTC regulation and provided for registration of 

local traders.

March 1993—Futures trading in New York is disrupted and 

the CFTC’s New York office is temporarily relocated due to the 

explosion of a bomb placed by terrorists in the basement of the 

World Trade Center. 

April 9, 1993—The CFTC 

adopts rules requiring the 

registration of FBs and 

ethics training for all individual 

registrants, as mandated by 

the FTPA. The Commission 

also adopts rules permitting 

the suspension of registrants 

charged with felonies under 

authority granted by the FTPA. 

January 10, 1994—The CFTC 

files an administrative complaint 

against two former CBOT 

members, Anthony Catalfo, and 

Darrell Zimmerman, alleging that the 

respondents engaged in a scheme to 

manipulate Treasury bond futures and put options on the CBOT. 

June 28, 1994—The CFTC approves final rules permitting 

registrants to provide to customers a “generic” risk disclosure 

statement that will satisfy risk disclosure requirements applicable 

to both domestic and foreign commodity futures and options 

transactions. 

December, 1994—CFTC, in coordination with the SEC, files and 

simultaneously settles, for a fine of $10 million, an administrative 

complaint against BT Securities, a subsidiary of Bankers Trust. 

The Commission’s complaint alleges that BT Securities committed 

fraud in its OTC derivatives transactions with Gibson Greetings. 

APPROPRIATION AND EMPLOYMENT HISTORY FY 1986-1996

FY 1986 FY 1987 FY 1988 FY 1989 FY 1990 FY 1991 FY 1992 FY 1993 FY 1994 FY 1995 FY 1996

489 497 510 535 527 551 592 568 543 542 541

$28 $30 $33 $35 $39 $44 $47 $47 $47 $49 $54

LEGEND: Actual FTE Approved Appropriation (in millions) 

Continued on next page

C o m m i s s i o n H i s t o r y A t A G l n c 
 CF

February 29, 1996—The CFTC’s Division of Trading & Markets 

issues a no-action letter to permit the Deutsche Terminborse (DTB) 

[predecessor to Eurex] to install and utilize DTB computer terminals 

in the United States in connection with the purchase and sale of 

certain futures and options contracts—the staff’s first consideration 

of a request to place computer terminals of an off-shore exchange 

in the United States. 

July 10, 1996—A CFTC order imposes a $600,000 civil monetary 

penalty against Fenchurch Capital Management Inc. of Chicago, on 

charges of market manipulation and cornering of the cheapest-todeliver note deliverable against the CBOT 10-year Treasury note 

futures contract. 

December 19, 1996—The CFTC notifies the CBOT that the 

delivery terms of its corn and soybean futures contracts do not 

satisfy the statutory objectives of Section 5a(a)(10) of the CEA of 

“permit[ting] the delivery of any commodity . . . at such point or 

points and at such quality and 

locational price differentials 

as will tend to prevent or 

diminish price manipulation, 

market congestion, or 

the abnormal movement 

of such commodity in 

interstate commerce” 

and gives the CBOT 

75 days to respond. 

November 7, 

1997—The CFTC 

orders the CBOT to 

change the delivery 

specifications for 

its corn and soybean futures 

contracts pursuant to Section 

5a(a)(10) of the CEA. The 

Commission notes that the 

CBOT can propose alternate 

specifications that meet the 

requirements of the CEA. 

December 4, 1997—The 

SEC vetoes the proposed CBOT’s 

futures and futures options on the 

Dow Jones Transportation Average 

and the Dow Jones Utilities Average, 

stating that these contracts are too 

narrow-based to meet the requirements 

of the 1982 Shad-Johnson Accord. 

This is the only time the SEC exercised its veto power under the 

Accord. A court decision subsequently overturns the SEC veto 

and the CFTC approves the contracts on October 27, 1999. 

May 7, 1998—The CFTC approves the CBOT’s new corn 

and soybean futures contracts with delivery specifications that 

supersede those ordered by the CFTC on November 7, 1997. 

May 11, 1998—The CFTC enters into a settlement with 

Sumitomo Corporation to resolve allegations of manipulating 

the copper market in 1995 and 1996 that includes a civil 

monetary penalty of $150 million. 

November 4, 1999—The CFTC staff issues a report comparing 

the global competitiveness of U.S. futures and option markets 

to their counterparts abroad. The report, entitled The Global 

Competitiveness of U.S. Futures Markets Revisited, updates a 

1994 CFTC study, using the same methodology as the earlier study.

November 9, 1999—The PWG issues a report unanimously 

calling for legislation creating greater legal certainty for OTC 

derivatives.

Significant Dates in CFTC History — 2000s

February 22, 2000—The CFTC transmits to Congress a staff 

report, A New Regulatory Framework, which recommends changes 

to the CFTC’s regulatory structure. The report details changes 

that will lessen the regulatory burdens on U.S. futures markets by 

creating a more flexible regulatory framework. At the same time, the 

framework provides the OTC markets with greater legal certainty. 

Much of this framework will be incorporated into the CFMA. 

September 14, 2000—The CFTC and SEC announce an agreement providing for joint jurisdiction over security futures products, 

that is, single stock futures and futures on narrow-based stock 

indexes. Under the agreement, which will be incorporated into the 

CFMA, the CFTC retains exclusive jurisdiction over futures contracts on broad-based stock indexes. 

December 21, 2000—President Clinton signs into law the 

CFMA, which, among other things, reauthorizes the Commission for 

five years, overhauls the CEA to create a flexible structure for the 

regulation of futures and options trading, clarifies Commission jurisdiction over certain retail foreign currency transactions, and repeals 

the 18-year-old ban on the trading of single stock futures. 

April 18, 2001—For the first time since the passage of the 

CFMA, the CFTC uses its newly clarified authority to file a complaint 

charging fraud and the offering of illegal futures contracts against 

a firm soliciting retail investors to trade foreign currency contracts. 

Over the next several years, the CFTC filed similar complaints 

against dozens of firms that solicit retail investors to trade foreign 

currency. 

July 9, 2001—The CFTC approves the application of EnergyClear Corporation for registration as a DCO under the CEA. This 

is the first new DCO that is not affiliated with a trading facility to be 

granted registration by the Commission since the passage of the 

Continued from previous page

APPROPRIATION AND EMPLOYMENT HISTORY FY 1997-2007

LEGEND: Actual FTE Approved Appropriation (in millions) 

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

553 560 567 556 546 509 521 517 487 493 437

$55 $58 $61 $63 $71 $88 $85 $90 $94 $97 $98

C o m m o d i t y F u t u r e s r a d i n 
CFTC

CFMA. DCOs for the existing futures 

exchanges were grandfathered in under 

the CFMA. 

August 1, 2001—The CFTC kicks off implementation of 

the CFMA by adopting new rules for the various types of exchanges 

(with different levels of regulatory oversight) that the CFMA created. 

These types of exchanges include designated contract markets, 

derivatives transaction execution facilities, exempt boards of trade, 

and exempt commercial markets. 

August 21, 2001—The CFTC orders Avista Energy, Inc. to 

pay $2.1 million to settle CFTC charges of manipulating electricity 

futures.

August 22, 2001—The CFTC adopts new rules for derivatives 

clearing organizations, further implementing the CFMA. 

September 11, 2001—The CFTC New York office is destroyed 

during the terrorist attack against the World Trade Center. 

Commission staff escape without serious injury. 

July 1, 2002—The CFTC restructures its staff organization to 

facilitate the implementation of the CFMA. Under the restructuring, 

the functions previously performed by the Division of Trading and 

Markets and the Division of Economic Analysis are performed by 

two new divisions and one new office: the Division of Market 

Oversight, the Division of Clearing and Intermediary Oversight, 

and the Office of the Chief Economist. 

November 8, 2002—Trading in single stock futures is launched 

on two new exchanges: OneChicago and NQLX. 

March 12, 2003—The CFTC charges the bankrupt Enron Corporation and a former Enron vice president with manipulating prices 

in the natural gas market. Enron also is charged with operating an 

illegal, undesignated futures exchange and offering illegal 

lumber futures contracts through Enron Online, its Internet trading platform. Enron settles in May 2004 and the 

trader settles in July 2004.

July 15, 2003—The CFTC approves exchange rules 

implementing a common clearing link between the CBOT 

and CME. 

Fiscal Year 2003—The CFTC approves or (in most 

cases) accepts the exchange self-certification of a record 

348 new futures and option contracts during fiscal year 2003. 

While about 200 of these new contracts are single stock futures, the 

number of new non-single stock futures contracts easily exceeds 

the old record of 92 new contracts set in Fiscal Year 1996. 

November 18, 2003—The CFTC joins other members of the 

President’s Corporate Fraud Task Force in undercover “Operation 

Wooden Nickel” to prosecute individuals and companies allegedly 

stealing millions of dollars through sales of illegal foreign currency 

futures contracts. 

February 4, 2004—The CFTC designates the USFE, also known 

as Eurex US, as a contract market for the automated trading of 

futures and options on futures contracts. This is the first designated 

contract market to be owned by a foreign futures exchange.

October 13, 2005—The CFTC issues a statement regarding the 

bankruptcy filing of Refco. Ultimately, customers holding position is 

futures contracts through the firms CFTC registered FCM subsidiary 

are repaid in full from funds in the segregated customer accounts.

December 19, 2006—15 defendants from “Operation Wooden 

Nickel” ordered by U.S. District Court (SDNY) to pay restitution 

return ill-gotten gains and pay fines totaling over $25 million. 

Penalties were imposed subsequently on nine additional defendants. 

During this time period the investigation and litigation of fraud in 

retail forex is the largest area of the CFTC’s anti-fraud enforcement 

program.

July 12, 2007—The CME and the CBOT announced the 

completion of their merger creating the world’s largest exchange.

July 25, 2007—The CFTC charges hedge fund Amaranth with 

attempted manipulation in the price of natural gas. Since December 

2002, the Commission has imposed over $300 million in civil monetary penalties for manipulation, attempted manipulation and false 

price reporting in the energy markets.

September 18, 2007—The CFTC held a hearing to examine 

trading on regulated exchanges and ECMs as part of the 

Commission’s on going review of energy futures trading.

October 24, 2007—The CFTC delivers to Congress a report that 

includes recommendations to increase the oversight of some trading 

activity on electronic trading 

facilities known as ECMs.

October 25, 2007—British 

Petroleum agrees to pay a total 

of $303 million in sanctions to 

settle charges of manipulation 

and attempted manipulation in 

the propane market.

C o m m i s s i o n H i s t o r y A t A G l n c 
 CF

Management’s Discussion and Analysis

The Management’s Discussion and Analysis (MDA) section is an overview 

of the entire report, as supported and detailed in the Performance Section 

and the Financial Section. The MDA presents performance and financial

highlights for FY 2007, in addition to providing a discussion of compliance with legal and regulatory requirements, and future business trends 

and events. The MDA also includes the Inspector General’s FY 2007 assessment of management challenges facing the Commission. For more information on this section, please contact Mark Carney, Chief Financia

Officer, at 202-418-5477

Performance Section

The Performance Section compares the Commission’s performance to the 

annual goals as set forth in the 2004-2009 CFTC Strategic Plan. At the

close of FY 2007, the Commission issued the 2007-2012 CFTC Strategic 

Plan adopting a fourth strategic goal, which focuses on assessing and 

measuring organizational and management excellence. The Commission

will begin publishing it’s performance for the fourth goal in the FY 2008 

Performance and Accountability Report. For more information on this

section, please contact Emory Bevill, Deputy Director for Budget and 

Planning, at 202-418-5187

Financial Section

The Financial Section is comprised of the Commission’s financial statements and related Independent Auditors’ report. For more information,

please contact Keith Ingram, Deputy Director for Accounting and Financial 

Systems, at 202-418-5612

How This Report is Organ

This document consists of three primary sections and supplemental sections:

M A N A G E M E N T ’ S D I S C U S S I O N A N D A N A LY S I S

Commission at a Glance .................................................. 5

Performance Highlights.................................................. 16

Financial Highlights...................................................... 26

Management Assurances ................................................ 29

Forward Looking — Future Business Trends and Events..... 32

Inspector General’s FY 2007 Assessment .......................... 35

P E R F O R M A N C E S E C T I O N

Introduction to the Performance Section................39

Strategic Goal One: Economic Utility ...................40

Strategic Goal Two: Market Users and Public ........50

Strategic Goal Three: Industry..............................73

F I N A N C I A L S E C T I O N

A Message from the Chief Financial Officer .........101

Limitations of Financial Statements ................... 102

Principal Financial Statements .......................... 103

Notes to the Financial Statements ...................... 108

Report of the Independent Auditors......................119
CF

Questions and comments about this report can be directed to Mark Carney, Chief Financial 

Officer, at 202-418-5477 or via email at mcarney@cftc.gov.

An electronic version of the CFTC FY 2007 Performance and Accountability Report is available 

on the Internet at www.cftc.gov/abouthecftc/cftcreports.html. The 2007-2012 CFTC Strategic 

Plan, Keeping Pace with Change, is also available at this Web site

Other Accompanying Information

Other Accompanying Information provides an update on the Commission’s 

progress in addressing management challenges identified by the Inspector General 

in the FY 2006 Performance and Accountability Report. Also included is the

Commission’s summary of audit and management assurances. For more information on this section, please contact Mark Carney, Chief Financial Officer, at

202-418-5477

Appendix

The Appendix contains the FY 2007 Commissioner’s biographies, summaries of 

filed Enforcement actions addressed in the Performance Section, descriptions of 

CFTC Information Technology systems addressed in the Performance Section, 

and a glossary of abbreviations and acronyms used throughout the report

For more information, please contact Lisa Malone, Budget Analyst, Office of 

Financial Management, at 202-418-5184

132 CFTC

O t h e r A c c O m p A n y i n g i n f O r m A t i O n

Management Challenges...................................... 129

Summary of Audit and Management Assurances .....131

136 CFTC

A p p e n d i c e s

FY 2007 Commissioners.................................................133

Enforcement Litigation by Strategic Goal..........................135

CFTC Timeline .............................................................148

CFTC Information Technology Systems Descriptions..........152

Glossary of Abbreviations and Acronyms ..........................153

Figures and Tables .........................................................160
M A N A G E M E N T ’ S D I S C U S S I O N A N D A N A LY S I S

Commission at a Glance .................................................. 9

Performance Highlights...................................................20

Financial Highlights...................................................... 30

Management Assurances ................................................ 33

Forward Looking — Future Business Trends and Events..... 36

Inspector General’s FY 2007 Assessment .......................... 39
CFTC

Commodity Futures Industry 

Futures contracts on agricultural commodities have been 

traded in the United States for more than 150 years and 

have been under Federal regulation since the 1920s. At

the time of the Commission’s establishment, the vast 

majority of futures trading took place on commodities 

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 movements

Over the years, however, the futures industry has become 

increasingly diversified. 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, highly complex financial contracts based on interest rates, foreign currencies, 

Treasury bonds, securities indexes, and other products have 

far outgrown agricultural contracts in trading volume. The

latest statistics show that approximately five percent of onexchange commodity futures and option contracts activity 

occurs in the agricultural sector, while financial commodity 

futures and option contracts make up approximately 86 

percent, and other contracts, such as those on metals and 

energy products, make up about nine percent. Moreover,

the electronic integration of cross-border markets and 

firms, as well as cross-border alliances, mergers and other 

business activities, have transformed the futures markets 

and firms into a global industry

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, cross-border activities, product innovation, and greater competition

How the CFTC is Organized and Functions

The CFTC consists of five Commissioners who are 

appointed by the President to serve staggered five-year 

terms. All Commissioners are confirmed by the Senat

No more than three Commissioners at any one time may 

be from the same political party. The President designates

one of the Commissioners to serve as Chairman, with the 

advice and consent of the Senate

Commission at a Glan

Mission Statement

The mission of the CFTC is to protect market users and the p

from fraud, manipulation, and abusive practices related to the sale 

commodity futures and options, and to foster open, competitive

and financially sound commodity futures and option market
10 C

The Commission’s organization chart is aligned with its 

newly adopted CFTC 2007-2012 Strategic Plan, and its 

functions are divided between program policy and internal 

management. The Office of the Chairman oversees the

Commission’s principal divisions and offices that administer the policies, regulations, and guidance regarding the 

Commodity Exchange Act (CEA or the Act). The Office of

the Executive Director, by delegation of the chairman, 

directs the internal management of the Commission, 

ensuring that funds are responsibly accounted for and that 

program performance is measured and improved 

effectively

Attorneys at the Commission work on complex and novel 

legal issues in litigation, regulation, and policy development. They participate in administrative and civil proceedings; assist U.S. Attorneys in criminal proceedings involvi

futures law violations; develop regulations governing clearinghouses, exchanges, and intermediaries; provide a wide 

range of analysis and guidance on regulatory and supervisory issues; and provide legal advice to the Commission 

on policy and adjudicatory matters

Auditors examine records and operations of futures 

exchanges, clearinghouses, and firms for compliance 

with financial requirements, while futures trading 

specialists perform regulatory and compliance oversight 

of alleged fraud, market manipulations, and trade 

practice violations

Economists evaluate filings for new futures and option 

contracts and amendments to existing contracts to ensure 

they meet the Commission’s regulatory standards

Economists also analyze the economic effect of various 

Commission and industry actions and events and advise 

the Commission accordingly. In addition, economists

monitor trading activity and price relationships in futures 

markets to detect and deter price manipulation and other 

potential market disruptions

The CFTC is headquartered in Washington, D.C  Regiona

offices are located in Chicago, Kansas City, and New York

Additional information about the Commission’s history and 

its divisions can be obtained from the Commission’s Office 

of External Affairs or through its Web site, www.cftc.gov.

Commodity Futures Trading Commission Organization Structure

Commissioner Commissioner Chairman Commissioner Commissioner

Clearing and

Intermediary Oversight Market Oversight

Equal Employment Opportunity

Enforcement

Chief Operating Officer and

Executive Director Chief of Staff

Financial Management

Chief Financial Officer

Management

Operations

Information

Technology Services

Chief Information Officer

Human Resources

Chief Human Capital

Officer

Library Proceedings

Headquarters are located in Washington D.C. Regional Offices are located in New York, Chicago, and Kansas City

Organization and Locations
CFT

M A N A G E M E N T ’ S D I S C U S S I O N A N D A N A LY S I S

Evolving Mission and Responsibilities

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 

Modernization Act of 2000 (CFMA). The CFMA repealed

the ban on futures contracts based on individual securities 

and narrow-based securities indexes and instituted a regulatory framework for such products to be administered 

jointly by the CFTC and the Securities and Exchange 

Commission (SEC). It codified the principal provisions of

a new regulatory framework adopted earlier by the 

Commission. It also brought legal certainty to the trading

done in bilateral, over-the-counter (OTC) derivatives transactions and clarified the CFTC’s jurisdiction over retail, offexchange foreign currency (forex) transactions. Although

the CFMA changed the Commission’s approach to regulation, the Commission’s 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

Keeping Pace with Change

The futures industry has come a long way in the seven years 

since the CFMA was enacted. The principles-based

approach, codified in the CFMA, combined the best forces 

of the free market with a truly flexible and fair approach to 

regulation. During this period, the Commission experienced unprecedented growth in the amount of money

invested, volume, new products, trading platforms, and 

market participants. However, the phenomenal progress

in the industry, for all its benefits, carries with it new 

responsibilities, challenges, and opportunities

Since the development of the Commission’s first Strategic 

Plan in 1997, the mission of the CFTC has been expressed 

and measured through three strategic goals, each focusing 

on a vital area of regulatory responsibility. The plan

reflected the direction of the agency, including three key 

objectives: 1) modernizing regulations affecting trading 

platforms and market intermediaries; 2) permitting futures 

based on single securities or narrow-based securities 

indexes; and 3) providing legal certainty for OTC derivatives. The plan also reflected the enormous and continuing

changes in the markets, including rapid growth in volume, 

globalization, and the movement from open outcry onexchange trading floors to all-electronic trading from 

widely dispersed geographic locations

In FY 2007, at the close of the fiscal year, the Commission 

issued Keeping Pace with Change, the Strategic Plan for FY 

2007 through FY 2012. With this Strategic Plan, the

Commission adopted a fourth strategic goal, which focuses 

on assessing and measuring organizational and management excellence. Establishing this fourth strategic goal

allows the Commission to extend its performance and 

management framework—which requires the Commission 

to establish and measure its progress in achieving outcome 

objectives and strategic goals—beyond strictly program 

performance to the performance of the organization itself

Performance measures for the fourth strategic goal will be 

published in the FY 2008 Performance and Accountability 

Report.

In a marketplace driven by change, as is the futures industry, 

it may be helpful to look back at the way the industry and 

CFTC have trended in the past few years. The charts that

follow reflect many of those changes affecting the CFTC: 

1) industry growth versus staff growth; 2) growth in actively 

traded futures and option contracts; 3) enforcement actions 

in energy and forex markets and pool/hedge fund fraud; 

4) growth in foreign commodity trading; 5) number of 

registrants; 6) contract markets designated by the CFTC; 

7) number of CFTC-registered derivatives clearing organizations (DCOs); 8) exempt commercial markets (ECMs); 

9) exempt boards of trade (XBOTs); and 10) amount of 

customer funds held at futures commission merchants 

(FCMs)
12 C

Growth in Volume of Futures & Option Contracts Traded & CFTC Full-time 

Equivalents (FTEs), 1997-2007

Trading volume has increased six-fold in the last decade while staffing levels at the Commission have trended downward

Actively Traded Futures & Option Contracts, 1997-2007

The number of actively traded contracts on U.S. exchanges has more than quintupled in the last deca

0

Contract Trading 

Volume (Millions)

2,500

2,000

1,500

1,000

500

1997

3,000

1998 1999 2000 2001 2002 2003 2004 2005 2006 2007

553

F i s c a l Ye a r

FTEs (Staffing Levels)

Contract Trading Volume

(Millions)

560 567 546 514 521 497 517 491 493 437

522 625 614 580

723

1,004

1,225

1,518

1,920

2,421

3,085

553 560 567 546 514 521 497 517 491 493 437

0

Contract Trading 

Volume (Millions)

2,500

2,000

1,500

1,000

500

19971998 1999 2000 2001 2002 2003 2004 2005 2006 2007

553

F i s c a l Ye a r

FTEs (Staffing Levels)

Contract Trading Volume

(Millions)

560 567 546 514 521 497 517 491 493 437

522 625 614 580

723

1,004

1,225

1,518

1,920

2,421

553 560 567 546 514 521 497 517 491 493 437

0

N u m b e r o f C o n t r a c t s

1,000

800

600

400

200

1997

1,200

1,400

1998 1999 2000 2001 2002 2003 2004 2005 2006 2007

258 286 251 266 250 278

538

662

906

1,135

1,365

F i s c a l Ye a r

Actively Traded Futures

& Option Contracts on

U.S. Exchanges

0

N u m b e r o f C o n t r a c t s

1,000

800

600

400

200

1997

1,200

1,400

1998 1999 2000 2001 2002 2003 2004 2005 2006 2007

258 286 251 266 250 278

538

662

906

1,135

1,365

F i s c a l Ye a r

Actively Traded Futures

& Option Contracts on

U.S. Exchanges
CFT

M A N A G E M E N T ’ S D I S C U S S I O N A N D A N A LY S I S

Preservation of Market Integrity and Protection of Market Users

Manipulation, Attempted Manipulation, and False Reporting

The CFTC has taken strong action utilizing every tool at its disposal to detect and deter against illegitimate market forces

The Commission uses enforcement action to preserve market integrity and protect market users, demonstrating that our 

authority is significant and that we intend to use it

For example, CFTC enforcement efforts in the energy arena from December 2001 through September 2007 have resulted 

in 38 enforcement actions charging 63 companies and individuals and the assessment of approximately $308 million in 

penalties

Actions Taken Since December 2001 in Energy Markets Energy Markets

Number of Cases Filed or Enforcement Actions 38

Number of Entities/Persons Charged 63

Number of Dollars in Penalties Assessed

• Civil Monetary Penalties $308,198,500

Commodity Pools, Hedge Funds, Commodity Pool Operators (CPOs), and Commodity Trading Advisors (CTAs)

Investors continue to fall prey to unscrupulous CPOs and CTAs, including CPOs and CTAs operating hedge funds

The majority of the Commission’s pool/hedge fund fraud cases are brought against unregistered CPOs and/or CTAs. These

cases tend to involve Ponzi schemes or outright misappropriation, as opposed to legitimate hedge fund operations. From

October 2000 through September 2007, the Commission filed a total of 61 enforcement actions alleging misconduct in 

connection with commodity pools and hedge funds

Actions Taken Since October 2000 Pools/Hedge Funds

Number of Cases Filed or Enforcement Actions 61

• Cases/Actions Charging Commission Registrants 23

Number of Dollars in Penalties Assessed $ 231,027,883

Forex Fraud

The Commission vigorously uses its enforcement authority to combat the problem of forex fraud. Since passage of the

CFMA in December 2000 through September 2007, the Commission, on behalf of more than 25,000 customers, has 

filed 98 cases. Those efforts have thus far resulted in approximately $453 million in restitution and $551 million in

civil monetary penalties

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

Number of Cases Filed or Enforcement Actions 98

• Number of Entities/Persons Charged 374

• Number of Customers Affected 25,859

Number of Dollars in Penalties Assessed

• Civil Monetary Penalties $ 551,301,267

• Restitution $ 453,173,819
14 

Growth of Foreign Commodity Trading

Since 2000, the number of foreign customers trading on U.S. exchanges has more than tripled and the number of 

customers trading on foreign exchanges has more than quintupled

Number of Registrants

Companies and individuals who handle customer funds, solicit or accept orders, or give trained advice must apply for 

CFTC registration through the National Futures Association (NFA), a self-regulatory organization (SRO) with delegated 

oversight authority from the Commission. The Commission regulates the activities of nearly 70,000 registrant

Type of Registered Professional Number as of September 30, 2007

Associated Persons (APs) (Salespersons) 53,844 

Commodity Pool Operators (CPOs) 1,416

Commodity Trading Advisors (CTAs) 2,601

Floor Brokers (FBs) 8,038

Floor Traders (FTs) 1,506

Futures Commission Merchants (FCMs) 197 1

Introducing Brokers (IBs) 1,699 2

TOTAL 69,301

1 Includes 16 notice-registered FCMs.

2 Includes 42 notice-registered IBs. Amount in Thousands

2000

27.0

54.0

2007

127.8

138.3

0

100

80

60

40

20

120

140

160 Foreign Customers Trading on

U.S. Commodity Exchanges

U.S. Customers Trading on

Foreign Commodity Exchanges

F i s c a l Ye a r

A

2000

27.0

2007

0

40

20

F i s c a l Ye a r
CFT

M A N A G E M E N T ’ S D I S C U S S I O N A N D A N A LY S I S

Contract Markets Designated by the CFTC, 2002-2007

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 

Exchanges3 2002 2003 2004 2005 2006 2007

BTEX ● ●

CBOT ● ● ● ● ● ●

CCFE ● ● ● ●

CFFE ●

CFE ● ● ● ● ●

CME ● ● ● ● ● ●

CSCE ● ● ●

EPFE ●

HedgeStreet ● ● ● ●

INET ●

KCBT ● ● ● ● ● ●

MACE ● ●

ME ● ● ●

MGE ● ● ● ● ● ●

NQLX ● ● ● ●

NYBOT/ICE US ● ● ● ●

NYCE ● ● ●

NYFE ● ● ●

NYMEX

(incl. COMEX)

● ● ● ● ● ●

OCX ● ● ● ● ● ●

PBOT ● ● ● ● ● ●

USFE ● ● ● ●

TOTAL 16 15 18 13 12 12

3

 Refer to the CFTC Glossary in the Appendix for full names of organizations.
16 

Number of CFTC-Registered Derivatives Clearing Organizations, 2002-2007

Clearinghouses that provide clearing services for CFTC-regulated exchanges must register as DCOs. Currently, 11 DCOs

are registered with the Commission

DCOs4 2002 2003 2004 2005 2006 2007

AE ● ● ●

BTEX ● ●

CBOT ● ● ● ●

CCorp ● ● ● ● ● ●

CME ● ● ● ● ● ●

EnergyClear ● ●

FCOM ● ●

GCC ● ●

HedgeStreet ● ● ● ●

ICC ● ●

KCBT ● ● ● ● ● ●

LCH ● ● ● ● ● ●

MGE ● ● ● ● ● ●

NYCC/ICE Clear ● ● ● ● ● ●

NYMEX ● ● ● ● ● ●

OCC ● ● ● ● ● ●

ONXCC ● ●

TOTAL 14 14 10 11 11 11

4

 Refer to the CFTC Glossary in the Appendix for full names of organizations.
CFTC

M A N A G E M E N T ’ S D I S C U S S I O N A N D A N A LY S I S

Exempt Commercial Markets, 2002-2007

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 anti-fraud 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 information, record-keeping, and other requirements. An

ECM is prohibited from claiming that the facility is registered with, or recognized, designated, licensed or approved by, the 

Commission. A total of 21 ECMs have filed notices with the Commission and 19 were active in FY 200

Exempt 

Commercial 

Markets5 2002 2003 2004 2005 2006 2007

CCX ● ● ● ● ●

CDXchange ● ● ● ● ●

ChemConnect ● ●

Flett ●

GFI ●

HSE ● ● ● ● ● ●

ICAP ● ●

ICAP ETC ● ●

ICAP HYDE ● ●

ICE ● ● ● ● ● ●

IMAREX ● ● ● ● ● ●

NGX ● ● ● ● ● ●

Nodel ●

NTP ● ●

OPEX ● ● ● ● ● ●

Options ATS ●

SL ● ● ● ● ●

TCX ● ● ●

TFS ● ● ● ● ●

TFSE ● ● ● ● ●

TS ● ● ● ● ●

TOTAL 7 11 11 12 17 19

5

 Refer to the CFTC Glossary in the Appendix for full names of organizations.
18 C

Exempt Boards of Trade, 2002 – 2007

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 provision

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 XBOT must provide certain pricing information

to the public. To date, 11 XBOTs have filed notices with the Commissio

Exempt Boards 

of Trade6 2002 2003 2004 2005 2006 2007

AE ● ● ● ●

CME AM ● ● ●

GFI ForexMatch ●

Intrade ● ● ●

Longitude ●

MATCHBOXX

ATS

●

Storm ● ●

Swapstream ● ●

WBOT ● ● ● ●

WXL ● ● ● ● ●

Yellow Jacket ●

TOTAL 1 2 3 5 8 8

5

 Refer to the CFTC Glossary in the Appendix for full names of organizations.
CFT

M A N A G E M E N T ’ S D I S C U S S I O N A N D A N A LY S I S

Customer Funds Held in Futures Commission Merchant Accounts, 1997-2007

The amount of customer funds held at FCMs has more than quadrupled in the last decade

0

A m o u n t i n B i l l i o n s

100

80

60

40

20

1997

120

140

160

180

1998 1999 2000 2001 2002 2003 2004 2005 2006 2007

$38.7

F i s c a l Ye a r

Customer Funds in

FCM Accounts

$47.5

$54.1 $56.7

$59.7 $64.3

$75.6

$94.5

$116.7

$138.0

$155.4

0

20

19971998 1999 2000 2001 2002 2003 2004 2005 2006 2007

F i s c a l Ye a r
20 CF

Performance Highlig

The mission of the CFTC is accomplished through three strategic goals, each focusing on a vital area of regulatory responsibility to: 1) ensure the economic vitality of the commodity futures and option markets; 2) protect market 

users and the public; and 3) ensure market integrity in order to foster open, competitive, and financially sound markets

Accomplishing the three long-term strategic goals is evidenced by the progress of nine key outcome objectives. In most

cases, due to the broad economic functions that the Commission oversees, it is not a simple task to identify specific 

detailed objectives that will be accomplished each year. However, it is possible to identify conditions that, if present, are

indicators that the Commission’s activities are contributing successfully to the health of the industry it regulates

Resource Investment by Strategic Goal

In FY 2007, the Commission invested 37 percent of its resources in economic vitality, 35 percent in protecting market 

users and the public, and 28 percent in market integrity

Net Cost by Strategic Goal

$35.6 Million

Goal Two: Protect 

market users and 

the public.

35%

$37.6 Million

Goal One: Ensure the 

economic vitality of the 

commodity futures and 

option markets.

37%

$28.5 Million

Goal Three: Ensure market 

integrity in order to foster 

open, competitive, and 

financially sound markets.

28%

Net Cost by Strategic Goal

Net Cost by Strategic Goal

153 FTEs

Goal Two: Protect 

market users and 

the public.

35%

162 FTEs

Goal One: Ensure the 

economic vitality of the 

commodity futures and 

option markets.

37%

122 FTEs

Goal Three: Ensure market 

integrity in order to foster 

open, competitive, and 

financially sound markets.

28%

Full-time Equivalents by Strategic Goal
CFTC

M A N A G E M E N T ’ S D I S C U S S I O N A N D A N A LY S I S

Summary of CFTC Mission Statement, Strategic Goals & Outcomes

Mission Statement

The mission of the CFTC is to protect market users and the p

from fraud, manipulation, and abusive practices related to the sale 

commodity futures and options, and to foster open, competitive

and financially sound commodity futures and option market

Goa

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

O

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

Protect market users and the public

O

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 CEA are handled effectively and 

 expeditiously.

Goal 

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

O

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. 
22 CF

Results Not 

Demonstrated

6%

Met

59%

Not Met

6%

Exceeded

29%

FY 2007 Performance Results FY 2007 Performance Metrics Results

Annually, the performance metrics are analyzed to 

determine the measure of success the program’s activities 

have achieved in accomplishing the Commission’s overall 

strategic mission. In FY 2007, the Commission met or

exceeded 88 percent of its 34 performance metrics.

Since many of the Commission’s performance metrics 

are subject to external influences, such as the futures 

industry, metrics alone cannot fully disclose the status 

of the performance ratings. In the Performance Section,

the Commission, therefore, further analyzes the progress 

of each performance metric using adjectival ratings. The

following is a summary outline of adjectival ratings used 

by Lead Program Offices to evaluate the results of each 

performance metric: 

EFFECTIVE: Significantly exceeds the standards of performance and achieves noteworthy results.

MODERATELY 

EFFECTIVE: 

Exceeds the standards of performance; although there may be room for improvement in some 

elements, better performance in all other elements more than offsets this.

ADEQUATE: Meets the standard of performance; deficiencies do not substantially affect performance.

MARGINAL: Below the standard of performance; deficiencies require attention and corrective action.

UNSATISFACTORY: 

Significantly below the standard of performance; deficiencies are serious, may affect overall results, 

urgently require senior management attention, prompt corrective action.

RESULTS NOT 

DEMONSTRATED: Data is not available to evaluate the performance.
CFTC

Introduction to Strategic Go

The focus of this goal is the marketplace. If U.S. commodity futures and option markets are protected from, aare free of, abusive practices and influences, they will fulfill their vital role in the U.S. market economy, accuratel

reflecting the forces of supply and demand and serving market users by fulfilling an economic need

Strate

Ensure the economic vitality of the commodity futures and option markets.

Annual Per

No price manipulation or other disruptive activities that would cause loss of confidence 

or negatively affect price discovery or risk shifting.

Outcomes and Performance Measures

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

activity.

1.1.1. Percentage growth in market volume.

1.1.2. 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.

1.1.3. Percentage increase in number of products traded.

1.1.4. Percentage of new exchange and clearinghouse organization applications completed within expedited review period.

1.1.5. Percentage of new contract certification reviews completed within three months to identify and correct deficiencies in 

contract terms that make contracts susceptible to manipulation.

1.1.6. Percentage of rule 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.

1.2 Markets that are effectively and efficiently monitored to ensure early warning of potential problems or issues that could 

adversely affect their economic vitality.

1.2.1 Percentage of derivative clearing organization applications demonstrating compliance with Core Principles.

1.2.2 Ratio of markets surveilled per economist.

1.2.3 Percentage of contract expirations without manipulation.

Performance Trends for Goal One

Monitoring market activity represents one of the ways the Commission seeks to protect the economic function of the 

markets. Market surveillance is conducted to detect attempted manipulation and other abusive practices that could

undermine the capacity of these markets to perform their economic function. The Commission takes preventive measures

to ensure that market prices accurately reflect fundamental supply and demand conditions, including the routine daily 

monitoring of large trader positions, futures and cash prices, price relationships, and supply and demand factors in order 

to detect threats of price manipulation
24 C

Market Volume

Contract trading volume peaked to more than three billion in FY 2007, as shown in Figure 1, Growth in Volume of Futures & 

Option Contracts Traded & CFTC FTEs, on page 12, with increased demand realized for products traded on exchanges. The

FY 2007 actual is driven by changes in economic fundamentals, success of newly launched products, new participants using 

these markets, and other changes in the marketplace. As such, these factors may impact the precision of any prediction of

future trading volume

Performance Measure 1.1.1

FY 2005

Actual 

FY 2006

Actual 

FY 2007

Plan

FY 2007

Actual

Percentage growth in market volume 26% 26% 25% 27%

New Products

The actual percentage of new products offered on the exchanges in FY 2007 increased above projections. These results are

driven by customer demand for new products, exchange innovation, opportunities made available by the increasing use 

of electronic trading, and other changes in the marketplace. As such, these factors may impact the number of products

introduced

Performance Measure 1.1.3

FY 2005

Actual 

FY 2006

Actual 

FY 2007

Plan

FY 2007

Actual

Percentage increase in number of products traded 43% 25% 10% 20%
CFTC

Introduction to Strategic Go

While the United States is the beneficiary of explosive growth in the futures industry, the risk of fraud and manipulation is always present. The trend toward electronic trading platforms and the expanding complexity of

trading instruments have challenged the Commission to reconfigure its ability to identify, investigate, and take action 

against parties involved in violating applicable laws and regulations. If evidence of criminal activity is found, matters are

referred to state or Federal authorities for prosecution under criminal statutes

Over the years, the Commission has taken action in a number of cases involving manipulation or attempted manipulation 

of commodity prices. A variety of administrative sanctions, such as bans on futures trading, civil monetary penalties, and

restitution orders, is available to the Commission. The Commission may also seek Federal court injunctions, asset freezes,

and orders to disgorge ill-gotten gains

Strateg

Protect market users and the public.

Annual Perf

To have an effective and efficient market surveillance program.

Outcomes and Performance Measures

2.1 Violations of Federal commodities laws are detected and prevented.

2.1.1. Number of enforcement investigations opened during the fiscal year.

2.1.2. Number of enforcement cases filed during the fiscal year.

2.1.3. 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.

2.1.4. Cases filed by other criminal and civil law enforcement authorities during the fiscal year that included cooperative assistance from the Commission.

2.2 Commodity professionals meet high standards.

2.2.1. Percentage of self-regulatory organizations that comply with Core Principles.

2.2.2. Percentage of derivative clearing organizations that comply with Core Principles.

2.2.3. Percentage of professionals compliant with standards regarding testing, licensing, and ethics training.

2.2.4. Percentage of self-regulatory organizations that comply with requirement to enforce their rules.

2.2.5. Percentage of total requests receiving CFTC responses for guidance and advice.

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

2.3.1. Percentage of filed complaints resolved within one year of the filing date.

2.3.2. Percentage of appeals resolved within six months.
26 C

Performance Trends for Goal Two

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 works to protect market 

users and the public by promoting compliance with, 

and deterring violations of, the CEA and Commission 

regulations. The majority 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

Enforcement Investigation and Litigation

In FY 2007, the Commission filed 41 enforcement actions 

and its enforcement program opened 99 investigations 

of potential violations of the Act and Commission 

regulations. The Commission obtained near record relief

against enforcement action defendants and respondents—

monetary penalties imposed during FY 2007 included 

$290,910,031 in restitution and disgorgement, and 

$251,072,084 in civil monetary penalties

Performance Measure 2.1.1

FY 2005

Actual 

FY 2006

Actual 

FY 2007

Plan

FY 2007

Actual

Number of enforcement investigations opened during the fiscal 

year

131 123 85 99

Performance Measure 2.1.2

FY 2005

Actual 

FY 2006

Actual 

FY 2007

Plan

FY 2007

Actual

Number of enforcement cases filed during the fiscal year 64 38 40 41

Performance Measure 2.1.3

FY 2005

Actual 

FY 2006

Actual 

FY 2007

Plan

FY 2007

Actual

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

100% 100% 95% 100%

While the Commission’s Enforcement program continues 

to perform at a high level, current resource constraints 

continue to have an adverse impact. Enforcement staff

are operating at full capacity and shifting resources from 

important investigations to ongoing and future litigation 

demands limits the ability to pursue new investigations as 

shown in the metrics above. 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 U.S. Department of Justic

(DOJ) are an important adjunct to effective enforcement 

of the CEA, cooperative enforcement still requires the 

active use of Commission FTEs to assist DOJ in its criminal 

prosecutions
CFTC 

Introduction to Strategic Goal

The Commission focuses on issues of market integrity, seeking to protect: 1) the economic integrity of the markets so that markets may operate free from manipulation; 2) the financial integrity of the markets so that the insolvency 

of a single participant does not become a systemic problem affecting other market participants; and 3) the operational 

integrity of the markets so that transactions are executed fairly and proper disclosures to existing and prospective customers 

are made

Strategi

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

Annual Perfo

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.

Outcomes and Performance Measures

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

3.1.1. Lost funds:

 a) Number of customers who lost funds.

 b) Amount of funds lost.

3.1.2. Number of rulemakings to ensure market integrity and financially sound markets.

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

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

3.2.1. Percentage of intermediaries who meet risk-based capital requirements.

3.2.2. Percentage of self-regulatory organizations that comply with requirement to enforce their rules.

3.3 Markets are free of trade practice abuses. 

3.3.1. Percentage of exchanges deemed to have adequate systems for detecting trade practice abuses.

3.3.2. Percentage of exchanges that comply with requirement to enforce their rules.

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

3.4.1. Percentage of CFMA Section 126(b) objectives addressed.

3.4.2. Number of rulemakings, studies, interpretations, and guidances to ensure market integrity and exchanges’ 

compliance with regulatory requirements.

3.4.3. 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.

3.4.4. Percentage of total requests receiving CFTC responses for guidance and advice.

Performance Trends for Goal Three

In fostering open, competitive, and financially sound markets, the Commission’s two main priorities are to avoid 

disruptions to the system for clearing and settling contract obligations and to protect the funds that customers entrust to 

FCMs. Clearing organizations and FCMs are the backbone of the clearing and settlement system; together, they protect

against the possibility that the financial difficulties of one trader may become a systemic problem for other traders
28 CF

Commission staff also work with the SROs and NFA to 

monitor closely the financial condition of the FCMs 

themselves, who must provide the Commission, designated 

SRO, and NFA with various monthly and annual financial 

reports. The SROs and NFA also conduct audits and daily

financial surveillance of their respective member FCMs

Part of this financial surveillance involves looking at each 

FCM’s exposure to losses from large customer positions 

that it carries. As an oversight regulator, the Commission

not only reviews the audit and financial surveillance work 

of the SROs and NFA, but also monitors the financial 

strength of FCMs directly, as appropriate. The Commission

also periodically reviews clearing organization procedures 

for monitoring risks and protecting customer funds

Protecting Customer Funds

Staff monitor the operations of registrants in possession of 

customer funds through a number of financial oversight 

and risk surveillance activities. This monitoring includes

reviewing monthly financial reports submitted by FCMs, 

reviewing annual reports of FCMs certified by independent 

public accountants, and conducting onsite examinations 

of FCMs. In FY 2007, staff processed about 2,700 financial

reports filed by FCMs, and performed examinations and 

onsite reviews of several FCMs to test compliance with the 

Commission’s financial requirements for the safekeeping 

of customer funds

The financial and risk surveillance activities performed by 

staff have taken on greater importance in recent years due 

to the number of instances of market volatility and their 

impacts on market intermediaries and the clearing system

During FY 2007, staff conducted nearly 30 market move 

reviews to monitor the potential for, and instances of, 

market volatility, market disruptions, or emergencies that 

have the potential to impact: 1) the proper capitalization 

of firms; 2) the proper segregation of customer funds; 

3) the ability of financial intermediaries to make payments 

to a DCO in a timely manner; and 4) issues with respect to 

systemic risk.

As a result of these and other ongoing financial oversight 

and risk surveillance activities, in FY 2007, there were no 

losses of regulated customer funds as a result of an FCM 

failure or the inability of customers to transfer their funds 

from a failing FCM to a financially sound FCM. This

performance trend again met the program’s objectives of 

ensuring sound financial practices of clearing organizations 

and firms holding customer funds, and the protection of 

customer funds

Oversight of SROs’ and DCOs’ Compliance Programs

A key aspect of assuring effective self-regulation is oversight 

by the Commission of futures industry SROs, which 

include exchanges and NFA, and DCOs, to ensure their 

fulfillment of responsibilities for monitoring and ensuring 

the financial integrity of market intermediariesw and the 

protection of customer funds. Toward this end, Commission staff oversee, review, and report to the Commission

concerning SRO and DCO self-policing programs to 

evaluate their compliance with applicable provisions of 

the Act and Commission regulations. Similar to the

approach of other Federal financial regulators and certain 

overseas financial supervisors, the Commission employs a 

risk-based approach to its examination cycles of SROs and 

DCOs, i.e., both the scheduling and scope of the risk-based

reviews are based on an analysis of the underlying risks to 

which an institution is exposed and the controls that it has 

in place to address those risks.

Substantial staff resources were committed to the 

examination of selected SROs and DCOs in FY 2007, 

resulting in the completion of three major reviews of 

SROs’ and DCOs’ compliance programs. The reviews

concluded that the SROs’ and DCOs’ compliance programs 

were meeting the requirements of the Act and Commission 

regulations. This performance trend again met the

Commission’s oversight program objectives of ensuring 

the financial integrity of market intermediaries and the 

protection of customer funds

Performance Measure 3.1.1

FY 2005

Actual 

FY 2006

Actual 

FY 2007

Plan

FY 2007

Actual

Lost funds: 

a) Number of customers who lost funds 

b) Amount of funds lost

0

$ 0

0

$ 0

0

$ 0

0

$ 0
CFTC

M A N A G E M E N T ’ S D I S C U S S I O N A N D A N A LY S I S

Performance Measure 3.1.3

FY 2005

Actual 

FY 2006

Actual 

FY 2007

Plan

FY 2007

Actual

Percentage of clearing organizations that comply with requirement to enforce rules100% 100% 100% 100%

Performance Measure 3.2.2

FY 2005

Actual 

FY 2006

Actual 

FY 2007

Plan

FY 2007

Actual

Percentage of self-regulatory organizations that comply with 

requirement to enforce their rules

100% 100% 100% 100%

Performance Measure 3.3.2

FY 2005

Actual 

FY 2006

Actual 

FY 2007

Plan

FY 2007

Actual

Percentage of exchanges that comply with requirement to 

enforce their rules

100% 100% 100% 100%
30 C

Financial Highlig

The following chart is an overview of the Commission’s financial position, preceding a discussion of the agency’s financial highlights for FY 2007

2007 2006

Condense

Fund Balance with Treasury $ 19,507,914 $ 20,055,508

Property, Equipment, and Software, Net 2,850,911 3,674,493

Accounts Receivable 126,276 63,855

Prepayments 131,142 461,038

Other (Custodial) 620,311 5,756,605

Total Assets $ 23,236,554 $ 30

FECA Liabilities $ 223,003 $ 311,285 

Payroll, Benefits and Annual Leave 7,415,622 9,182,837

Contingent & Deposit Fund Liabilities 357,563 59,088

Other Deferred Lease Liabilities 3,169,541 2,837,403

Accounts Payable 2,960,373 2,574,535 

Custodial Liabilities 620,311 5,756,605

Other 10,001 –

Total Liabilities 14,756,414 20,721,753 

Cumulative Results of Operations (5,700,823) (4,568,800)

Unexpended Appropriations 14,180,963 13,858,546 

Total Net Position 8.480,140 9,289,746 

Total Liailities and Net Position $ 23,23

Condensed

Total Cost $ 101,824,806 $ 104,256,065 

Net Revenue (91,763) (23,150)

Total et Cost of Operations $ 101,73

Net ost 

Goal One - Economic Utility $ 37,641,226 $ 33,354,533

Goal Two - Market User and Public 35,606,565 40,650,837

Goal Three - Industry 28,485,252 30,227,545

$ 101,733,043 $ 104,232,915
CFT

M A N A G E M E N T ’ S D I S C U S S I O N A N D A N A LY S I S

Financial Discussion and Analysis

The CFTC prepares annual financial statements in 

accordance with GAAP for Federal government entities and 

subjects the statements to an independent audit to ensure 

their integrity and reliability in assessing performance

Management recognizes the need for performance and 

accountability reporting, and fully supports assessments of 

risk factors that can have an impact on its ability to do so

Improved reporting enables managers to be accountable 

and supports the concepts of the Government Performance 

and Results Act (GPRA), which requires the Commission 

to: 1) establish a strategic plan with programmatic goals 

and objectives; 2) develop appropriate measurement 

indicators; and 3) measure performance in achieving those 

goals

The financial summary as shown on page 30 highlights 

changes in financial position between September 30, 2006 

and September 30, 2007. This overview is supplemented

with brief descriptions of the nature of each required 

financial statement and its relevance. Certain significant

balances or conditions featured in the graphic presentation 

are explained in these sections to help clarify their 

relationship to Commission operations. Readers are

encouraged to gain a deeper understanding by reviewing 

the Commission’s financial statements and notes to the 

accompanying audit report presented in the Financial 

Section of this report

Understanding the Financial Statements

The CFTC presents financial statements and notes in the 

format required for the current year by Office of 

Management and Budget (OMB) Circular A-136, Financial 

Reporting Requirements, which is revised annually by OMB 

in coordination with the U.S. Chief Financial Officer

Council. CFTC’s current year and prior year financial

statements and notes are presented in a comparative 

format

Balance Sheet

The balance sheet presents, as of a specific point in time, 

the economic value of assets and liabilities retained or 

managed by the Commission. The difference between

assets and liabilities represents the net position of the 

Commission

For the year ended September 30, 2007, the balance sheet 

reflects total assets of $23 million. This reflects a 23 percent

decrease from FY 2006. Although the Commission’s fund

balance with the U.S. Department of the Treasur

(Treasury) was only $0.5 million less in FY 2007 than it

was at the end of FY 2006, custodial accounts receivable 

balances dropped by 89 percent. The CFTC litigates against

defendants for alleged violations of the CEA, as amended

Violators may be subject to a variety of sanctions including 

fines, injunctive orders, bars and suspensions, rescissions 

of illegal contracts, disgorgement, and restitution to 

customers. When collectible custodial receivables (nonentity assets) are high, these fines and penalties that have

been assessed and levied against businesses for violation of 

law dominate the balance sheet

In FY 2007, approximately $264 thousand in net custodial 

receivables was attributable to civil monetary sanctions

This precipitous drop is largely explained by the timing of 

civil monetary penalties collections. In FY 2007, a $2.

million collection related to NRG Energy Inc. was booked

in late September. For FY 2006, the majority of the $5.

million net receivable was attributable to a $4.2 milli0n

debt collected from Dominion Resources in early October 

2006. In addition, due to a month delay in publishing the

annual schedule of fees notice in the Federal Register, only 

$251 thousand out of $608 thousand had been collected 

of the fees charged to recover the costs incurred by the 

Commission in the operation of its program of oversight 

of self-regulatory organization rule enforcement programs

In addition, the net value of general property, plant, and 

equipment decreased almost $825 thousand, as the 

Commission began depreciating internally-developed 

software for the eLaw Program

As should be expected from a small regulatory agency, 

payroll, benefits, and annual leave make up the majority of 

CFTC liabilities. Several factors influenced the change in

the Commission’s net position during FY 2007. This, as

noted above, includes the timing of prior year write-offs of 

old debt, and the overall case management and analysis of 

debt by the Division of Enforcement

Statement of Net Cost

This statement is designed to present the components of 

the net cost of the Commission. Net Cost is the gross cost

incurred less any revenues earned from Commission activi-
32 C

ties. The statement of net cost is categorized by the

Commission’s strategic goals. The Commission experienced a 2.4 percent decrease in the total net cost o

operations during FY 2007. This is consistent with the

continuing resolution budget the Commission received for 

its appropriation

Goal One, which tracks activities related to market oversight, continues to require a significant share of 

Commission resources. The CFTC experienced a 12.

percent increase in net cost of operations in FY 2007, rising 

to $37.6 million. This increase was largely attributable to 

shift in resources back from responding to the collapse of 

Refco LLC, in FY 2006.

Goal Two is representative of efforts to protect market users 

and the public. In FY 2007, the Goal Two, net cost of operations fell to $35.6 million, a 12.4 percent reduction. Th

lower funding levels primarily impacted the Division of 

Enforcement, which conducted 20 percent less enforcement investigations than the previous fiscal year due to 

declining staffing levels due to the hiring freeze that was in 

effect for most of FY 2007 throughout the Commission

Goal Three is representative of efforts to ensure market 

integrity. In FY 2007, the Goal Three net cost of operations

was $28.5 million, a decrease of 5.8 percen   Productivi

improvements achieved through the use of an audit 

software tool helped to offset some of the reduction in 

resources. For example, staff resources were able to

complete three major reviews of self-regulatory organization and derivatives clearing organization compliance 

programs. As futures markets become more global in

nature, the Commission is increasingly called upon to 

register overseas clearinghouses, to approve complex crossborder trading and clearing linkages, and to perform effective ongoing supervision. This requires the Commission

to invest resources in developing and maintaining effective 

relationships with foreign regulatory authorities

Statement of Budgetary Resources

This statement provides information about the provision 

of budgetary resources and its status as of the end of the 

year. Information in this statement is consistent with

budget execution information and the information 

reported in the Budget of the U. S. Government, FY 2007

The $98.0 million appropriation level received in FY 2007

was based on a continuing resolution formula. As a consequence the level was slightly less than the enacted FY 2006

level $98.4 million, however, as no rescission was enacted

in FY 2007, the Commission received a small net increase 

of about $580,000 to maintain a “steady state” and fund 

benefits and compensation, lease expenses, printing, and 

services to support systems users, telecommunications, 

operations, and maintenance of technology equipment

Gross outlay decreases are mainly due to an almost yearlong hiring freeze that reduced disbursements for payroll 

and benefits, netted by an apportionment of no-year 

appropriation recoveries of $3.4 million and the cancellation of expired accounts

Statement of Custodial Activity

This statement provides information about the sources and 

disposition of non-exchange revenues. Non-exchange

revenue at the CFTC is primarily represented by fines, 

penalties, and forfeitures assessed and levied against businesses and individuals for violations of the CEA. Other

non-exchange revenues include registration, and filing and 

appeal fees, as well as general receipts. The statement of

custodial activity reflects total non-exchange revenue 

collected (cash collections) of $12.4 million and a transfer

of the collections to the Treasury in the same amount

Historical experience has indicated that a high percentage 

of custodial receivables prove uncollectible. The methodology used to estimate the allowance for uncollectible

amounts related to custodial accounts is that custodial 

receivables are considered 100 percent uncollectible unless 

otherwise noted in the judgment. An allowance for uncollectible accounts has been established and included in

Accounts Receivable on the balance sheet. The allowance

is based on past experience in the collection of accounts 

receivables and analysis of outstanding balances. Accounts

are re-estimated quarterly based on account reviews and 

determination that changes to the net realizable value are 

needed. The re-estimate can cause wide swings in the statement line that reports Change in Accounts Receivabl
CFT

Management Assuran

Management Overview

The CFTC is committed to management excellence and recognizes the importance of strong financial systems 

and internal controls to ensure accountability, integrity, 

and reliability. This operating philosophy has permitted

the Commission to make significant progress in documenting and testing its internal controls over financial reporting 

for next year, as prescribed in OMB Circular A-123, Management’s Responsibility for Internal Control. The graph below depicts all five components of the internal control process that must be present in an organization to ensure an 

effective internal control process

Control Environment is the commitment to encourage 

the highest level of integrity and personal and professional 

standards, and promotes internal control through leadership philosophy and operation style

Risk Assessment is the identification and analysis of risks 

associated with business processes, financial reporting, 

technology systems, and controls and legal compliance in 

the pursuit of agency goals and objectives

Control Activities are the actions supported by management policies and procedures to address risk, e.g., performance reviews, status of funds reporting, and asset management review

Monitoring is the assessment of internal control performance to ensure the internal control processes are properly 

executed and effective

Information and Communication ensures the agency’s 

control environment, risks, control activities, and performance results are communicated throughout the agency

Internal Control Process

The Commission relies on its performance management 

and internal control framework to:

■ Ensure that its divisions and mission support offices 

achieve their intended results efficiently and effectively; 

and

■ Ensure the maintenance and use of reliable, complete, 

and timely data for decision-making at all levels

Information & Communication

MONiTORiNG

CONTROL ACTiViTiES

CONTROL ENViRONMENT

RiSk ASSESSMENT

Information & Communication

Information & Communication

MONiTORiNG

CONTROL ACTiViTiES

CONTROL ENViRONMENT

RiSk ASSESSMENT

Information & Communication
34 

The Commission strongly believes that the rapid 

implementation of audit recommendations is essential 

to improving its operations. Integration of Commission

strategic, budget, and performance data permits management to make individual assurance statements with 

confidence. Moreover, data-driven reporting provides the

foundation for Commission staff to monitor and improve 

its control environment

Statement of Assurance

“CFTC management is responsible for establishing and maintaining effective internal control and financial management 

systems that meet the objectives of the Federal Managers’ Financial Integrity Act (FMFIA). The CFTC conducted its 

assessment of the internal control over effectiveness and efficiency of operations, and compliance with applicable laws 

and regulations, in accordance with OMB Circular A-123, Management’s Responsibility for Internal Control. Based 

on the results of this evaluation, the CFTC can provide reasonable assurance that its internal control over operations, 

and compliance with applicable laws and regulations, as of September 30, 2007 was operating effectively and no 

material weaknesses were found in the design or operation of the internal controls. 

In addition, the CFTC conducted its assessment of the effectiveness of internal control over financial reporting, 

which includes safeguarding of assets and compliance with applicable laws and regulations, in accordance with the 

requirements of Appendix A of OMB Circular A-123. Based on the results of this evaluation, the CFTC can provide 

reasonable assurance that its internal control over financial reporting as of June 30, 2007 was operating effectively and 

no material weaknesses were found in the design or operation of the internal control over financial reporting.” 

Walter L. Lukke

Acting Chairman

November 15, 2007

Statement of Assurances

The Statement of Assurance is required by the Federal Managers’ Financial Integrity Act (FMFIA) and OMB Circular 

A-123, Management’s Responsibility for Internal Control. The 

assurance is for internal controls over operational effectiveness (we do the right things to accomplish our mission) 

and operational efficiency (we do things right)

During FY 2007, in accordance with the FMFIA, and using 

the guidelines of OMB, the Commission reviewed key 

components of its management and internal control 

system

The objectives of the Commission’s internal controls are to 

provide reasonable assurance that:

■ Obligations and costs are in compliance with applicable laws;

■ Assets are safeguarded against waste, loss, unauthorized use, or misappropriation;

■ Revenues and expenditures applicable to Commission 

operations are properly recorded and accounted for to 

permit the preparation of accounts and reliable financial and statistical reports and to maintain accountability over assets; 

■ All programs are efficiently and effectively carried out 

in accordance with applicable laws and management 

policy;

■ Management has plans and a process to continue 

assessing controls in accordance with OMB Circular A123, Appendix A; and

■ Management has a process in place to assure prompt 

and proper implementation of corrective actions to 

resolve deficiencies in internal controls, including 

material weaknesses
CFT

M A N A G E M E N T ’ S D I S C U S S I O N A N D A N A LY S I S

The efficiency of the Commission’s operations is continually evaluated using information obtained from reviews 

conducted by the Government Accountability Office 

(GAO) and the Office of Inspector General (OIG), specifically requested studies, or observations of daily 

operations.

These reviews ensure that the Commission’s systems and 

controls comply with the standards established by FMFIA

Moreover, managers throughout the Commission are 

responsible for ensuring that effective controls are implemented in their areas of responsibility. Individual assurance statements from division and office heads serve as a

primary basis for the chairman’s assurance that management controls are adequate. The assurance statements are

based upon each office’s evaluation of progress made in 

correcting any previously reported problems, as well as 

new problems identified by the OIG, GAO, other management reports, and the management environment within 

each office

Commission organizations that have material weaknesses 

are required to submit plans for correcting those weaknesses. The plans, combined with the individual assurance

statements, provide the framework for continually monitoring and improving the Commission’s management and 

internal controls.

Summary of Material Weaknesses (FMFIA § 2)

The Commission did not declare any material weaknesses 

in FY 2007. Between FY 2006 and FY 2007, the Commission

made significant improvements in addressing one declared 

material weakness under FMFIA, in the area of financial 

reporting that hindered preparation of timely and accurate 

financial statements, in FY 2006. The major impediments

that faced the Commission covered the following areas:

■ Establishing the custodial fines and interest receivable 

balance as well as estimating the allowance for loss on 

each receivable. The Commission migrated to a new 

accounting system, and made enhancements to its case 

tracking processes and systems to resolve these 

findings

■ Accounting for leases and knowledge of accounting principles. CFTC now recognizes lease expense, for rental of 

its various office spaces, on a straight-line basis, as 

required under GAAP. CFTC restated its FY 2005 financial statements  The Commission resolved thes

findings by 1) configuring its new accounting system to 

recognize lease expense on a straight-line basis; 2) 

holding training on Federal Accounting Standards; and 

3) enhancing the process used to review new leases or 

lease changes

■ Recording accruals and preparing financial statements.

CFTC did not properly record the accounts payable, 

operating leases, subsequent cash disbursements, and 

undelivered orders. CFTC improved its process to

properly record its accruals when it migrated to its new 

accounting platform and began using an invoice 

workflow application. This component of the material

weakness was revised and repeated as a significant 

deficiency. It will be resolved in Fiscal Year 200

Summary of Non-Conformances (FMFIA § 4)

The Commission declared no systems nonconformance 

under FMFIA, during FY 2007. The independent auditors’

report for FY 2006 disclosed one instance of noncompliance that was required to be reported under Government 

Audit Standards and OMB Bulletin 07-04, Audit 

Requirements for Federal Financial Statements. The auditors

disclosed noncompliance with the Federal Information 

Security Management Act (FISMA), noting continued 

improvements were required with entity-wide security and 

contingency planning programs, access controls, segregation of duties, and service continuity to fully meet guidelines of the E-Government Act of 2002 and OMB Circular 

A-130, Management of Federal Information Resources. The 

Commission took corrective actions between June 30, 

2006 and June 30, 2007 that addressed the majority of the 

concerns leading to the audit disclosure—in particular 

testing contingency plans, putting configuration management plans into place, and implementing a formal enterprise configuration control board
36 

The futures industry has undergone enormous growth and change during the last 20 years—from the 

products that are trading to the platforms on which they 

are traded. As the Commission looks ahead, it expects

technology, globalization, and innovation will continue to 

drive growth in the markets it regulates

As this period of rapid change continues, the Commission 

expects to lose most of its experienced career staff, primarily 

through retirement, in the near future. During FY 2006,

the Commission experienced its first wave of these 

retirements

From a resources perspective, the Commission has struggled to operate at the level needed to do the job expected 

of it by Congress, the Administration, and the American 

people. The Commission finds itself repeatedly having to

make difficult choices about how it will use its limited 

resources to fulfill its statutory mission

It is anticipated that Commission efforts will be scaled 

back to the extent increased productivity cannot offset 

anticipated resource reductions. As noted in the discussion

of the net cost of operations, the Commission attempts to 

balance its investment in three strategic goals, each focusing 

on a vital area of regulatory responsibility. To continue to

be an effective regulator, the Commission will need to 

place greater reliance on risk management approaches to 

supervision. It will also continue to leverage needed

systems and data maintained by other Federal agencies 

and, wherever possible, by SROs. Moving forward, the

Commission will be required to confront the jurisdictional 

challenges created by innovation and the worldwide 

creation and expansion of futures and option markets

These, coupled with a wide array of new surveillance issues, 

are expected to significantly change the way the 

Commission uses and allocates resources across its performance goals. From an operational perspective, the

Commission will continue to allocate and deploy its 

resources in less traditional ways as described below. As

this process accelerates, the Commission seeks to transform itself along the following dimensions

Technology

■ Technology continues to make it possible for market 

participants to trade globally, 24 hours a day, on newly 

designed platforms. This presents a challenge to the

Commission to maintain a robust, yet flexible, regulatory framework as market participants have an 

increasing number of choices available to them as to 

where, when, and how to trade

■ The expansion of electronic trading continues to 

require an increase in Commission staff trained to carry 

out oversight of more technologically driven markets 

and self-regulatory systems

■ As electronic trading of commodity futures and option 

contracts on Commission-regulated exchanges becomes 

the norm, the Commission must continue to upgrade 

its own technology and infrastructure so that it may 

Forward Looking 

Future Business Trends and Ev
CFTC

M A N A G E M E N T ’ S D I S C U S S I O N A N D A N A LY S I S

effectively discharge its statutory mandate of deterring 

and preventing price manipulation and any other 

disruptions to the integrity of the markets the 

Commission regulates

■ The continuing shift of market volume to the electronic 

trading environment poses new data processing challenges to the CFTC. Because this medium allows

exchanges to gather and transmit much more information about trading activity, the CFTC must increase its 

overall capacity for processing and storage. In addition

to the significant increase in the amount of information being made available to the CFTC, there has been 

a large increase in the number of contracts being 

traded. Therefore, to meet these challenges, the Office

of Information and Technology Services (OITS) will 

continue to improve its computational performance. A

variety of projects are underway that address specific 

CFTC business needs using the data and market information the Commission receives

■ Commission work continued on Project eLaw, an effort 

that provides law office automation and modernization to the Commission’s Division of Enforcement, 

Office of the General Counsel (OGC), and Office of 

Proceedings. Project eLaw is a Commission-wide

initiative that seamlessly integrates technology and 

work processes to support managers and staff across 

the Commission in their investigation, trial and appellate work. In FY 2007, the eLaw project became a major

program supporting the Commission. The case

management solution (Practice Manager) was further 

customized to best meet the needs and evolving 

requirements of the users. This year saw the program

pursuing the area of computer forensics and audio 

analytics to further support the Division of Enforcement 

with their investigation and litigation work. The eLaw

program will continue to support the Commission’s 

legal practice in the areas of case planning, case 

management, litigation support, and document 

management

■ In FY 2008, the Commission will continue to maintain, 

support, and enhance the eLaw solution and consider 

expansion into other areas of the Commission that 

would benefit from the automated technology.

■ Presently, the Commission is developing a new Trade 

Surveillance System (TSS) to replace its older trade 

surveillance system that was designed for open outcry 

trading and has not been significantly upgraded since 

its inception in the mid-1980s. TSS will give the

Commission the ability to discharge its statutory 

mandate of deterring and preventing price manipulation and any other disruptions to the integrity of the 

markets the Commission regulates. Specifically, TSS

will enhance staff’s ability to effectively detect and deter 

trade practice violations in a rapidly changing environment, especially with respect to electronic trading data, 

and will provide staff with greater efficiency and flexibility. Trade violation detection software will perform

sophisticated pattern recognition and data mining to 

automate basic trade practice surveillance, and detect 

novel and complex abusive practices in today’s highspeed, high-volume global trading environment. TSS

also will fill a vacuum in inter-market surveillance that 

only the Commission can address, e.g., New York 

Mercantile Exchange (NYMEX) and Chicago Board of 

Trade (CBOT) metals contracts, and side-by-side 

trading, e.g., simultaneous trading of a contract on a

DCM’s floor and the DCM’s electronic trading 

platform.

Globalization

■ The continued globalization of the futures and option 

markets through electronic linkages, strategic alliances 

and mergers, as well as increasing requests for the 

Commission to participate in U.S. government initiatives with economically important jurisdictions and t

provide technical assistance to developing markets 

requires additional experienced staff to meet these 

demands

■ In such an integrated global marketplace, the possibility of market disruptions caused by economic 

changes, terrorism, epidemics, natural disasters or 

political developments could trigger global market 

systemic concerns. Because no one regulator will have

all of the needed information or jurisdiction over 

markets, firms, and persons to ensure customer and 

market protections, the Commission’s challenge will 

be to coordinate with global regulators
38 C

Marketplace

■ Development and growth of renewable energy sources 

(i.e., biofuels) could impact existing energy markets

■ Disruption of oil exports to the United States may 

disrupt energy markets

■ A significant portion of the power grids may be disabled 

for an extended period of time, crippling markets

■ Changes in the structure of the futures and options 

industry, such as the conversion of exchanges from 

member-owned entities to publicly-owned corporations, exchange mergers, and the introduction of new 

and novel contracts will mean that the Commission 

will require more staff to review novel and increasingly 

complex legal and regulatory issues

■ Convergence of products and markets requires 

increased interagency coordination with the SEC and 

the Federal Energy Regulatory Commission to address 

areas of mutual interest related to cross-jurisdictional 

issues, such as those presented by credit event products 

and commodity exchange-traded funds, and potential 

manipulation in the energy markets, respectively

■ Expansion of these markets results in strong competition for employees with the skills the Commission 

requires to meet its mission, continually challenging 

the agency to offer competitive compensation

Government

■ Congress could pass new legislation impacting the 

markets and the role of the Commission

■ Congress might require an investigation of certain 

markets

■ Congress might not appropriate adequate funds for the 

Commission to effectively discharge its mission-critical 

functions

■ Prompt implementation of the confines of enhanced egovernment business processes is a continual challenge 

within limited staff and financial resources

Information Technology 

■ Technology improvements will continue to empower 

the Commission in the future by increasing the availability of its most critical resource—time. Through

these improvements, executive management may spend 

additional time on policy analysis and decision-making 

rather than on the processing and compiling of key 

data. The Commission will increasingly leverage

business processes, services, and systems of larger 

agencies for internal operations, while externally 

relying more on exchange databases when conducting 

reviews and investigations

Human Capital 

■ Human capital management with an enhanced strategic focus continues to emphasize building the staff 

resources necessary to core business lines, with support 

requirements met through the use of leveraged 

resources and competitive sources of service

■ Competition to hire and retain staff is intense in a job 

market where scarce mission-critical skills command 

premium compensation levels. Even at “pay parity”

salaries, the Commission must continually seek to 

improve the work environment so it can continue to 

attract, engage, and retain a workforce that is equal to 

the evolving challenges of market oversight

Management

■ Compliance with the future demands and uncertainties 

of Homeland Security Presidential Directives 12 and 

20, as well as Pandemic Influenza preparedness
CFT

Inspector Generals FY 2007 Asse
40 C
CFT

M A N A G E M E N T ’ S D I S C U S S I O N A N D A N A LY S I S
P E F OR M A N C  S E C T I O

Introduction to the Performance Section................43

Strategic Goal One: Economic Utility ...................44

Strategic Goal Two: Market Users and Public ........54

Strategic Goal Three: Industry..............................77
Introduction to the Performance S

This Section includes details of Commission efforts to meet its strategic and

performance goals. The Commission scrutinizes performance measures to

ensure that the metrics adequately challenge the programs to reach the

desired results, ensure accountability, and provide information that can

be used to make financial decisions and develop future budgets.
44 

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 1.1: No price manipulation or other disruptive activities that 

would cause loss of confidence or negatively affect price discovery or risk shifting. 

Strategic Goal Oe:  Economic
CFT

P ERF O RM A N CE  S E C T I 

Performanc Measure 1.1.1  Percentage Growth 

History of Results: FY 2004 Actual FY 2005 Actual FY 2006 Actual

24% 26% 26%

ACTUAL

FY 200

PLAN

FY 200

0

10

20

30

40

50

60

70

80

90

100

P E R C E N T A G E

25% 27%

Results: 27%

Measurement: Percentage

Status: Effective

Data Source: Exchanges’ trading volume data.

Verification: Exchange data is compared to FIA report.

Lead Program Office 

Division of Market Oversight (DMO)

Performance Trends & Variations 

Growth in the futures markets continued in FY 2007 with 

increased demand realized for products traded on the 

exchanges. The actual FY 2007 number is driven by changes

in economic fundamentals, success of newly launched 

products, the number of new participants using these 

markets, and other changes in the marketplace

Data Source & Validation 

Exchanges are required to submit trading volume data to 

the Commission on a daily basis. This data is then stored

in a Commission database for use in market surveillance 

analysis

Exchange volume data is submitted to the Commission 

electronically for each business day, subjected to a series of 

edit and quality checks, and maintained in a central 

database. The data is also compared to monthly data

published by the Futures Industry Association (FIA)

Performance Highlights 

Growth in the volume and complexity of trading in energy 

futures markets, including trading in related OTC and 

foreign markets, has been met by expanded data collection, enhanced information technology capabilities, more 

detailed analyses of transaction data, reassignment of 

current economists to energy market surveillance, and 

additional hires of economists for energy market 

surveillance

FY 2007 Performance Results
46 

Performance Measure 1.1.2 Percentage of novel or innovative proposals or requests 

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.

History of Results: FY 2004 Actual FY 2005 Actual FY 2006 Actual

100% 100% 100%

ACTUAL

FY 200

PLAN

FY 200

0

10

20

30

40

50

60

70

80

90

100

P E R C E N T A G E

100% 100%

Results: 100%

Measurement: Percentage

Status: Effective

Data Source: Formal filings and signed letter responses by 

the Commission.

Verification: Formal filing and disposition dates maintained 

in internal tracking system.

Lead Program Office 

Division of Market Oversight

Performance Trends & Variations 

DMO handled a number of proposals or requests for 

Commission action during the fiscal year that included 

newer approaches to derivatives trading or enhancements 

to the price-discovery process. The items, which included

innovative products and exchange processes, were all 

addressed within six months of formal receipt

Data Source & Validation 

Supporting documentation is in the form of formal filings 

with the Commission and signed letter responses by DMO 

or the Commission (upon DMO recommendation)

DMO is able to calculate review time by consulting an 

internal tracking system which reflects all formal filings 

that are made with DMO, including filing and disposition 

dates

Performance Highlights 

DMO was responsible for two particular actions that 

dramatically increased the availability of risk-management 

tools. On May 24, 2007, DMO issued a no-action relief to

the Dubai Mercantile Exchange Limited (DME) to make its 

electronic trading and order matching system, DME Direct, 

available to DME members, and guaranteed customers in 

the United States without obtaining contract market designation or registration as a derivatives transaction execution 

facility pursuant to Sections 5 and 5a of the Act. The relief

letter enabled U.S.-based traders to directly access DME’

products, including its Oman sour crude oil contract—the 

first physically-delivered, Middle East-based energy futures 

contract ever to be offered by a futures exchange

DMO also was responsible for the Commission’s issuance 

of an order permitting NYMEX FBs and FTs subject to 

certain conditions to be considered eligible contract participants for the purposes of executing exempted transactions 

under Section 2(h)(1) of the Act. The order, issued in

response to a petition by NYMEX, enables FBs and FTs at 

that exchange to execute bilateral OTC energy transactions 

pursuant to the exemptive provisions of Section 2(h)(1) of 

the Act

FY 2007 Performance Results
CFTC

P ERF O RM A N CE  S E C T I 

Performanc Measure 1.1.3  Percentage increase in number of 

History of Results: FY 2004 Actual FY 2005 Actual FY 2006 Actual

12% 36% 25%

0

10

20

30

40

50

60

70

80

90

100

P E R C E N T A G E

10%

20%

ACTUAL

FY 200

PLAN

FY 200

Results: 20%

Measurement: Percentage

Status: Effective

Data Source: Exchanges submit data on trading volume, 

open interest, delivery notices, exchange of 

futures and prices for all products traded.

Verification: Data is validated by internal program edits 

and quality checks in central database.

Lead Program Office 

Division of Market Oversight

Performance Trends & Variations 

The growth in the number of new products offered on the 

exchanges continued in FY 2007. The actual FY 2007

number is driven by customer demand for new products, 

exchange innovation, opportunities made available by the 

increasing use of electronic trading, and other changes in 

the marketplace. As such, these factors may not be foreseeable with high precision

Data Source & Validation 

Exchanges are required to submit trading volume, open 

interest, delivery notices, exchange of futures, and prices to 

the Commission each business day for all products traded

This data is then stored in a Commission database for use 

in market surveillance analyses

The exchange data is submitted to the Commission electronically for each business day, subjected to a series of edit 

and quality checks, and maintained in a central database

Performance Highlights 

The number of products traded grew by approximately 20 

percent in FY 2007, as futures innovation of energy 

products, security futures products, and weather derivative 

products continued at a rapid pace

FY 2007 Performance Results
48 C

Performanc Measure 1.1.4  Percentage of new exchange or clearinghouse organizati

completed within expedited review period.

History of Results: FY 2004 Actual FY 2005 Actual FY 2006 Actual

100% 100% 100%

ACTUAL

FY 200

PLAN

FY 200

0

10

20

30

40

50

60

70

80

90

100

P E R C E N T A G E

100%

N/A

Results: Not Applicable

Measurement: Percentage

Status: Results Not Demonstrated

Data Source: New exchange(s) and DCO application(s).

Verification: Filings and Actions automated database 

tracks and calculates processing time from 

receipt date through to date of designation 

or registration.

Lead Program Office 

Division of Clearing and Intermediary Oversight (DCIO)

Division of Market Oversight

Performance Trends & Variations 

No exchange designation or DCO applications were filed 

in FY 2007. One exchange designation application was

filed in FY 2006, but the formal review of that contract 

market application was stayed by the applicant.

Data Source & Validation 

Supporting documentation consists of the applications for 

designation as a contract market, including all attachments 

and supporting materials submitted by the applicant 

related materials produced by the DCIO and DMO staff in 

reviewing the application, a memorandum to the 

Commission, and the proposed order

DCIO and DMO staff maintain files containing documentation related to the review of an application. The DCIO

methodology for determining the statistic would be to 

tabulate the number of applications received and reviewed, 

determine the number that are completed within the expedited review period, and calculate the performance statistic

DMO staff use a database Filings and Actions (FILAC), 

which includes the date of receipt of the request for designation as a contract market, stays in the review process, 

and the date of designation. The database automatically

calculates processing time

Performance Highlights 

Staff reviewed several draft filings by the applicant, which 

had stayed its application, and provided feedback within 

weeks regarding areas still missing from the application, as 

well as provided responsive feedback to other entities 

working on draft applications

FY 2007 Performance Results
CFT

P ERF O RM A N CE  S E C T I 

Performance Measure 1.1.5 Percentage of new contract certification reviews completed with

to identify and correct deficiencies in contract terms that make contracts susceptible to manipulation.

History of Results: FY 2004 Actual FY 2005 Actual FY 2006 Actual

53% 54% 81%

ACTUAL

FY 200

PLAN

FY 200

0

10

20

30

40

50

60

70

80

90

100

P E R C E N T A G E

75%

82%

Results: 82%

Measurement: Percentage

Status: Effective

Data Source: Exchange certification filings, certified rule 

amendments, and agency memoranda.

Verification: Filings and Actions automated database 

tracks and calculates processing time from 

receipt date through to date of designation 

or registration.

Lead Program Office 

Division of Market Oversight

Performance Trends & Variations 

In FY 2007, an unusually large proportion of new contract 

certifications were for weather index contracts and security 

futures products. Those contracts typically are easier to

review than other contracts, and thus the percentage of 

completed reviews for contracts certified in FY 2007 was 

higher than anticipated.

U.S. exchanges continued to innovate in FY 200.  In th

regard, the Chicago Mercantile Exchange (CME) requested 

approval of corporate credit event options and a credit 

index event contract. The U.S. Futures Exchange (USF

and HedgeStreet certified binary options on mergers and 

acquisitions, and HedgeStreet certified binary options on 

corporate earnings and corporate revenues. Each of those

contracts raised issues with respect to the jurisdictional 

boundary between the CFTC and the SEC. It is reasonable

to expect that exchanges will continue to introduce novel 

and complex products in the future.

Data Source & Validation 

DMO staff maintain files containing exchange certification 

filings, including new contract certification filings and 

certified rule amendments to correct deficiencies in new 

contract certification filings, and DMO memoranda. DMO

memoranda provide descriptions, analyses, and conclusions regarding compliance with the CEA and Commission 

regulations and policies. The FILAC database includes the

receipt date of the new product certification and the date 

of DMO’s memorandum. The database automatically

calculates processing time

Performance Highlights 

Commission staff completed reviews of more than 500 

new contract certifications; approved three corporate credit 

event options; approved the North American Investment 

Grade High Volatility Credit Index Event futures contract; 

and identified contract design flaws in the NYMEX UxC 

Uranium futures contract

FY 2007 Performance Results
50 C

Performance Measure 1.1.6 Percentage of rule change certification reviews completed withi

to identify and correct deficiencies in exchange rules that make contracts susceptible to manipulation or trading abuses 

or result in violations of law.

History of Results: FY 2004 Actual FY 2005 Actual FY 2006 Actual

70% 84% 86%

ACTUAL

FY 200

PLAN

FY 200

0

10

20

30

40

50

60

70

80

90

100

P E R C E N T A G E

85% 82%

Results: 82%

Measurement: Percentage

Status: Effective

Data Source: Exchange certification filings and agency 

memoranda.

Verification: Filings and Actions automated database 

tracks and calculates processing time from 

receipt date through to date of DMO 

memorandum.

Lead Program Office 

Division of Market Oversight

Performance Trends & Variations 

The percentage of product rule amendment certification 

reviews completed within three months of receipt by the 

Commission decreased over last year. This slight drop in

performance is the result of several factors. A significant

number of rule amendments associated with new product 

certifications were complex or lacked sufficient supporting 

data/information. Thus, Division staff either waited for

data/information from the relevant exchange or sought to 

obtain the data/information from other sources. Because

there is no statutory deadline for the reviews, there is no 

way to “stop the clock” while waiting for the necessary 

data/information. In addition, a few rule amendment

reviews were the result of a staff member retirement several 

years ago. Visibility of his projects was lost until the FILAC

tracking system was implemented. Those reviews were reassigned to other staff and placed in their queues  Othe

rule amendment reviews were allowed to slip in favor of 

more important matters. In this regard, the Division is

understaffed relative to the volume of reviews it is required 

to accomplish. Therefore, the Division must prioritize its

rule amendment reviews regarding contracts with very low 

trading volume. It is not reasonable to expect that the

performance will improve significantly in the absence of 

an increase in staffing, which can not occur in the current 

budget environment.

Data Source & Validation 

DMO staff maintain files containing exchange certification 

filings and DMO memoranda. Those DMO memoranda

provide descriptions, analyses, and conclusions regarding 

compliance with the CEA and Commission regulations

The FILAC database includes the receipt date of the certification filing and the date of DMO’s memorandum. The

database automatically calculates processing time

Performance Highlights 

Commission staff completed reviews of 161 substantive 

product rule amendments and 195 substantive trading rule 

amendments

FY 2007 Performance Results
CFT

P ERF O RM A N CE  S E C T I 

Performance Measure 1.2.1 Percentage of derivative clearing organization application

compliance with Core Principles.

History of Results: FY 2004 Actual FY 2005 Actual FY 2006 Actual

100% 100% N/A

ACTUAL

FY 200

PLAN

FY 200

0

10

20

30

40

50

60

70

80

90

100

P E R C E N T A G E

100%

N/A

Results: Not Applicable

Measurement: Percentage

Status: Results Not Demonstrated

Data Source: New exchange(s) and DCO application(s) 

for registration.

Verification: Agency files containing applications, staff 

reviews, memoranda to the Commission 

and proposed Orders.

Lead Program Office 

Division of Clearing and Intermediary Oversight

Performance Trends & Variations 

No applications for registration as a DCO were received in 

FY 2007

Data Source & Validation 

Supporting documentation would consist of an application for registration as a DCO, including all attachments 

and supporting materials submitted by the applicant; and 

related materials produced by DCIO staff in reviewing the 

application, including a memorandum to the Commission 

and proposed order

DCIO staff maintain files containing supporting documentation related to the review of an application. The DCIO

methodology for determining the statistic would be to 

tabulate the number of applications received and reviewed 

to determine that the applications demonstrated compliance with CEA Core Principles, and calculate the performance statistic

Performance Highlights 

None to report

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 1.2: To have an effective and efficient market surveillance program. 

FY 2007 Performance Results
52 C

Performanc Measure 1.2.2  Ratio of contracts surveille

History of Results: FY 2004 Actual FY 2005 Actual FY 2006 Actual

10 11 12

ACTUAL

FY 200

PLAN

FY 200

R A T 

0

10

20

30

40

50

60

70

80

90

100

13 13

Results: 13

Measurement: Ratio

Status: Adequate

Data Source: Exchanges submit data to the Commission 

on all traded contracts, which are maintained 

in the Commission’s database.

Verification: Data is validated by internal program edits 

and quality checks in central database.

Lead Program Office 

Division of Market Oversight

Performance Trends & Variations

The target ratio of contracts surveilled per economist is 

above ideal levels. For this reason, an “Adequate” Status of

Performance Result has been selected in spite of the fact 

that the actual number of contracts surveilled per economist did meet expectations. To increase the efficiency of

DMO’s surveillance efforts, similar contracts on the same 

underlying commodity are generally analyzed together

Even though the number of contracts increased during the 

year, the increase was mostly due to additional products 

on existing commodities. These additional products may

not materially add to the economists’ surveillance burden

Thus, they were not counted as distinct contracts for the 

purpose of arriving at the relevant ratio.

Data Source & Validation 

Exchanges submit data to the Commission on all traded 

contracts. The individual contracts are grouped by underlying commodity in a central database  This grouping i

used in the adjustment of the number of contracts 

surveilled by each economist

Exchanges submit data on all products traded to the 

Commission electronically for each business day. The data

is subject to a series of edit and quality checks and is maintained in a central database. The total number of contracts

is extracted from this data. This number is then modified

by subtracting out individual contracts that are very similar 

to and have the same underlying commodity as other 

contracts. The final number is then divided by the number

of regional office economists

Performance Highlights 

The ratio of contracts surveilled per economist is too high 

to ensure full surveillance coverage of all futures markets

The efficiency and enthusiasm of surveillance economists 

are very high, but they are being stretched too thin, with 

consequential effects on morale and on the adequacy of 

surveillance coverage for some markets

FY 2007 Performance Results
CFT

P ERF O RM A N CE  S E C T I 

Performanc Measure 1.2.3  Percentage of contract expirations witho

History of Results: FY 2004 Actual FY 2005 Actual FY 2006 Actual

99.9% 99.9% 99.9%

ACTUAL

FY 200

PLAN

FY 200

0

10

20

30

40

50

60

70

80

90

100

P E R C E N T A G E

99.9% 99.9%

Results: 99.9%

Measurement: Percentage

Status: Effective

Data Source: Surveillance reports and large trader position 

reports.

Verification: Economists daily track and monitor futures 

expirations and economic fundamentals.

Lead Program Office 

Division of Market Oversight

Performance Trends & Variations

This measurement examines the number of contract expirations without manipulation compared to the total 

number of futures and option expirations. The total

number of expirations may vary throughout the year as 

different contracts enter and exit the market

Data Source & Validation 

The number of referrals to and from the Division of 

Enforcement, in conjunction with information and 

evidence gathered internally by surveillance economists, is 

used to find the number of expirations without manipulations. The total number of futures and option expirations

is retrievable from the database

Economists track and monitor futures expirations and 

economic fundamentals on a daily basis. The large trader

reporting system is also used to generate detailed surveillance reports of large trader positions going into expiration. Information on reportable traders’ positions is stored

and kept in the system, and can be analyzed further 

through its internally developed integrated surveillance 

system

Performance Highlights 

Surveillance of energy markets has been the greatest challenge during FY 2007. During this year, DMO has enhanced

its data collection, information processing, and surveillance analyses to keep pace with the rapidly growing and 

changing energy markets. Special calls were issued to

InterContinental Exchange to obtain daily large trader 

reports on this OTC market. Daily NYMEX transaction

data started to be received and analyzed to detect possible 

manipulative schemes. Software enhancements were made

to Integrated Surveillance System (ISS) to better display 

and analyze positions in deferred futures months

FY 2007 Performance Results
54 

Goal Two: Protect market users and the public.

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

Annual Performance Goal 2.1: Violators have a strong probability of being detected 

and sanctioned. 

Strategic Goal Two: Market Users an
CFT

P ERF O RM A N CE  S E C T I 

Performanc Measure 2.1.1  Number of enforcement investigations opened during 

History of Results: FY 2004 Actual FY 2005 Actual FY 2006 Actual

215 131 123

ACTUAL

FY 200

PLAN

FY 200

N u b

0

10

20

30

40

50

60

70

80

90

100

85

99

Results: 99

Measurement: Number

Status: Effective

Data Source: Agency documentation and reports 

maintained in the Practice Manager 

litigation management system.

Verification: Internal reports on investigations and 

litigation documented and maintained 

in internal Enforcement systems.

Lead Program Office 

Division of Enforcement

Performance Trends & Variations 

Performance target was met for FY 2007. Commencing in

2002, the complexity of Commission’s investigations has 

increased substantially over prior fiscal years (e.g., the 

Commission’s investigation of alleged energy market 

manipulation). As a result of these investigations, the

complexity of the Commission’s cases filed and litigated 

also has increased substantially since FY 2002. The

Commission’s FY 2007 Plan target for this performance 

measure took into account both these factors and the 

Division of Enforcement’s FTE constraints

Data Source & Validation 

Internal Enforcement reports identify each of the litigations and investigations opened during the fiscal year. Staff

prepare opening reports for each Enforcement investigation and litigation. These opening reports are recorded in

internal Enforcement systems (Practice Manager)

Performance Highlights 

None to report

FY 2007 Performance Results
56 

Performanc Measure 2.1.2  Number of enforcement cases filed during 

History of Results: FY 2004 Actual FY 2005 Actual FY 2006 Actual

83 69 38

ACTUAL

FY 200

PLAN

FY 200

N u b

0

10

20

30

40

50

60

70

80

90

100

40 41

Results: 41

Measurement: Number

Status: Effective

Data Source: Agency documentation and reports 

maintained in the Practice Manager 

litigation management system.

Verification: Final complaints for each litigation are 

recorded in internal Enforcement system 

and made public via the Commission’s 

Web site.

Lead Program Office 

Division of Enforcement

Performance Trends & Variations 

Performance target was met for FY 2007. Commencing in

2002, the complexity of Commission’s investigations has 

increased substantially over prior fiscal years (e.g., the 

Commission’s investigation of alleged energy market 

manipulation). As a result of these investigations, the

complexity of the Commission’s cases filed and litigated 

also has increased substantially since FY 2002. The

Commission’s FY 2007 Plan target for this performance 

measure took into account both these factors and the 

Division of Enforcement’s FTE constraints

Data Source & Validation 

Staff are required to submit all final filed, stamped copies 

of the complaint for each litigation. These complaints are

recorded in internal Enforcement systems (Practice 

Manager)

Performance Highlights 

Among the significant enforcement actions filed by the 

Commission during FY 2007 are the following: CFTC v. 

Amaranth Advisors, L.L.C., et al., No. ’07 CIV 6682 (S.D

filed July 25, 2007) (charging attempted manipulation of 

the price of natural gas futures contracts on NYMEX on 

February 24 and April 26, 2006, and making false statements to NYMEX to cover up this misconduct); CFTC v. 

Energy Transfer Partners, L.P., No. 3-07CV1301-K (N.D. 

filed July 26, 2007) (charging attempted manipulation of 

the price of physical natural gas at the Houston Ship 

Channel delivery hub during September and November 

2005); In re Marathon Petroleum Company, CFTC Docket 

No. 07-09 (CFTC filed Aug. 1, 2007) (finding that Maratho

Petroleum Company attempted to manipulate a price of 

spot cash West Texas Intermediate (WTI) crude oil delivered at Cushing, Oklahoma on November 26, 2003, by 

attempting to influence downward the Platts market assessment for spot cash WTI for that day); CFTC v. Parish, et al.,

No. 2:07-cv-01044-DCN (D.S.C. filed April 17, 20

(charging fraud in connection with an alleged pool with 

total value of approximately $134 million); and In re 

Merrill Lynch Investment Managers, LLC, et al., CFTC Docket 

No. 07-08 (CFTC filed July 31, 2007) (finding that registered CPOs repeatedly failed to distribute to pool participants and file with the NFA their commodity pools’ annual

reports in a timely manner)

FY 2007 Performance Results
CFTC

P ERF O RM A N CE  S E C T I 

Performance Measure 2.1.3 Percentage of enforcement cases closed during the fiscal ye

Commission obtained sanctions (e.g. civil monetary penalties, restitution and disgorgement, cease and desist orders, 

permanent injunctions, trading bans, and registration restrictions). 

History of Results: FY 2004 Actual FY 2005 Actual FY 2006 Actual

99% 100% 100%

ACTUAL

FY 200

PLAN

FY 200

0

10

20

30

40

50

60

70

80

90

100

P E R C E N T A G E

95% 100%

Results: 100%

Measurement: Percentage

Status: Effective

Data Source: Agency documentation and reports 

maintained in the Practice Manager 

litigation management system.

Verification: Final orders for each litigation are 

recorded in internal Enforcement system.

Lead Program Office 

Division of Enforcement

Performance Trends & Variations 

Performance target was met for FY 2007. During the

FY 2007, the Division of Enforcement closed a total of 

63 enforcement cases. In each of these closed cases the

Commission obtained sanctions (e.g., civil monetary 

penalties, restitution and disgorgement, cease and 

desist orders, permanent injunctions, trading bans, and 

registration restrictions) against one or more of the 

respondents/defendants

Data Source & Validation 

Enforcement results identify each litigation and litigation result obtained by the Division on behalf of the 

Commission

Staff are required to submit all final orders for each litigation as part of closing activities for their files. These orders

are recorded in internal Enforcement systems (Practice 

Manager)

Performance Highlights 

None to report

FY 2007 Performance Results
58 C

Performance Measure 2.1.4 Cases filed by other criminal and civil law enforcement authori

fiscal year that included cooperative assistance from the Commission. 

History of Results: FY 2004 Actual FY 2005 Actual FY 2006 Actual

23 23 23

ACTUAL

FY 200

PLAN

FY 200

30

25

20

15

10

5

0

N u b

21

24

Results: 24

Measurement: Number

Status: Effective

Data Source: Copies of civil complaints, criminal 

information and indictments, and final 

Orders submitted to the Commission by 

cooperating authorities. Cooperative 

enforcement matters are maintained in 

the Practice Manager litigation 

management system.

Verification: Final orders for each litigation recorded 

in internal Enforcement system.

Lead Program Office 

Division of Enforcement

Performance Trends & Variations 

Performance target was met for FY 2007. The Commission

believes that its performance in cooperative criminal and 

civil enforcement was effective. During the rating period,

the Division of Enforcement continued to devote significant resources to cooperative enforcement with other 

criminal and civil law enforcement authorities.

Data Source & Validation 

Copies of civil complaints, criminal information and 

indictments, and orders are collected by the Division of 

Enforcement’s Office of Cooperative Enforcement

Staff and cooperating authorities submit final orders to the 

Office of Cooperative Enforcement, which maintains a 

database of all cooperative enforcement matters. In

addition, pending cooperative enforcement matters are 

tracked through internal Enforcement systems (Practice 

Manager)

Performance Highlights 

None to report

FY 2007 Performance Results
CFT

P ERF O RM A N CE  S E C T I 

Outcome 2.2: Commodity professionals meet high standards.

Annual Performance Goal 2.2: No unregistered, untested, or unlicensed commodity 

professionals. 

Performance Measure 2.2.1 Percentage of self-regulatory organizations that comply with 

History of Results: FY 2004 Actual FY 2005 Actual FY 2006 Actual

100% 100% 100%

ACTUAL

FY 200

PLAN

FY 200

0

10

20

30

40

50

60

70

80

90

100

P E R C E N T A G E

100% 100%

Results: 100%

Measurement: Percentage

Status: Effective

Data Source: Agency reports and files from reviews and 

analyses.

Verification: Interviews, walk-through demonstrations, 

empirical testing, and site visits of SROs 

and FCMs.

Lead Program Office 

Division of Clearing and Intermediary Oversight

Performance Trends & Variations 

Performance target was met for FY 2007. DCIO conducts

periodic, routine examinations of the financial and sales 

practice programs of the SROs for the purpose of assessing 

the SROs’ compliance with relevant Core Principles and 

with Commission regulations and interpretations. During

FY 2007, DCIO completed a review of the financial and 

sales practice oversight program of one DCM. Based upon

its review, DCIO concluded that the DCM’s program was 

consistent with the relevant Core Principles, and with 

Commission regulations and interpretations

DCIO also initiated an examination of the financial and 

sales practice program of a second DCM, during FY 2007

This examination is currently in progress. At this stage of

the examination, DCIO has not identified any issues that 

would indicate a failure of the DCM’s program to satisfy 

the relevant Core Principles and Commission regulations 

and interpretations

DCM Core Principle 11 provides, in relevant part, that a 

DCM shall establish and enforce rules to ensure the financial integrity of FCMs and the protection of customer 

funds. DCIO and DCMs, in their capacity as SROs, receive

and review monthly financial reports submitted by FCMs 

for the purpose of assessing whether the FCMs are in 

compliance with the Commission’s and SROs’ minimum 

financial requirements, including requirements relating to 

the safeguarding of customer funds. In addition,

FY 2007 Performance Results
60 C

Commission regulations and SRO rules require an FCM to 

file a notification with the Commission and its designated 

SRO whenever such FCM fails to meet its minimum capital 

or segregation requirement. DCIO’s review and analysis

of FCM financial reports and notifications, including 

appropriate coordination with the SROs during FY 2007, 

demonstrated that the SROs were complying with Core 

Principle 11

Data Source & Validation 

Supporting documentation of DCIO’s assessment of SROs’ 

compliance with Core Principles is contained in reports 

and work papers prepared by staff while carrying out the 

review and analyzing relevant SRO materials. Such documentation is maintained in DCIO’s file

DCIO delivers a letter to the SRO requesting documents 

that reflect the systems, policies, procedures, practices, and 

internal controls implemented by the SRO. After reviewing

these materials, DCIO staff interview selected management 

staff, followed by fieldwork at the SRO and a review of 

documents. The fieldwork at the SRO primarily consists of

a walk-through demonstration. The purpose of the fieldwork is to confirm DCIO’s understanding of the SRO’s

program and to provide reasonable assurance that it 

operates in the manner represented

The testing of execution of procedures is performed by 

sample testing and documentation review. DCIO staff use

standard statistical techniques to size and select samples in 

the areas of disclosure documents, financial reports, 

exemption and extension notices, compliance examinations, and sales practices. Samples are selected and tested

to facilitate an understanding of the operation of a process 

or procedure in practice rather than to provide statistical 

assurances

For further verification of compliance oversight procedures, 

DCIO staff also visit firms whose operations were reviewed 

by the SRO during the SRO’s examination. Such reviews

include performing the same testing steps that the SRO 

conducted in its examinations of the firms. The results of

such DCIO testing are then compared to the workpapers of 

the SRO’s examination of the selected firms

DCIO also reviews monthly financial reports submitted by 

FCMs for purposes of assessing whether the FCMs comply 

with the Commission’s and SROs’ minimum financial 

requirements, including requirements to properly safeguard customer funds. DCIO further reviews notices

submitted by an FCM stating that the firm is undercapitalized or undersegregated to assess whether the firm’s SRO 

has taken appropriate measures to address the undercapitalization or undersegregation

The methodology for collecting this statistic is based on 

ongoing oversight and planned reviews related to the aforementioned areas for which the results could potentially 

indicate an SRO’s noncompliance with relevant Core 

Principles and with Commission regulations and 

interpretations

Performance Highlights 

The completed review assessed the DCM’s financial and 

sales practice program, including staffing levels, conduct of 

examinations of FCMs, conduct of financial statement 

review, and disciplinary actions. DCIO concluded that the

DCM’s program was consistent with the relevant Core 

Principles and with Commission regulations and interpretations
CFT

P ERF O RM A N CE  S E C T I 

Performance Measure 2.2.2 Percentage of derivative clearing organizations that comply with 

History of Results: FY 2004 Actual FY 2005 Actual FY 2006 Actual

100% 100% 100%

ACTUAL

FY 200

PLAN

FY 200

0

10

20

30

40

50

60

70

80

90

100

P E R C E N T A G E

100% 100%

Results: 100%

Measurement: Percentage

Status: Effective

Data Source: Documentation from DCOs under review; 

agency reports; and financial surveillance 

materials.

Verification: Statistical data is obtained through financial 

surveillance and planned reviews.

Lead Program Office 

Division of Clearing and Intermediary Oversight

Performance Trends & Variations 

Performance target was met for FY 2007. Reviews of

compliance with certain Core Principles were completed at 

six DCOs. Reviews of five DCOs found them to be in

compliance with the Core Principles. One DCO was found

to be in compliance with the Core Principles except that 

further demonstration was deemed necessary in one 

instance. No affirmative conclusion of noncompliance can

be made at this time

On a daily basis, DCIO staff conduct financial surveillance 

of DCOs and clearing members. Staff have identified no

instances of noncompliance

During the past fiscal year, 73 rule submissions, many 

containing multiple rules, were filed by DCOs under the 

self-certification provisions of the Act. Staff reviewed each

of the submissions and found none that violated Core 

Principles

Data Source & Validation 

Each of the DCOs under review submits extensive documentation. DCIO staff create extensive workpapers in

conducting the reviews of DCOs. When the reviews are

complete, DCIO staff provide reports to the Commission

Files are maintained containing many of these materials.

Financial surveillance materials are also maintained in 

files. Some of them are maintained on a DCIO shared

drive called Financial Surveillance Home. In addition,

written reports are periodically prepared and kept on file

A paper file is created for each DCO rule submission

Typically, a staff memorandum is included in the file.

The methodology for collecting this statistic is based on 

ongoing oversight and planned reviews related to the aforementioned areas for which the results potentially could 

indicate a DCO’s noncompliance with Core Principles

Performance Highlights 

The reviews of six DCOs to determine compliance with 

Core Principles represented the first comprehensive review 

of such entities since clearing organizations were required 

to register with the Commission under the CFMA and 

FY 2007 Performance Results
62 C

became subject to the Commission’s oversight authority

DCIO chose to review multiple DCOs simultaneously 

because this approach provided an opportunity to develop 

a deeper understanding of each DCO’s policies and practices by comparing and contrasting them to the policies 

and practices of other DCOs. As a result of this approach,

a number of benefits were derived, including the following: 

1) established new baseline of knowledge for DCIO 

regarding DCO programs; 2) strengthened working relationships with DCO staff; 3) established and strengthened 

relationships with settlement banks; 4) comparative 

process provided insights both for future oversight of 

DCOs and for DCIO’s financial surveillance program; 5) 

obtained verification of Stressing Positions at Risk (SPARK) 

stress test results by comparing to DCO results; and 6) the 

process may serve as a template for future reviews
CFT

P ERF O RM A N CE  S E C T I 

Performance Measure 2.2.3 Percentage of professionals compliant with standards regarding test

and ethics training.

History of Results: FY 2004 Actual FY 2005 Actual FY 2006 Actual

100% 100% 100%

ACTUAL

FY 200

PLAN

FY 200

0

10

20

30

40

50

60

70

80

90

100

P E R C E N T A G E

100% 100%

Results: 100%

Measurement: Percentage

Status: Effective

Data Source: National Futures Association’s audit reports.

Verification: NFA audits and the agency’s ongoing 

oversight of NFA’s compliance and 

registration programs.

Lead Program Office 

Division of Clearing and Intermediary Oversight

Performance Trends & Variations 

Performance target was met for FY 2007—100 percent of 

professionals were compliant with standards regarding 

testing, licensing, and ethics training

Data Source & Validation 

The methodology for collecting this statistic is based on 

information provided by NFA and DCIO’s ongoing oversight and examinations periodically conducted with respect 

to NFA’s registration and compliance programs.

DCIO relies on information provided by NFA. In FY 2007,

NFA reported that, in 10 percent of the audits it completed, 

it cited the firms in its audit report for failing to have 

adequate ethics training procedures or failing to follow 

their procedures. In FY 2006, NFA reported that in 10

percent of the audits it completed, it cited the firms in its 

audit report for failing to have adequate ethics training 

procedures or failing to follow their procedures. However,

through subsequent follow-up activity for both FY 2006 

and FY 2007, NFA confirmed that with one exception, the 

cited firms came into compliance. NFA issued a complaint

against this one firm in September 2007, and the matter is 

not yet resolved.

During FY 2007, DCIO completed two final and one 

proposed rulemaking related to registration of intermediaries: 

■ 17 CFR Part 3, Registration of Intermediaries, at 72 Fed

Reg. 35918 (July 2, 2007) – Final amendments to regulations; 17 CFR Part 3, Registration of Intermediaries,

at 72 Fed. Reg. 20788 (April 26, 2007) – Propose

amendments to regulations

■ 17 CFR Part 3, Termination of APs and Principals, at 72 

Fed. Reg. 45392 (August 14, 2007) – Proposed amendments to regulatio

■ 17 CFR, Part 170, Membership in a Registered Futures 

Association, at 72 Fed. Reg. 2614 (January 22, 2007) 

Final amendments to regulations; 17 CFR Part 170, 

Membership in a Registered Futures Association, at 

71 Fed. Reg. 64171 (November 1, 2006) – Propose

amendments to regulations

FY 2007 Performance Results
64 

Performance Highlights 

In January 2007, the Commission amended its regulations 

to require that all persons registered with the Commission 

as FCMs must become and remain members of at least one 

registered futures association (RFA). Currently, NFA is the

sole RFA, and it also is an SRO. This action was consistent

with the CFMA, which transformed the Commission’s role 

to an oversight agency of, in the case of registration, NFA

By requiring NFA membership, then, this action protects 

market users and the public. NFA audits its members, such

as FCMs, to detect and prosecute violations resulting from 

their activities. By requiring NFA membership, this action

furthers the goal of there being no unregistered, untested 

or unlicensed commodity professionals
CFT

P ERF O RM A N CE  S E C T I 

Performance Measure 2.2.4 Percentage of self-regulatory organizations that comply with

enforce their rules.

History of Results: FY 2004 Actual FY 2005 Actual FY 2006 Actual

100% 100% 100%

ACTUAL

FY 200

PLAN

FY 200

0

10

20

30

40

50

60

70

80

90

100

P E R C E N T A G E

100% 100%

Results: 100%

Measurement: Percentage

Status: Effective

Data Source: Agency reports and files from reviews and 

analyses.

Verification: Interviews, walk-through demonstrations, 

empirical testing and site visits of DCOs.

Lead Program Office 

Division of Clearing and Intermediary Oversight

Performance Trends & Variations 

Performance target was met for FY 2007. DCIO conducts

periodic, routine examination of the financial and sales 

practice programs of the SROs for the purpose of assessing 

the SROs’ compliance with relevant Core Principles, and 

compliance with Commission regulations and interpretations. During FY 2007, DCIO completed a review of the

financial and sales practice oversight program of one DCM

Based upon its review, DCIO concluded that the DCM’s 

program was consistent with the relevant Core Principles, 

and with Commission regulations and interpretations

DCIO also initiated an examination of the financial and 

sales practice program of a second DCM, during FY 2007

This examination is currently in progress. At this stage of

the examination, DCIO has not identified any issues that 

would indicate a failure of the DCM’s program to satisfy 

the relevant Core Principles and Commission regulations 

and interpretations

DCM Core Principle 11 provides, in relevant part, that a 

DCM shall establish and enforce rules to ensure the financial integrity of FCMs and the protection of customer 

funds. DCIO and DCMs, in their capacity as SROs, receive

and review monthly financial reports submitted by FCMs 

for the purpose of assessing whether the FCMs are in 

compliance with the Commission’s and SROs’ minimum 

financial requirements, including requirements relating to 

the safeguarding of customer funds. In addition,

Commission regulations and SRO rules require an FCM to 

file a notification with the Commission and its designated 

SRO whenever such FCM fails to meet its minimum capital 

or segregation requirement. DCIO’s review and analysis

of FCM financial reports and notifications, including 

appropriate coordination with the SROs during FY 2007, 

demonstrated that the SROs were complying with Core 

Principle 11

Data Source & Validation 

DCIO staff conduct risk-focused reviews of the financial 

and sales practice oversight programs of SROs. Supporting

documentation is contained in the report and the workpaFY 2007 Performance Results
66 

pers prepared by staff while carrying out the review and 

analyzing relevant SRO materials. Such documentation is

maintained in DCIO’s files.

DCIO delivers a letter to the SRO requesting documents 

that reflect the systems, policies, procedures, practices, and 

internal controls implemented by the SRO. After reviewing

these materials, DCIO staff interview selected management 

staff, followed by fieldwork at the SRO and a review of 

documents. The fieldwork at the SRO primarily consists of

a walk-through demonstration. The purpose of the fieldwork is to confirm DCIO’s understanding of the SRO’s

program and to provide reasonable assurance that it 

operates in the manner represented

The testing of execution of procedures is performed by 

sample testing and documentation review. DCIO staff use

standard statistical techniques to size and select samples in 

the areas of disclosure documents, financial reports, 

exemption and extension notices, compliance examinations, and sales practices. Samples are selected and tested

to facilitate an understanding of the operations of a process 

or procedure in practice rather than to provide statistical 

assurances

For further verification of compliance oversight procedures, 

DCIO staff also visit firms whose operations were reviewed 

by the SRO. Such reviews include performing the same

testing steps that the SRO conducted in its examinations of 

the firms. The results of such DCIO testing are then

compared to the workpapers of the SRO’s examination of 

the selected firms

DCIO also reviews monthly financial reports submitted by 

FCMs for purposes of assessing whether the FCMs comply 

with the Commission’s and SROs’ minimum financial 

requirements, including requirements to properly safeguard customer funds. DCIO further reviews notices

submitted by an FCM stating that the firm is undercapitalized or undersegregated to assess whether the firm’s SRO 

has taken appropriate measures to address the undercapitalization or undersegregation

The methodology for collecting this statistic is based on 

ongoing oversight and planned reviews related to the aforementioned areas for which the results potentially could 

indicate an SRO’s and NFA’s noncompliance with the 

requirement to enforce their rules in accordance with 

applicable Core Principles and Commission regulations 

and interpretations

Performance Highlights 

The completed review assessed the DCM’s financial and 

sales practice program, including staffing levels, conduct of 

examinations of FCMs, conduct of financial statement 

review, and disciplinary actions. DCIO concluded that the

DCM’s program was consistent with the relevant Core 

Principles and with Commission regulations and interpretations
CFTC

P ERF O RM A N CE  S E C T I 

Performanc Measure 2.2.5  Percentage of total requests receiving CFTC responses for guid

History of Results: FY 2004 Actual FY 2005 Actual FY 2006 Actual

90% 90% 95%

ACTUAL

FY 200

PLAN

FY 200

0

10

20

30

40

50

60

70

80

90

100

P E R C E N T A G E

95% 95%

Results: 95%

Measurement: Percentage (rounded to nearest 5%)

Status: Effective

Data Source: Signed letters (formal) and email & telephone 

responses (informal).

Verification: Agency files maintained in chronological 

files and responses to formal requests are 

published on Commission’s Web site.

Lead Program Office 

Division of Clearing and Intermediary Oversight

Performance Trends & Variations

Performance target was met for FY 2007. DCIO staff

respond to numerous requests for guidance and advice on 

the CEA and Commission regulations each year. Requests

are received from members of the public, market participants, intermediaries, SROs, foreign entities, and others

These requests may be formal, such as written requests for 

no-action, interpretative, or exemption letters. DCIO also

receives numerous informal requests for guidance and 

advice via email and phone calls.

Although DCIO responds to all requests received, it is not 

always possible for DCIO to respond within the fiscal year 

that it receives a request. Many of these requests are routine

in nature and are responded to in a very short time frame, 

if not immediately. This is particularly true for many of

the requests that are received via email and phone calls

Other requests that raise novel or complex issues, or 

requests for formal DCIO responses in the form of noaction letters, interpretations, or exemptions, take more 

time to research and to prepare a response. It should be

noted, however, that statistics on numbers of letters issued 

or email responses may not reflect the complexity of any 

particular matter or the resources necessary to address one 

issue versus another issue. In addition, matters commenced

in one fiscal year may overlap into, and be completed 

during, a subsequent fiscal year, resulting in some imprecision in statistical measures for a given year. DCIO staff

make every effort to respond to requests as quickly as 

possible, but the timeliness of a response also is affected by 

the speed with which a requester provides additional information sought by staff, and the length of time required by 

other Commission divisions or offices to review a draft 

response, factors outside the control of DCIO

Meeting the performance target was due, among other 

reasons, to the ever-increasing experience and familiarity 

of staff with the Act and the Commission’s regulations, and 

to the use by requesters of electronic communications to 

more easily and readily present and supplement their 

requests for guidance

FY 2007 Performance Results
68 C

Data Source & Validation 

Supporting documentation is in the form of responses to 

formal (by signed letter) and informal (by email and telephone) requests for guidance and advice contained in 

DCIO’s files

Responses to formal requests are posted on the Commission’s Internet Web site and are maintained by hard 

copy in DCIO’s chronological files; responses to nonroutine, informal requests similarly are recorded by hard 

copy and maintained in DCIO’s chronological files. The

methodology for collecting these statistics is to compare 

the files of requests received with responses sent and to 

calculate the performance statistic

Performance Highlights 

In FY 2007, DCIO responded favorably to several requests 

for registration relief from foreign affiliates of U.S.-registered FCMs, such that those affiliates were permitted t

introduce institutional U.S. customers to any registere

FCM for trading on U.S. commodity futures and optio

markets without having to register with the CFTC as, e.g., 

an IB. To ensure that these affiliates met high standards in

conducting this activity and to protect the investing public, 

DCIO conditioned this relief on the registered FCM of a 

foreign affiliate agreeing to be jointly and severally liable 

for any violations of the Act or the Commission’s regulations committed by the foreign affiliate in connection with 

the latter’s handling of orders for these customers—

including those orders executed by the affiliate and given 

up to another FCM. See Staff Letters 07-08, dated May 30,

2007, and 07-05, dated April 26, 2007, wherein DCIO 

issued this relief

DCIO also issued two general letters of broad application 

providing guidance to registrants during FY 2007. The first

letter provided guidance to CPOs on complying with the 

financial reporting requirements set forth in Part 4 of the 

Commission’s regulations. The letter assisted CPOs in

meeting their regulatory requirements by highlighting 

recent regulatory changes affecting the financial filings 

required of CPOs, and identified common deficiencies 

observed in prior year financial filings. This letter was

issued January 31, 2007, and is available on the Commission’s Web site

The second letter was addressed to all FCMs and provided 

information to assist the FCMs in meeting their obligation 

under the Act and Commission regulations to prepare and 

to file an audited annual financial report with the 

Commission and with their designated SROs. This letter

was dated February 8, 2007, and is available on the 

Commission’s Web site
CFT

P ERF O RM A N CE  S E C T I 

Outcome 2.3: Customer complaints against persons or firms registered under the Act are handled 

effectively and expeditiously.

Annual Performance Goal 2.3: Customer complaints are resolved within one year from the date 

filed and appeals are resolved within six months.

Performance Measure 2.3.1(a) Percentage of filed complaints resolved within one year of the 

Voluntary Proceedings.

History of Results: FY 2004 Actual FY 2005 Actual FY 2006 Actual

67% 100% 71%

0

10

20

30

40

50

60

70

80

90

100

P E R C E N T A G E

50%

100%

ACTUAL

FY 200

PLAN

FY 200

Results: 100%

Measurement: Percentage

Status: Effective

Data Source: Reparations case tracking system and 

Judgment Officer Disposition report.

Verification: Weekly and monthly reports and statistics 

submitted by Judgment Officer.

Lead Program Office 

Office of Proceedings

Performance Trends & Variations 

A claim of any size can be adjudicated through the voluntary proceeding if all complainants and respondents 

consent to use this approach and if the complainant 

submits the required $50 filing fee. All evidence is

submitted in writing and there is no oral hearing. The

decision issued by the Judgment Officer (JO) is final and is 

not appealable.

Prior to FY 2007, data for the voluntary, summary and 

formal proceedings were combined, with a goal of 

completing all proceedings within one year of the date the 

complaint was received. In FY 2007, the performance goal

was re-examined and revised to provide goals and results 

for each of the different types of proceedings. The change

reflects the impact of the time required to correct complaint 

deficiencies, prepare and submit documentary evidence, 

and prepare for the hearings, as well as the complexity of 

the cases

The voluntary proceedings tend to take less time because, 

given the non-appealable nature of the proceedings and 

the more informal nature of the resolution process, the 

parties are more inclined to settle and the proceeding 

completed through a review of written documentation.

FY 2007 Performance Results
70 CF

The summary and formal proceedings take more time 

because of the evidentiary and hearing requirements of the 

proceedings; the summary tend to take slightly longer, in 

part because more parties are pro se. A variety of other

factors can affect the length of the proceeding, including 

motions for extensions of time and stays pending payment 

of penalties agreed to in settlement

In FY 2007, 100 percent of the voluntary proceeding 

complaints were resolved in one year or less from the date 

of filing, demonstrating that complaints heard in the 

voluntary forum were processed and resolved in a timely 

and efficient manner. Voluntary proceedings typically

conclude more quickly because a final decision is issued 

after all written submissions are received; there is no oral 

hearing

Data Source & Validation 

The reparations case tracking system generates reports that 

provide the total number of cases decided by fiscal year, 

the date that each case was received, the date of the 

decision, the number of processing days, and decision type

There is also a report that provides the same information 

by separating the data by administrative law judge (ALJ) or 

JO and fiscal year. These reports are used to provide the

statistical information for the performance measure

The Office of Proceedings uses “Repcase,” the integrated 

computerized case tracking system, to collect, maintain, 

and analyze performance information for each reparations 

case. The reparations case reports are separated into two

sections: complaints and hearings. The data and information collected in the Complaints Section consist of the

number of cases pending the first of the month, the 

number of cases received during the month, the number of 

cases disposed of in complaints, and the number of cases 

pending at the end of the month. The data and information collected for the Hearings Section consist of the

number of cases pending with an ALJ or JO at the beginning of the month, the number of cases assigned during 

the month, including remands, reassignments, and 

motions to vacate, the number and type of cases disposed 

of during the month, and the number of cases pending 

with each ALJ and JO at the end of the month

The data can be verified and validated by the reports and 

statistics that the presiding officer submits on a monthly 

basis. A monthly report is prepared on the reparations

cases pending one year or more. Weekly reports are

prepared for the executive director and a monthly report is 

prepared and submitted to the chairman. The latter

includes monthly and yearly statistics regarding reparations and administrative enforcement cases

Performance Highlights 

In FY 2007, 100 percent of the voluntary proceeding cases 

were resolved in one year. This accomplishment supports

the outcome measure, objective, and goal being addressed 

because it demonstrates that all the voluntary proceeding 

cases are being resolved in one year or less from the date 

of filing
CFTC

P ERF O RM A N CE  S E C T I 

Performance Measure 2.3.1(b) Percentage of filed complaints resolved within one year and si

filing date for Summary Proceedings.

History of Results: FY 2004 Actual FY 2005 Actual FY 2006 Actual

50% 52% 66%

ACTUAL

FY 200

PLAN

FY 200

0

10

20

30

40

50

60

70

80

90

100

P E R C E N T A G E

50% 50%

Results: 50%

Measurement: Percentage

Status: Effective

Data Source: Reparations case tracking system and 

Judgment Officer Disposition report.

Verification: Weekly and monthly reports and statistics 

submitted by Judgment Officer.

Lead Program Office 

Office of Proceedings

Performance Trends & Variations 

If the complainant does not select the voluntary proceeding 

and the claim amount is $30,000 or less, the complainant 

must select the summary proceeding and submit a $125 

filing fee. In the summary proceeding process, evidence is

submitted in writing and an oral hearing may be held by 

telephone. The decision by the JO is appealable to the

Commission and, ultimately, to the U.S. Court of Appea

As explained in Performance Measure 2.3.1(a) above, th

Commission previously measured all cases together, with a 

goal of resolving all types of cases (voluntary, summary, 

and formal) within one year of filing. However, because of

differences in the three decisional processes and the 

external factors that can affect them, a new goal of resolving 

50 percent of summary complaints within one year and six 

months was set

In FY 2007, 50 percent of the summary proceeding 

complaints were resolved in one year and six months. The

results show that the remaining 50 percent of the cases 

took longer than a year and six months to process and 

resolve, due in part to the retirement of one of the two JOs 

at the end of FY 2006. The other JO assumed the retiring

JO’s case load, which contributed to the length of time 

required to process the cases. In addition, some of the

cases took more than one year and six months to process 

because of parties’ non-compliance with deficiency letters, 

delays in submitting required documents, requests for 

extensions of time, and other processing and review factors

The Commission plans to assess procedures and the 

amount of time it takes to process the complaints from 

time of receipt to the date of the decision to determine 

what, if any, processes may be improved

In resolving the summary proceeding complaints, the 

targets cannot be arbitrarily set at a level at which achievement is automatic because of the various external factors 

involved in processing and resolving the complaints

FY 2007 Performance Results
72 CF

Data Source & Validation 

The reparations case tracking system generates reports that 

provide the total number of cases decided by fiscal year, 

the date that each case was received, the date of the 

decision, the number of processing days, and decision type

There is also a report that provides the same information 

by separating the data by ALJ or JO and fiscal year. These

reports are used to provide the statistical information for 

the performance measure

The Office of Proceedings uses “Repcase,” the integrated 

computerized case tracking system, to collect, maintain, 

and analyze performance information for each reparations 

case. The reparations case reports are separated into two

sections: complaints and hearings. The data and information collected in the Complaints Section consist of the

number of cases pending the first of the month, the 

number of cases received during the month, the number of 

cases disposed of in complaints, and the number of cases 

pending at the end of the month. The data and information collected for the Hearings Section consist of the

number of cases pending with an ALJ or JO at the beginning of the month, the number of cases assigned during 

the month, including remands, reassignments, and 

motions to vacate, the number and type of cases disposed 

of during the month, and the number of cases pending 

with each ALJ and JO at the end of the month

The data can be verified and validated by the reports and 

statistics that the presiding officer submits on a monthly 

basis. A monthly report is prepared on the reparations

cases pending one year or more. Weekly reports are

prepared for the executive director and a monthly report is 

prepared and submitted to the chairman. The latter

includes monthly and yearly statistics regarding reparations and administrative enforcement cases

Performance Highlights 

None to report
CFTC

P ERF O RM A N CE  S E C T I 

Performance Measure 2.3.1(c) Percentage of filed complaints resolved within one year and si

filing date for Formal Proceedings.

History of Results: FY 2004 Actual FY 2005 Actual FY 2006 Actual

100% 79% 78%

ACTUAL

FY 200

PLAN

FY 200

0

10

20

30

40

50

60

70

80

90

100

P E R C E N T A G E

50%

90%

Results: 90%

Measurement: Percentage

Status: Effective

Data Source: Reparations case tracking system and 

Administrative Law Judges’ Disposition 

reports.

Verification: Weekly and monthly reports and statistics 

submitted by Administrative Law Judges.

Lead Program Office 

Office of Proceedings

Performance Trends & Variations 

The formal proceeding can be selected if the complainant 

does not select the voluntary proceeding and if the claim 

amount is more than $30,000. The complainant must

submit a $250 filing fee. In addition to the submission of

documentary evidence, an oral hearing may be held in a 

location that is, to the extent possible, convenient to the 

parties. The decision is appealable to the Commission

and, ultimately, to the U.S. Court of Appeal

As explained in Performance Measure 2.3.1(a) above, th

Commission previously measured all cases together, with a 

goal of resolving all types of cases (voluntary, summary, 

and formal) within one year of filing. However, because of

differences in the three decisional processes and the 

external factors that can affect them, a new goal of resolving 

50 percent of formal complaints within one year and six 

months was set

In FY 2007, 90 percent of the formal proceeding complaints 

were resolved in one year and six months. The results

demonstrate that problem-free reparations complaints are 

being processed in an effective and efficient manner; 

however, the length of time it takes to reach a decision after 

a complainant files a complaint can vary substantially. The

time that it takes to process and resolve this type of 

complaint depends upon, among other factors, the facts 

and complexity of the case; whether the parties are cooperative in discovery and prepare and submit their evidence 

quickly; whether any procedural disputes arise; and 

whether an oral hearing is required (and if so, when it can 

be scheduled.) Pro se complainants and inexperienced

attorneys also impact the amount of time it takes to process 

this type of case. The Commission will assess the process

to determine if any improvements can be made that would 

increase the percentage of formal complaints resolved 

within one year and six months from the date of filing

In resolving the formal proceeding complaints, the targets 

cannot be arbitrarily set at a level at which achievement is 

automatic because of the various external factors that are 

involved in processing and resolving the complaints

FY 2007 Performance Results
74 C

Data Source & Validation 

The reparations case tracking system generates reports, 

which provide the total number of cases that were decided 

by fiscal year, the date that each case was received, the date 

of the decision, the number of processing days, and 

decision type. There is also another report that provides

the same information by separating the data by ALJ or JO 

and fiscal year. These reports are used to provide the statistical information for the performance measur

The Office of Proceedings uses “Repcase,” the integrated 

computerized case tracking system, to collect, maintain, 

and analyze performance information for each reparations 

case. The reparations case reports are separated into two

sections: complaints and hearings. The data and information collected in the Complaints Section consist of the

number of cases pending the first of the month, the 

number of cases received during the month, the number of 

cases disposed of in complaints, and the number of cases 

pending at the end of the month. The data and information collected for the Hearings Section consist of the

number of cases pending with an ALJ or JO at the beginning of the month, the number of cases assigned during 

the month, including remands, reassignments, and 

motions to vacate, the number and type of cases disposed 

of during the month, and the number of cases pending 

with each ALJ and JO at the end of the month

The data can be verified and validated by the reports and 

statistics that the presiding officer submits on a monthly 

basis. A monthly report is prepared on the reparations

cases pending one year or more. Weekly reports are

prepared for the executive director and a monthly report is 

prepared and submitted to the chairman. The latter

includes monthly and yearly statistics regarding reparations and administrative enforcement cases

Performance Highlights 

None to report
CFTC

P ERF O RM A N CE  S E C T I 

Performance Measure 2.3.2 Percentage of appeals resolved wi

History of Results: FY 2004 Actual FY 2005 Actual FY 2006 Actual

35% 46% 46%

ACTUAL

FY 200

PLAN

FY 200

0

10

20

30

40

50

60

70

80

90

100

P E R C E N T A G E

50%

66%

Results: 66%

Measurement: Percentage

Status: Effective

Data Source: Opinions and orders issued by the 

Commission.

Verification: Final opinions and orders are posted on the 

Commission’s Web site. Pending cases are 

maintained by the Secretariat; status reports 

are issued monthly.

Lead Program Office 

Office of Proceedings

Performance Trends & Variations

The performance of OGC under this measure is effective, 

exceeding the goal for the year (5o percent of appeals 

resolved within six months) and substantially exceeding 

the results for the two prior fiscal years. The performance

also is effective because OGC exceeded its goal despite 

substantial constraints on its ability to control ultimate 

outcomes under this measure. Once an appeal is filed, its

resolution may be delayed by one or more appealing 

parties, who may seek extensions of filing deadlines. After

OGC staff review a case and make a recommendation to 

the Commission regarding its resolution, OGC no longer 

controls the case. The case rests with the commissioners

and their advisors, who face competing priorities. Finally,

the performance of OGC this year particularly warrants 

being deemed effective because the performance measure 

was exceeded in a year when OGC lost approximately onethird of its professional staff

Performance Analysis & Review 

OGC maintained its productivity from FY 2005 to FY 2006 

and anticipates exceeding its planned FY 2007 goal of 50 

percent, based on actual results through the first three 

quarters. The increased number of cases resolved within

six months resulted primarily from the disposition of 

matters through delegated authority.

Data Source & Validation 

The principal supporting documentation consists of the 

opinions and orders issued by the Commission

Apart from this documentation, which is posted on the 

Commission’s Web site, the Office of Proceedings, OGC, 

and the Secretariat maintain dockets on the status of 

pending cases. In addition, OGC prepares monthly reports

to the Commission on the status of cases. Performance

data is validated as follows: the date of the notice of appeal 

or other pleading bringing a matter before the Commission 

starts the six-month time period. The Commission’s order

disposing of a matter stops the time period.

FY 2007 Performance Results
76 C

Performance Highlights 

In FY 2007, the Commission signaled the importance of 

maintaining the user-friendly nature of the customer reparations forum

■ The Commission vacated an initial decision that 

dismissed a claim because the pro se complainant did 

not file a detailed prehearing memorandum discussing 

issues of law. The Commission remanded the case for

a hearing (Anderson v. Beach);

■ The Commission exercised its rarely used authority to 

take sua sponte review of an initial decision to determine whether sanctions imposed on the complainant 

and a respondent for deficient responses to a prehearing 

order constituted an abuse of discretion (Wade v. 

Chevalier)
CFTC 

P ERF O RM A N CE  S E C T I 

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

financially sound markets

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

financial practices.

Annual Performance Goal 3.1: 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. 

Strategic Goal Thre:  Ind
78 CF

Performance Masure 3.1.1()  Lost Funds:  Number of customers

History of Results: FY 2004 Actual FY 2005 Actual FY 2006 Actual

0 0 0

ACTUAL

FY 200

PLAN

FY 200

0

10

20

30

40

50

60

70

80

90

100

0 0

N u b

Results: 0

Measurement: Number

Status: Effective

Data Source: Agency database for filing financial reports,

1-FR-FCM and FOCUS reports.

Verification: Exchanges’ daily trading data and FCMs’ 

financial filings are maintained in SPARK 

and 1-FR data systems. 

Performance Masure 3.1.1()  Lost Funds:  Amoun

History of Results: FY 2004 Actual FY 2005 Actual FY 2006 Actual

$ 0 $ 0 $ 0

ACTUAL

FY 200

PLAN

FY 200

0

10

20

30

40

50

60

70

80

90

100

$ 0 $ 0

D O L L A R S

Results: $0

Measurement: Dollars

Status: Effective

Data Source: Agency database for filing financial reports,

1-FR-FCM and FOCUS reports.

Verification: Exchanges’ daily trading data and FCMs’ 

financial filings are maintained in SPARK 

and 1-FR data systems. 

FY 2007 Performance Results

FY 2007 Performance Results
CFTC

P ERF O RM A N CE  S E C T I 

Lead Program Office 

Division of Clearing and Intermediary Oversight

Performance Trends & Variations 

Performance target was met for FY 2007. No customers

who deposited funds with FCMs for trading on DCMs 

experienced any losses during FY 2007, as a result of the 

FCM’s failure to adhere to Commission regulations

However, a registered FCM filed for bankruptcy protection 

in August 2007. DCIO is continuing to monitor the FCM’s

bankruptcy proceedings and, as of September 30, 2007, no 

customers trading on DCMs have lost funds due to the 

FCM’s bankruptcy.

FCMs are required to segregate customer funds for trading 

on DCMs in designated accounts with a bank, trust 

company, clearing organization, or other FCM. FCMs

holding funds for customers trading on non-U.S. contrac

markets are required to comply with Part 30 of the 

Commission’s regulations with respect to the custody of 

the customers’ funds.

FCMs also are required to prepare daily calculations 

demonstrating compliance with the customer funds 

custody requirements. These calculations must be prepared

by 12:00 noon demonstrating compliance as of the end of 

business on the previous business day.

DCIO conducts financial and risk surveillance activities to 

closely monitor the operations of FCMs in possession of 

customer funds. These surveillance activities include

DCIO’s SPARK system, combined with required financial 

warning notices from the FCMs and constant market 

monitoring.

Data Source & Validation

Supporting documentation is contained in DCIO’s files 

and the database maintained for filing 1-FR-FCM forms 

and FOCUS reports

The methodology for collecting and maintaining the data 

to use to analyze and validate this item is part of the daily 

procedures for handling the SPARK and 1-FR data systems

The data is obtained from daily trading information 

obtained from the exchanges, combined with the periodic 

financial filings of the FCMs

Performance Highlights 

There were no losses of regulated customer funds due to 

firm failures or the inability of customers to transfer their 

funds from a failing firm to a sound firm in FY 2007 or 

FY 2006
80 CF

Performanc Measure 3.1.2  Number of rulemakings to ensure market integrity and financiall

History of Results: FY 2004 Actual FY 2005 Actual FY 2006 Actual

1 3 3

ACTUAL

FY 200

PLAN

FY 200

N u b

6

1

10

9

8

7

6

5

4

3

2

1

0

Results: 1

Measurement: Number

Status: Effective

Data Source: Code of Federal Regulations: proposed and 

final amendments to regulations.

Verification: Proposed and final regulations are published 

in the Federal Register and posted on the 

Commission’s Web site.

Lead Program Office 

Division of Clearing and Intermediary Oversight

Performance Trends & Variations 

Not meeting the FY 2007 performance target is not viewed 

as a performance deficiency. Unrelated to performance, a

number of factors may contribute to not meeting the plan

The number of rulemakings to ensure market integrity and 

financial soundness is not a number that can be precisely 

predetermined. The final number of rulemakings is driven,

in part, by changes in the marketplace, or in the structure 

of exchanges, clearing organizations, and intermediaries 

that operate within that marketplace. The number can be a

function of what is needed to allow appropriate market 

interrelationships to be maintained and to allow registered 

entities to operate in the most efficient manner possible

These factors may not be foreseeable at the time the performance estimate is prepared. In addition, the need for a

rulemaking may not be known or may not have reached a 

decision-making point until further analysis, study, and 

other actions or events have taken place. This also can

account for a difference between the FY 2007 Plan and 

Actual

DCIO completed one rulemaking that effectively addressed 

regulatory efforts to ensure market integrity and financially 

sound markets. This rulemaking, concerning limitations

on withdrawals of equity, was designed to help preserve 

and enhance the required compliance by FCMs and IBs 

with the Commission’s minimum financial requirements, 

while strengthening protection of market participants and 

the public. The Commission may now, by written order,

temporarily prohibit an FCM from carrying out equity 

withdrawal transactions that could be detrimental to the 

financial integrity of the FCM or could adversely affect its 

ability to meet customer obligations

Data Source & Validation 

DCIO staff maintain files of the supporting documentation 

related to the respective rulemakings. The methodology

for collecting these statistics is by tabulating the number of 

FY 2007 Performance Results
CFTC

P ERF O RM A N CE  S E C T I 

rulemakings for the fiscal year. In addition, proposed and

final regulations are published in the Federal Register and 

are posted on the Commission’s Web site

During FY 2007, DCIO completed one final rulemaking 

related to FCM net capital:

■ 17 CFR Part 1, Limitations on Withdrawals of Equity 

Capital, at 72 Fed Reg. 1148 (January 10, 2007) – Final

amendments to regulations

Performance Highlights 

The Commission completed a rulemaking amending its 

regulations to provide that the Commission may, by 

written order, temporarily prohibit an FCM from carrying 

out equity withdrawal transactions that would reduce the 

firm’s regulatory excess adjusted net capital by 30 percent 

or more. The purpose of this rule amendment was to

provide the Commission with explicit authority to prevent 

an FCM from transferring equity out of the FCM during a 

financial emergency. The Commission’s order would be

based on the Commission’s determination that such withdrawal transactions could be detrimental to the financial 

integrity of the FCMs or could adversely affect their ability 

to meet customer obligations. The amendment also

provides that an FCM may file with the Commission a 

petition for rescission of an order temporarily prohibiting 

equity withdrawals from the FCM
82 CF

Performance Measure 3.1.3 Percentage of clearing organizations that comply with require

their rules.

History of Results: FY 2004 Actual FY 2005 Actual FY 2006 Actual

100% 100% 100%

ACTUAL

FY 200

PLAN

FY 200

0

10

20

30

40

50

60

70

80

90

100

P E R C E N T A G E

100% 100%

Results: 100%

Measurement: Percentage

Status: Effective

Data Source: Documentation from DCOs under review; 

agency reports & files; and financial 

surveillance materials.

Verification: Statistical data is obtained through financial 

surveillance and planned reviews.

Lead Program Office 

Division of Clearing and Intermediary Oversight

Performance Trends & Variations 

Performance target was met for FY 2007. Reviews of

compliance with Core Principles were completed at six 

DCOs. Reviews of five DCOs found them to be in compliance with the Core Principles  One DCO was found to b

in compliance with the Core Principles except that further 

demonstration was deemed necessary in one instance. No

affirmative conclusion of noncompliance can be made at 

this time

On a daily basis, DCIO staff conduct financial surveillance 

of DCOs and clearing members. Staff have identified no

instances of noncompliance

During the past fiscal year, 73 rule submissions, many 

containing multiple rules, were filed by DCOs under the 

self-certification provisions of the CEA. Staff reviewed each

of the submissions and found none that violated CEA Core 

Principles

Data Source & Validation 

Each of the DCOs under review submits extensive documentation. DCIO staff create extensive workpapers in

conducting the reviews of DCOs. When the reviews are

complete, DCIO staff provide reports to the Commission

Files are maintained containing many of these materials.

Financial surveillance materials are also maintained in 

files. Some of them are maintained on a DCIO electronic

shared drive called Financial Surveillance Home. In addition,

written reports are periodically prepared and kept on file

A paper file is created for each DCO rule submission

Typically, a staff memorandum is included in the file.

The methodology for collecting this statistic is based on 

ongoing oversight and planned reviews related to the aforementioned areas for which the results potentially could 

indicate a DCO’s noncompliance with the requirement to 

enforce its rules

FY 2007 Performance Results
CFTC

P ERF O RM A N CE  S E C T I 

Performance Highlights 

The reviews of six DCOs to determine compliance with 

Core Principles represented the first comprehensive review 

of such entities since clearing organizations were required 

to register with the Commission under the CFMA and 

became subject to the Commission’s oversight authority

DCIO chose to review multiple DCOs simultaneously 

because this approach provided an opportunity to develop 

a deeper understanding of each DCO’s policies and practices by comparing and contrasting them to the policies 

and practices of other DCOs. As a result of this approach,

a number of benefits were derived, including the following: 

1) established new baseline of knowledge for DCIO 

regarding DCO programs; 2) strengthened working relationships with DCO staff; 3) established and strengthened 

relationships with settlement banks; 4) comparative 

process provided insights both for future oversight of 

DCOs and for DCIO’s financial surveillance program; 

5) obtained verification of SPARK stress test results by 

comparing to DCO results; and 6) the process may serve as 

a template for future reviews
84 C

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

Annual Performance Goal 3.2: No loss of funds resulting from failure of self-regulated organizations to ensure compliance with their rules. 

Performance Measure 3.2.1 Percentage of intermediaries who meet risk-based capit

History of Results: FY 2004 Actual FY 2005 Actual FY 2006 Actual

100% 100% 100%

ACTUAL

FY 200

PLAN

FY 200

0

10

20

30

40

50

60

70

80

90

100

P E R C E N T A G E

100% 100%

Results: 100%

Measurement: Percentage

Status: Effective

Data Source: Agency database for filing financial reports,

1-FR-FCM and FOCUS reports.

Verification: Exchanges’ daily trading data and FCMs’ 

financial filings are maintained in SPARK and 

1-FR data systems. 

Lead Program Office 

Division of Clearing and Intermediary Oversight

Performance Trends & Variations 

Performance target was met for FY 2007. The Act,

Commission regulations, and SRO rules require FCMs to 

comply with minimum financial requirements and related 

reporting requirements at all times. Included in the

minimum financial requirements is the Commission’s and 

SROs’ risk-based capital requirement.

Any FCM failing to meet the risk-based capital requirement 

must provide immediate notice to the Commission and to 

the firm’s designated SRO. Furthermore, Commission

regulations provide that any FCM that fails to meet 

minimum capital requirements, including the risk-based 

capital requirement, must transfer all customer accounts 

and immediately cease operating as an FCM until it can 

demonstrate compliance.

The Commission and SROs monitor FCMs’ compliance 

with the risk-based capital requirement through review of 

monthly financial reports, regulatory notices, and the 

conduct of in-field examination. DCIO also uses the

SPARK system, combined with required financial warning 

notices and market monitoring, to closely monitor the 

financial condition of FCMs.

FY 2007 Performance Results
CFTC

P ERF O RM A N CE  S E C T I 

Data Source & Validation 

Supporting documentation is contained in DCIO’s files 

and the database maintained for the filing of 1-FR-FCM 

forms and FOCUS reports

The methodology for collecting and maintaining the data 

used to analyze and validate this item is part of the daily 

procedures for handling the SPARK and 1-FR data systems

The data is obtained from daily trading information 

obtained from the exchanges combined with the periodic 

financial filings of the FCMs

Performance Highlights 

DCIO staff reviewed all regulatory notices received from 

FCMs during FY 2007. This review included assessing each

firm’s actions to ensure that all firms that reported a failure 

to maintain the minimum capital requirement either took 

the necessary steps to bring themselves back into compliance or properly transferred their customers’ accounts to 

other, adequately capitalized FCMs. DCIO staff reviewed

approximately 2,700 FCM financial reports submitted 

during FY 2007 for compliance with the minimum financial requirements. DCIO staff also conducted examinations of several FCMs during FY 2007 to assess the firms’

compliance with Commission and SRO capital rules
86 C

Performance Measure 3.2.2 Percentage of self-regulatory organizations that comply with

enforce their rules.

History of Results: FY 2004 Actual FY 2005 Actual FY 2006 Actual

100% 100% 100%

ACTUAL

FY 200

PLAN

FY 200

0

10

20

30

40

50

60

70

80

90

100

P E R C E N T A G E

100% 100%

Results: 100%

Measurement: Percentage

Status: Effective

Data Source: Documentation from SROs under review; 

agency reports and files; and financial 

surveillance materials.

Verification: SRO financial filings are maintained in 

SPARK and 1-FR data systems. 

Lead Program Office 

Division of Clearing and Intermediary Oversight

Division of Market Oversight

Performance Trends & Variations 

Division of Clearing and Intermediary Oversight 

Perform-ance target was met for FY 2007. DCIO conducts

periodic, routine examination of the financial and sales 

practice programs of the SROs for the purpose of assessing 

the SROs’ compliance with relevant Core Principles and 

Commission regulations and interpretations. During

FY 2007, DCIO completed a review of the financial and 

sales practice oversight program of one DCM. Based upon

its review, DCIO concluded that the DCM’s program was 

consistent with the relevant Core Principles, and with 

Commission regulations and interpretations

DCIO also initiated an examination of the financial and 

sales practice program of a second DCM, during FY 2007

This examination is currently in progress. At this stage of

the examination, DCIO has not identified any issues that 

would indicate a failure of NYMEX’s program to satisfy the 

relevant Core Principles and Commission regulations and 

interpretations

DCM Core Principle 11 provides, in relevant part, that a 

DCM shall establish and enforce rules to ensure the financial integrity of FCMs and the protection of customer 

funds. DCIO and DCMs, in their capacity as SROs, receive

and review monthly financial reports submitted by FCMs 

for the purpose of assessing whether the FCMs are in 

compliance with the Commission’s and SROs’ minimum 

financial requirements, including requirements relating to 

the safeguarding of customer funds. In addition,

Commission regulations and SRO rules require an FCM to 

file a notification with the Commission and its designated 

SRO whenever such FCM fails to meet its minimum capital 

or segregation requirement. DCIO’s review and analysis

of FCM financial reports and notifications, including 

appropriate coordination with the SROs during FY 2007, 

demonstrated that the SROs were complying with Core 

Principle 11

Division of Market Oversight 

DMO staff conduct rule enforcement reviews (RERs) of 

DCMs on a regular cycle to ensure that exchanges enforce 

their rules. CEA Core Principle 2 specifically requires that

exchanges monitor and enforce compliance with their 

rules. DMO reviews exchange compliance with CEA Core

Principle 2 when it conducts an RER of an exchange’s trade 

FY 2007 Performance Results
CFTC 

P ERF O RM A N CE  S E C T I 

practice surveillance program. RERs also examine the

adequacy of an exchange’s market surveillance, audit trail, 

disciplinary, and dispute resolution programs. When

DMO examines these programs, its review includes an 

analysis to ensure that an exchange is enforcing its rules 

that relate to the particular program under review. During

FY 2007, DMO completed a RER of the CME that included, 

among other things, review of CME’s trade practice surveillance program, including a detailed analysis of CME’s 

surveillance systems. The CME RER resulted in a report

that found that CME maintains an adequate trade practice 

surveillance program that includes the use of sophisticated 

surveillance systems. DMO also initiated a review of

CBOT’s market surveillance program, which is expected to 

be completed in early FY 2008. Although the CBOT RER

focused on market surveillance, market surveillance issues 

sometimes directly relate to trade practice abuses. In FY

2007, or shortly thereafter, DMO expects to issue a report 

of its combined RER of the Chicago Climate Futures 

Exchange (CCFE), USFE, and HedgeStreet. These exchanges

all contract with the NFA to perform trade practice surveillance. In reviewing these exchanges’ trade practice surveillance programs, DMO is carefully reviewing and analyzing

NFA’s automated surveillance system. Finally, in FY 2007,

DMO initiated an RER of NYMEX which includes, among 

other things, review of NYMEX’s market surveillance and 

trade practice surveillance programs. Although the

combined RER of CCFE, USFE, and HedgeStreet and the 

NYMEX RER are still in progress, staff have not identified 

any material deficiencies

DMO also conducts ongoing daily surveillance of all 

exchanges to ensure that exchanges are enforcing their 

rules

Data Source & Validation

Division of Clearing and Intermediary Oversight 

DCIO staff conduct risk-focused reviews of the financial 

and sales practice oversight programs of SROs and NFA on 

risk-based examination cycles. DCIO delivers a letter to

the SRO, requesting documents that reflect the systems, 

policies, procedures, practices, and internal controls implemented by the SRO. After reviewing these materials, DCIO

staff interview selected management staff, followed by 

performing fieldwork at the exchange and a review of documents. The fieldwork at the SRO primarily consists of a

walk-through demonstration. The purpose of the fieldwork is to confirm DCIO’s understanding of the SRO’s

program and to provide reasonable assurance that it 

operates in the manner represented

The testing of execution of procedures is performed by 

sample testing and documentation review. DCIO staff use

standard statistical techniques to size and select samples in 

the areas of disclosure documents, financial reports, 

exemption and extension notices, compliance examinations, and sales practices. Samples are selected and tested

to facilitate an understanding of the operations of a process 

or procedure in practice rather than to provide statistical 

assurances

For further verification of compliance oversight procedures, 

DCIO staff also visit firms whose operations were reviewed 

by the SRO during 2004. Such reviews include performing

the same testing steps that the SRO conducted in its examinations of the firms. The results of such DCIO testing are

then compared to the workpapers of the SRO’s examination of the selected firms

DCIO also reviews monthly financial reports submitted by 

FCMs for purposes of assessing whether the FCMs comply 

with the Commission’s and SROs’ minimum financial 

requirements, including requirements to properly safeguard customer funds. DCIO further reviews notices

submitted by an FCM stating that the firm is undercapitalized or undersegregated to assess whether the firm’s SRO 

has taken appropriate measures to address the undercapitalization or undersegregation

The methodology for collecting this statistic is based on 

ongoing oversight and planned reviews related to the aforementioned areas for which the results could potentially 

indicate an SRO’s noncompliance with the requirement to 

enforce its rules in accordance with applicable Core 

Principles and Commission regulations

Division of Market Oversight 

Each DCM that is the subject of an RER, and its third-party 

service provider, if applicable, submits extensive documentation during the course of RERs. DMO staff also create

workpapers during their analysis of submitted documentation. Exchange submissions and staff workpapers are organized and maintained in DMO file
88 CF

DMO also maintains a log of its exchange floor surveillance and maintains trade practice investigation files that 

include exchange trade data and staff’s analysis

When initiating an RER, DMO sends a letter to the 

exchange requesting documents that reflect systems, 

policies, procedures, and practices that relate to the CEA 

Core Principles and programs under review. After reviewing

the requested material, DMO staff conduct an on-site visit 

that includes interviewing senior exchange officials and 

reviewing files that demonstrate exchange staff’s use of 

surveillance systems as part of the investigatory process

The verification of procedures and adequacy of exchange 

surveillance system is measure by determining whether the 

exchange initiated a sufficient number of investigations 

given exchange volume, the adequacy of investigation, and 

the exchange’s success in bringing disciplinary actions

The methodology for collecting this statistic is based on 

ongoing oversight and planned RERs relating to the aforementioned areas for which the results potentially could 

indicate a DCM’s noncompliance with the requirement to 

enforce its rules

Performance Highlights

Division of Clearing and Intermediary Oversight 

The completed review assessed the DCM’s financial and 

sales practice program, including staffing levels, conduct of 

examinations of FCMs, conduct of financial statement 

review, and disciplinary actions. DCIO concluded that the

DCM’s program was consistent with the relevant Core 

Principles and with Commission regulations and 

interpretations

Division of Market Oversight 

DMO found in its CME RER report that CME maintains an 

adequate trade practice surveillance program to enforce its 

rules. In this regard, CME monitors all trading through a

combination of visual, video, and automated computer 

surveillance, and conducts investigations capable of 

detecting violations of CME rules. DMO noted that since

its last RER of CME’s trade practice surveillance program in 

2002, CME refined its automated surveillance systems and 

developed a new tool to allow compliance staff to conduct 

real-time surveillance of orders and trading on Globex, 

CME’s electronic trading platform
CFTC

P ERF O RM A N CE  S E C T I 

Outcome 3.3: Markets are free of trade practice abuses.

Annual Performance Goal 3.3: Minimize trade practice abuses. 

Performance Measure 3.3.1 Percentage of exchanges deemed to have adequate systems for 

practice abuses.

History of Results: FY 2004 Actual FY 2005 Actual FY 2006 Actual

100% 100% 100%

ACTUAL

FY 200

PLAN

FY 200

0

10

20

30

40

50

60

70

80

90

100

P E R C E N T A G E

100% 100%

Results: 100%

Measurement: Percentage

Status: Effective

Data Source: Agency reports and files from reviews 

and analyses, and documentation from 

exchanges subject to a rule enforcement 

review.

Verification: Reviews and analysis of systems, 

procedures, policies, practices, and 

manuals. Reviews include site visits.

Lead Program Office 

Division of Market Oversight

Performance Trends & Variations 

DMO staff conduct RERs of DCMs on a regular cycle that 

includes review and analysis of systems for detecting trade 

practice abuses. During FY 2007, DMO completed an RER

of the CME that included, among other things, review of 

CME’s trade practice surveillance program, including a 

detailed analysis of CME’s surveillance systems. The CME

RER resulted in a report that found that CME maintains an 

adequate trade practice surveillance program that includes 

the use of sophisticated surveillance systems. DMO also

initiated a review of CBOT’s market surveillance program, 

which is expected to be completed in early FY 2008

Although the CBOT RER focused on market surveillance, 

market surveillance issues sometimes directly relate to 

trade practice abuses. In FY 2007, or shortly thereafter,

DMO expects to issue a report of its combined RER of the 

CCFE, USFE, and HedgeStreet. These exchanges all contract

with the NFA to perform trade practice surveillance. In

reviewing these exchanges’ trade practice surveillance 

programs, DMO is carefully reviewing and analyzing NFA’s 

automated surveillance system. Finally, in FY 2007, DMO

initiated an RER of NYMEX which includes, among other 

things, review of NYMEX’s market surveillance and trade 

practice surveillance programs. Although the combined

RER of CCFE, USFE, and HedgeStreet and the NYMEX RER 

are still in progress, staff have not identified any material 

deficiencies.

FY 2007 Performance Results
90 C

Data Source & Validation

Each DCM that is subject of an RER, and its third-party 

service provider, if applicable, submits extensive documentation during the course of RERs. DMO staff also create

workpapers during its analysis of submitted documentation. Exchange submissions and staff workpapers are organized and maintained in DMO files

When initiating an RER, DMO sends a letter to the 

exchange requesting documents that reflect the systems, 

policies, procedures, and practices that relate to the CEA 

Core Principles and programs under review. With respect

to an exchange’s surveillance systems, DMO requested 

copies of all manuals, procedures, and/or guidelines 

relating to any automated surveillance system used by the 

exchange in connection with trade practice surveillance

After reviewing the requested material, DMO staff conduct 

an on-site visit that includes interviewing senior exchange 

officials and reviewing files that demonstrate exchange 

staff’s use of surveillance systems as part of their investigatory process. The verification of procedures and adequacy

of exchange surveillance systems is measured by determining whether the exchange initiated a sufficient number 

of investigations given exchange volume, the adequacy of 

investigations, and the exchange’s success in bringing disciplinary actions

The methodology for collecting this statistic is based on 

RERs relating to review and evaluation of exchange systems 

for detecting trade practice abuses

Performance Highlights 

DMO found in its CME RER report that CME maintains an 

adequate trade practice surveillance program to detect 

trading abuses. In this regard, CME monitors all trading

through a combination of visual, video, and automated 

computer surveillance, and conducts investigations capable 

of detecting violations of CME rules. DMO noted that

since its last RER of CME’s trade practice surveillance 

program in 2002, CME has refined its automated surveillance systems and has developed a new tool to allow 

compliance staff to conduct real-time surveillance of orders 

and trading on Globex, CME’s electronic trading platform
CFT

P ERF O RM A N CE  S E C T I 

Performance Measure 3.3.2 Percentage of exchanges that comply with requirement to enfo

History of Results: FY 2004 Actual FY 2005 Actual FY 2006 Actual

100% 100% 100%

ACTUAL

FY 200

PLAN

FY 200

0

10

20

30

40

50

60

70

80

90

100

P E R C E N T A G E

100% 100%

Results: 100%

Measurement: Percentage

Status: Effective

Data Source: Agency reports and files from reviews 

and analyses, and documentation from 

exchanges subject to a rule enforcement 

review.

Verification: Statistical data is obtained through financial 

surveillance and planned reviews.

Lead Program Office 

Division of Clearing and Intermediary Oversight

Division of Market Oversight

Performance Trends & Variations 

Division of Clearing and Intermediary Oversight 

Perform-ance target was met for FY 2007. DCIO conducts

periodic, routine examination of the financial and sales 

practice programs of the SROs for the purpose of assessing 

the SROs’ compliance with relevant Core Principles, and 

compliance with Commission regulations and interpretations. During FY 2007, DCIO completed a review of the

financial and sales practice oversight program of one DCM

Based upon its review, DCIO concluded that the DCM’s 

program was consistent with the relevant Core Principles 

and with Commission regulations and interpretations

DCIO also initiated an examination of the financial and 

sales practice program of a second DCM, during FY 2007

This examination is currently in progress. At this stage of

the examination, DCIO has not identified any issues that 

would indicate a failure of the DCM’s program to satisfy 

the relevant Core Principles and Commission regulations 

and interpretations

DCM Core Principle 11 provides, in relevant part, that a 

DCM shall establish and enforce rules to ensure the financial integrity of FCMs and the protection of customer 

funds. DCIO and DCM’s, in their capacity as SROs, receive

and review monthly financial reports submitted by FCMs 

for the purpose of assessing whether the FCMs are in 

compliance with the Commission’s and SRO’s minimum 

financial requirements, including requirements relating to 

safeguarding customer funds. In addition, Commission

regulations and SRO rules require an FCM to file a notification with the Commission and its designated SRO 

whenever such FCM fails to meet its minimum capital or 

segregation requirement. DCIO’s review and analysis

of FCM financial reports and notifications, including 

appropriate coordination with the SROs during FY 2007, 

demonstrated that the SROs were complying with Core 

Principle 11

Division of Market Oversight 

DMO staff conduct RERs of DCMs on a regular cycle to 

ensure that exchanges enforce their rules. CEA Core

Principle 2 specifically requires that exchanges monitor 

and enforce compliance with their rules. DMO reviews

exchange compliance with CEA Core Principle 2 when it 

conducts an RER of an exchange’s trade practice surveillance program. RERs also examine the adequacy of an

FY 2007 Performance Results
92 C

exchange’s market surveillance, audit trail, disciplinary, 

and dispute resolution programs. When DMO examines

these programs, its review includes an analysis to ensure 

that an exchange is enforcing its rules that relate to the 

particular program under review. During FY 2007, DMO

completed an RER of the CME that included, among other 

things, review of CME’s trade practice surveillance program, 

including a detailed analysis of CME’s surveillance systems

The CME RER resulted in a report that found that CME 

maintains an adequate trade practice surveillance program 

that includes the use of sophisticated surveillance systems

DMO also initiated a review of CBOT’s market surveillance 

program, which is expected to be completed in early FY 

2008. Although the CBOT RER focused on market surveillance, market surveillance issues sometimes directly relate

to trade practice abuses. In FY 2007, or shortly thereafter,

DMO expects to issue a report of its combined RER of the 

CCFE, USFE, and HedgeStreet. These exchanges all contract

with the NFA to perform trade practice surveillance. In

reviewing these exchanges’ trade practice surveillance 

programs, DMO is carefully reviewing and analyzing NFA’s 

automated surveillance system. Finally, in FY 2007, DMO

initiated an RER of NYMEX which includes, among other 

things, review of NYMEX’s market surveillance and trade 

practice surveillance programs. Although the combined

RER of CCFE, USFE, and HedgeStreet and the NYMEX RER 

are still in progress, staff have not identified any material 

deficiencies

DMO also conducts ongoing daily surveillance of all 

exchanges to ensure that exchanges are enforcing their 

rules

Data Source & Validation

Division of Clearing and Intermediary Oversight 

DCIO staff conduct risk-focused reviews of the financial 

and sales practice oversight programs of SROs. Supporting

documentation of DCIO’s assessment of exchanges 

complying with requirements to enforce their rules is 

contained in the report and the workpapers prepared by 

DCIO staff while carrying out the review and analyzing 

relevant exchange’s materials. Such documentation is

contained in DCIO’s files.

DCIO delivers a letter to the exchange, requesting documents that reflect the systems, policies, procedures, practices, and internal controls implemented by the exchange

After reviewing those materials, DCIO staff interview 

selected management staff, followed by performing fieldwork at the exchange and a review of documents. The

fieldwork at the exchange primarily consists of a walkthrough demonstration. The purpose of the fieldwork is to

confirm DCIO’s understanding of the exchange and to 

provide reasonable assurance that it operated in the 

manner represented.

The testing of execution of procedures is performed by 

sample testing and documentation review. DCIO staff use

standard testing and documentation review. DCIO staff

use standard statistical techniques to size and select 

samples in the areas of financial reports and audits

Samples are selected and tested to facilitate an understanding of the operation of a process or procedure in 

practice rather than to provide statistical assurances

For further verification of compliance oversight procedures, 

DCIO staff also visit firms whose operations are reviewed 

by the exchange. Such reviews include performing the

same testing steps that the SRO conducts in its examinations of the firms. The results of such DCIO testing are

compared to the workpapers of the exchange’s examination of the selected firms

DCIO also reviews monthly financial reports submitted by 

FCMs for purposes of assessing whether the FCMs comply 

with the Commission’s and SROs’ minimum financial 

requirements, including requirements to properly safeguard customer funds. DCIO further reviews notices

submitted by an FCM stating that the firm is undercapitalized or undersegregated to assess whether the firm’s SRO 

has taken appropriate measures to address the undercapitalization or undersegregation

The methodology for collecting the statistic is based on 

ongoing oversight and planned reviews related to the aforementioned areas for which the results could potentially 

indicate an exchange’s noncompliance with the requirement to enforce its rules
CFT

P ERF O RM A N CE  S E C T I 

Division of Market Oversight 

Each DCM that is the subject of an RER, and its third-party 

service provider, if applicable, submits extensive documentation during the course of RERs. DMO staff also create

workpapers during their analysis of submitted documentation. Exchange submissions and staff workpapers are organized and maintained in DMO file

DMO also maintains a log of its exchange floor surveillance and maintains trade practice investigation files that 

include exchange trade data and staff’s analysis

When initiating an RER, DMO sends a letter to the 

exchange requesting documents that reflect systems, 

policies, procedures, and practices that relate to the CEA 

Core Principles and programs under review. After reviewing

the requested material, DMO staff conduct an on-site visit 

that includes interviewing senior exchange officials and 

reviewing files that demonstrate exchange staff’s use of 

surveillance systems as part of the investigatory process

The verification of procedures and adequacy of exchange 

surveillance system is measured by determining whether 

the exchange initiated a sufficient number of investigations 

given exchange volume, the adequacy of investigation, and 

the exchange’s success in bringing disciplinary actions

The methodology for collecting this statistic is based on 

ongoing oversight and planned RERs relating to the aforementioned areas for which the results potentially could 

indicate a DCM’s noncompliance with the requirement to 

enforce its rules

Performance Highlights 

Division of Clearing and Intermediary Oversight 

The completed review assessed the DCM’s financial and 

sales practice program, including staffing levels, conduct of 

examinations of FCMs, conduct of financial statement 

review, and disciplinary actions. DCIO concluded that the

DCM’s program was consistent with the relevant Core 

Principles and with Commission regulations and 

interpretations

Division of Market Oversight 

DMO found in its CME RER report that CME maintains an 

adequate trade practice surveillance program to enforce its 

rules. In this regard, CME monitors all trading through a

combination of visual, video, and automated computer 

surveillance, and conducts investigations capable of 

detecting violations of CME rules. DMO noted that since

its last RER of CME’s trade practice surveillance program in 

2002, CME has refined its automated surveillance systems 

and has developed a new tool to allow compliance staff to 

conduct real-time surveillance of orders and trading on 

Globex, CME’s electronic trading platform
94 

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

Annual Performance Goal 3.4: Rulemakings issued and requests responded to reflect the 

evolution of the markets and protect the interests of the public. 

Performance Measure 3.4.1 Percentage of CFMA Section 126(b) objec

History of Results: FY 2004 Actual FY 2005 Actual FY 2006 Actual

100% 100% 100%

ACTUAL

FY 200

PLAN

FY 200

0

10

20

30

40

50

60

70

80

90

100

P E R C E N T A G E

100% 100%

Results: 100%

Measurement: Percentage

Status: Effective

Data Source: Agency reports, files, and documentation.

Verification: Formal MOUs or seriatim approvals are 

published in the Federal Register and 

posted on the Commission’s Web site.

Lead Program Office 

Executive Direction and Support

Performance Trends & Variations 

The Commission’s Office of International Affairs (OIA) 

assists the Commission in formulating and implementing 

its international policy. OIA’s activities track the objectives

set forth in section 126(b) of the CFMA, which endorsed 

the Commission’s international activities and encouraged 

the Commission to continue to: 1) coordinate with foreign 

regulatory authorities; 2) participate in international regulatory organizations and forums; and 3) provide technical 

assistance to foreign governmental bodies. These efforts

are intended to facilitate cross-border transactions and the 

supervision of such transactions by developing internationally accepted standards, enhancing international supervisory cooperation, and improving the quality and timelines of international information sharing.

These performance measures have been met by: 1) engaging 

in discussions with foreign regulators both on a bilateral 

basis and within Treasury’s country dialogues, on an “as 

needed” basis to address regulatory issues, as well as by 

carrying forward discussions with the Committee of 

European Securities Regulators (CESR); 2) participating in 

meetings and working groups organized by the 

International Organization of Securities Commissions 

(IOSCO), and the Council of Securities Regulators of the 

Americas (COSRA); and 3) by organizing the annual 

Commission training symposium and international regulators meeting, as well as by coordinating technical assistance missions to foreign market authorities

FY 2007 Performance Results
CFT

P ERF O RM A N CE  S E C T I 

OIA can anticipate certain recurring activities such as 

participating in the IOSCO Technical Committee and its 

constituent working groups, participating in Treasury 

country dialogues, and organizing the annual training 

seminar and international regulators’ meeting. Other

international matters are event-driven, such as the need to 

engage in bilateral discussions with a foreign regulator to 

negotiate a market surveillance arrangement, or ad hoc in 

nature, such as requests for technical assistance. Even

within the recurring forums of IOSCO and COSRA, for 

example, market events may result in the development of a 

new task force project, which, if it affects Commission 

regulatory interests, warrants Commission involvement

To date, OIA has been able, within the limits of its staff 

resources, to provide international coordination, representation and technical assistance at acceptable levels as 

approved by the chairman. However, the electronic integration of global markets, cross-border mergers, market

alliances and requests by foreign entities for regulated 

status under the CEA, as well as increasing calls on the 

CFTC to participate in Treasury-organized dialogues with 

commercially important jurisdictions such as India and 

China, have led to increasing demands that are straining 

the capacity of OIA to provide adequate levels of international coordination, representation and technical assistance services to and on behalf of the Commission

Although these demands can be met by the additional staff 

resources allocated to OIA for FY 2009, the failure to fund 

these potential resources will make it unlikely that OIA 

will be able to address the increasing demands resulting 

from the globalization of U.S. futures marke

Data Source & Validation

OIA staff maintain files of supporting documentation 

under key words that reflect the Section 126(b) topics

Projects are also found in the Commission Secretariat’s file, 

e.g., formal Memoranda of Understanding (MOUs) or 

seriatim7 approvals of IOSCO documents, and published 

Federal Register notices. IOSCO projects are also contained

in those final reports adopted by the IOSCO Technical 

Committee and published on the IOSCO Web site

Performance Highlights 

Coordination with foreign regulatory authorities

■ MOU (November 17, 2006), between the CFTC and 

United Kingdom (U.K.) Financial Services Authorit

(FSA) concerning consultation, cooperation and the 

exchange of information related to market oversight

The MOU establishes a framework for the CFTC and 

FSA to share information that the respective authorities 

need to detect potential abusive or manipulative 

trading practices that involve trading in related 

contracts on U.K. and U.S. derivatives excha

Sharing necessary information on linked markets will 

provide the regulators with a more complete view of 

these markets for oversight purposes

■ CFTC Initiative with the CESR—Completed “frequently 

asked questions” document, which provides firms and 

market users access to compliance-type questions and 

answers. This resource helps firms, exchanges, and

market users to understand how to comply with local 

rules and regulations, and thereby facilitate transAtlantic business.

■ OIA participated in, and provided staff support to the 

chairman in meetings with various global market 

authorities, including CESR, the French market regulator, and European Union officials and industry representatives. These meetings establish relationships and

provide a forum for raising and resolving regulatory 

issues

Participation in international regulatory organizations and 

forums

■ Participated in work projects of the IOSCO. Staff

participated actively in the standing committees on 

secondary markets and intermediaries, and provided 

support for the work of the standing committee on 

collective investments, which addressed issues such as 

guidance on information sharing for cross-border 

market supervision, and electronic recordkeeping, 

point of sale disclosure issue and hedge fund valuation, 

respectively, as well as on the IOSCO Implementation 

Task Force, which developed and encourages IOSCO’s 

7

 Latin for “in a series” or “in order.” CFTC issues are approved seriatim; meaning issues are approved by the Commissioners in order of hierarchy, or 

time in office. 
96 

member jurisdictions to undergo assisted assessment 

of compliance with the IOSCO Principles. These

projects help foster a higher level of global regulation.

■ Participated in Treasury-organized regulatory 

dialogues—Participated in Treasury-led dialogues in 

China and India, which support Treasury’s policy goals, 

and encourage foreign jurisdictions to foster conditions 

favoring access to products and market, as well as 

discussions under the North American Free Trade 

Agreement (NAFTA). OIA staff also provide issues of

concern to staff at Treasury in connection with 

Treasury’s participation in the Financial Stability 

Forum

Providing technical assistance

■ China – CFTC senior staff mission to the China 

Securities Regulatory Commission (CSRC) to provide 

technical information relevant to the trading of financial futures contracts. This technical assistance program

supported the general policy goals of Treasury with 

respect to China’s currency

■ India – CFTC senior staff mission, funded by the U.

Agency for International Development (USAID), to 

Mumbai, India (May 23-29, 2007) to provide technical 

assistance to the Forward Markets Commission (FMC)

This technical assistance program, which follows the 

signing of a technical assistance arrangement between 

the CFTC and FMC, fosters ongoing cooperation 

between the CFTC and FMC. Domestic and foreign

market participants benefit from developed markets 

that are financially sound and free from abusive 

practices

■ International Symposium and Training Program on 

Regulation of Derivative Products, Markets, and 

Financial Intermediaries (October 2006) – This annual 

symposium, attended by over 70 participants from 27 

countries, allows the CFTC to share its experiences and 

exchange ideas concerning how derivatives regulators 

can better meet new risks and challenges. This training

program will help facilitate cooperation and essential 

dialogue so that the CFTC may continue to ensure 

customer and market protections

■ International Regulators Meeting (March 2007) – 

Annual international regulators meeting held in 

conjunction with the FIA annual conference, brought 

together over 40 global regulators to address regulatory 

challenges of a changing marketplace. Such meetings

allow regulators to identify issues of common concern 

and to share ideas about different approaches to 

address such issues
CFTC

P ERF O RM A N CE  S E C T I 

Performance Measure 3.4.2 Number of rulemakings, studies, interpretations, and guidances t

integrity and exchanges’ compliance with regulatory requirements. 

History of Results: FY 2004 Actual FY 2005 Actual FY 2006 Actual

6 6 20

ACTUAL

FY 200

PLAN

FY 200

30

25

20

15

10

5

0

N u b

18 19

Results: 19

Measurement: Number

Status: Effective

Data Source: Federal Register; proposed and final 

amendments to regulations; notices and 

orders; and staff statements of guidance.

Verification: Proposed and final regulations are published 

in the Federal Register and posted on the 

Commission’s Web site.

Lead Program Office 

Division of Clearing and Intermediary Oversight

Division of Market Oversight

Performance Trends & Variations 

Division of Clearing and Intermediary Oversight 

DCIO completed a combined total of 10 rulemakings, 

studies, interpretations, and statements of guidance that 

addressed regulatory efforts to ensure market integrity and 

exchanges’ compliance with regulatory requirements

The number of rulemakings, studies, interpretations, and 

statements of guidance to ensure market integrity and 

exchanges’ compliance with regulatory requirements is 

not a number that can be precisely predetermined. The

final number of these combined statistics reported by 

DCIO is driven, in part, by changes in the marketplace, or 

in the structure of the exchanges, clearing organizations, 

and intermediaries that operate within that marketplace

The number can be a function of what is needed to allow 

appropriate market interrelationships to be maintained 

and to allow the exchanges, clearing organizations, and 

intermediaries to operate in the most efficient manner 

possible. These factors may not be foreseeable at the time

the performance estimate is prepared. In addition, the

need for a rulemaking, study, interpretation, or guidance 

may not be known or may not have reached a decisionmaking point until further analysis and other actions or 

events have taken place. This also can account for a difference between the FY 2007 Plan and Actua

Division of Market Oversight 

The number of rulemakings, studies, interpretations, 

and statements of guidance is not a number that can be 

forecasted precisely. The final number is driven, in part,

by changes in the marketplace or in the operations of 

exchanges that may not be foreseeable at the time the 

performance estimate is prepared

Data Source & Validation 

Division of Clearing and Intermediary Oversight 

The supporting documentation is maintained in DCIO’s 

files related to the respective rulemakings, studies, interpretations, and statements of guidance

FY 2007 Performance Results
98 C

DCIO staff maintain files of the supporting documentation 

related to the respective rulemakings, studies, interpretations, and statements of guidance. The methodology for

collecting these statistics is by tabulating the number of 

such rulemakings, studies, interpretations, and statements 

of guidance for the fiscal year. In addition, proposed and

final regulations are published in the Federal Register and, 

along with staff statements of guidance, are posted on the 

Commission’s Web site

During FY 2007, DCIO completed the following rulemakings, studies, interpretations, and statements of guidance:

■ 17 CFR Parts 1, 3, 4, 15 and 166, Exemption from 

registration for certain foreign persons, at 72 Fed. Re

15637 (April 2, 2007) – Proposed amendments to 

regulations

■ 17 CFR Part 3, Registration of Intermediaries at 72 Fed

Reg. 35918 (July 2, 2007) – Final amendments to regulations; 17 CFR Part 3, Registration of Intermediaries,

at 72 Fed. Reg. 20788 (April 26, 2007) – Propose

amendments to regulations

■ 17 CFR Part 3, Termination of APs and Principals, at 72 

Fed. Reg. 45392 (August 14, 2007) – Proposed amendments to regulatio

■ 17 CFR Part 4, Advertising by Commodity Pool 

Operators, Commodity Trading Advisors, and the 

Principals Thereof, at 72 Fed. Reg. 8106 (February 23

2007) – Final amendments to regulations

■ 17 CFR Part 30, Foreign Futures and Options 

Transactions, at 72 Fed. Reg. 14413 (March 28, 2007

– Order

■ 17 CFR Part 30, Foreign Futures and Options 

Transactions, at Fed. Reg. 50646 (September 4, 2007

– Order

■ 17 CFR Part 170, Membership in a Registered Futures 

Association, at 72 Fed. Reg. 2614 (January 22, 2007) 

Final amendments to regulations; 17 CFR Part 170, 

Membership in a Registered Futures Association, at 71 

Fed. Reg. 64171 (November 1, 2006) – Propose

amendments to regulations

■ 17 CFR Part 4, Electronic Filing of Notices of Exemption 

and Exclusion Under Part 4 of the Commission’s regulations, at 72 Fed. Reg. 1658 (January 16, 2007) – Fina

amendments to regulations; 17 CFR Part 4, Electronic 

Filing of Notices of Exemption and Exclusion Under 

Part 4 of the Commission’s regulations, at 71 Fed. Re

60454 (October 13, 2006)

■ 17 CFR Part 1, Limitations on Withdrawals of Equity 

Capital, at 72 Fed. Reg. 1148 (January 10, 2007) – Fina

amendments to regulations

■ 17 CFR Part 1, Financial Reporting Requirements for 

Introducing Brokers, at 71 Fed. Reg. 67462 (Novembe

22, 2006) – Final amendments to regulations

Division of Market Oversight 

DMO staff maintain files of the supporting documentation 

related to the referenced rulemakings and study. The methodology for collecting these statistics is by tabulating the

number of such rulemakings and studies for the fiscal year

In addition, the referenced rulemakings and study were 

published in the Federal Register and posted on the 

Commission’s Web site

■ 17 CFR Part 140 - Boards of Trade Located Outside of 

the United States and No-Action Relief From the 

Requirement To Become a Designated Contract Market 

or Derivatives Transaction Execution Facility, at 71 Fed

Reg. 64443 (November 2, 2006) – Final amendments

to regulations

■ 17 CFR Part 38 - Conflicts of Interest in Self-Regulation 

and Self-Regulatory Organizations, at 72 Fed. Reg. 693

(February 14, 2007) – Final amendments to 

regulations

■ Staff Letter 07-02 dated March 6, 2007, granting noaction relief to permit the Tokyo Financial Exchange, 

Inc. (TFX), to make its electronic trading and order

matching system, LIFFE CONNECTTM, as well as its 

Application Program Interface, available to TFX 

members in the U.S. without obtaining contrac

market designation or registration as a derivatives 

transaction execution facility pursuant to Sections 5 

and 5a of the Act
CFT

P ERF O RM A N CE  S E C T I 

■ 17 CFR Part 38 Conflicts of Interest in Self-Regulation 

and Self-Regulatory Organizations, at 72 Fed. Re

14051 (March 26, 2007) – Proposed amendments to 

regulations

■ Staff Letter 07-06 dated May 24, 2007, granting noaction relief to permit the DME, to make its electronic 

trading and order matching system, DME Direct, available to DME members and guaranteed customers in 

the U.S. without obtaining contract market designatio

or registration as a derivatives transaction execution 

facility pursuant to Sections 5 and 5a of the Act

■ 17 CFR Part 21 Special Calls, at 72 Fed. Reg. 502

(August 31, 2007) – Final amendments to regulations; 

■ 17 CFR Part 21 Special Calls, at 72 Fed. Reg. 3441

(June 22, 2007) – Proposed amendments to 

regulations

■ 17 CFR Parts 40 and 41, Confidential Information and 

Commission Records and Information, at 72 Fed. Re

39764 (July 20, 2007) – Proposed amendments to 

regulations

■ 17 CFR Parts 36 and 40, Amendments Pertinent to 

Registered Entities and Exempt Commercial Markets, at 

72 Fed. Reg. 45185 (August 13, 2007) – Propose

amendments to regulations

Performance Highlights 

Division of Clearing and Intermediary Oversight 

In February 2007, the Commission strengthened its regulations on advertising by CPOs, CTAs, and the principals 

thereof in response to the evolving nature of the managed 

money marketplace and in order to protect the interests of 

prospective CPO and CTA clients. Thus, with respect to

CPO and CTA advertising, these amendments: 1) restrict 

the use of testimonials; 2) clarify the required placement 

of the prescribed simulated or hypothetical performance 

disclaimer; and 3) include within the regulation’s coverage 

advertisements through electronic media. The Commission

also amended its capital rules in January 2007 by authorizing the Commission, by order, to temporarily restrict the 

withdrawal of equity capital from an FCM if, in the 

Commission’s judgment, such withdrawal would have a 

material adverse consequence on the FCM’s ability to 

protect customer funds and otherwise operate as a market 

intermediary

Division of Market Oversight 

In November 2006, after analyzing a substantial number 

of comment letters and conducting a public hearing, the 

Commission issued a Statement of Policy that affirms the 

use of the no-action process to permit foreign boards of 

trade to provide direct access to their electronic trading 

systems to U.S. members or authorized participant.  T

Statement of Policy also provides additional guidance and 

endorses procedural enhancements intended to protect the 

integrity of the futures markets and market participants. In

August 2007, the Commission expanded its access to 

market data for surveillance purposes by adopting several 

amendments relating to special calls for information not 

routinely submitted under the large trader reporting 

system. The amendments add to the types of information

which must be furnished upon special call and directly 

apply the Commission’s authority to issue special calls to 

foreign brokers.
100 C

Performance Measure 3.4.3 Percentage of requests for no-action or other relief completed wi

related to novel market or trading practices and issues to facilitate innovation.

History of Results: FY 2004 Actual FY 2005 Actual FY 2006 Actual

100% 100% 100%

ACTUAL

FY 200

PLAN

FY 200

0

10

20

30

40

50

60

70

80

90

100

P E R C E N T A G E

100% 100%

Results: 100%

Measurement: Percentage

Status: Effective

Data Source: Applicant’s letter requesting relief and 

Commission letter of response.

Verification: Applicant’s letter and supporting 

documentation maintained in internal 

tracking system, FILAC. Responses 

to formal request published on 

Commission’s Web site.

Lead Program Office 

Division of Market Oversight

Performance Trends & Variations 

In FY 2007, DMO issued nine no-action letters in response 

to requests for formal no-action relief from requirements 

of the CEA. Each letter was issued by DMO within six

months of the receipt of the relief request

Data Source & Validation

Supporting documentation is in the form of the applicant’s 

letter requesting relief and the DMO’s signed letter in 

response to the formal requests for guidance and advice

DMO maintains the FILAC internal tracking system for 

recording DMO actions, such as the issuance of no-action 

letters, which reflects the dates for relief requests and 

responsive letters, as well as the length of staff review

Responses to formal requests are posted on the 

Commission’s Web site

Performance Highlights 

On May 24, 2007, DMO issued a no-action relief to the 

DME, to make its electronic trading and order matching 

system, DME Direct, available to DME members and guaranteed customers in the United States without obtaining 

contract market designation or registration as a derivatives 

transaction execution facility pursuant to Sections 5 and 5a 

of the CEA. The relief letter enabled U.S.-based traders 

directly access DME’s products, including its Oman sour 

crude contract—the first physically-delivered, Middle Eastbased energy futures contract to ever be offered by a futures 

exchange

FY 2007 Performance Results
CFTC

P ERF O RM A N CE  S E C T I 

Performance Measure 3.4.4 Percentage of total requests receiving CFTC responses for guid

History of Results: FY 2004 Actual FY 2005 Actual FY 2006 Actual

90% 90% 95%

ACTUAL

FY 200

PLAN

FY 200

0

10

20

30

40

50

60

70

80

90

100

P E R C E N T A G E

95% 95%

Results: 95%

Measurement: Percentage

Status: Effective

Data Source: Signed letters (formal) and email & 

telephone responses (informal).

Verification: Agency files maintained in chronological 

files and responses to formal request are 

published on Commission’s Web site.

Lead Program Office 

Division of Clearing and Intermediary Oversight

Division of Market Oversight

Performance Trends & Variations 

Division of Clearing and Intermediary Oversight 

Perform-ance target was met for FY 2007. DCIO staff

respond to numerous requests for guidance and advice on 

the Act and Commission regulations each year. Requests

are received from members of the public, market participants, intermediaries, SROs, foreign entities, and others

These requests may be formal, such as written requests for 

no-action, interpretative, or exemption letters. DCIO also

receives numerous informal requests for guidance and 

advice via email and phone calls

Although DCIO responds to all requests received, it is not 

always possible for DCIO to respond within the fiscal year 

that it receives a request. Many requests are routine in

nature and are responded to in a very short time frame, if 

not immediately. This is particularly true for many of the

requests that are received via email and phone calls. Other

requests that raise novel or complex issues, or requests for 

formal DCIO responses in the form of no-action letters, 

interpretations, or exemptions, may take more time 

because of the need for research and for preparation of an 

appropriate response. It is noted that the statistics on

numbers of letters issued or email responses may not 

reflect the complexity of any particular matter or the 

resources necessary to address one particular issue. In

addition, matters commenced in one fiscal year may 

overlap into, and be completed during, a subsequent fiscal 

year, resulting in some imprecision in statistical measure 

for a given year. DCIO staff make every effort to respond

to requests as quickly as possible, but the timeliness of a 

response also is affected by the speed with which a 

requester provides additional information sought by staff, 

and the length of time required by other Commission divisions or offices to review a draft response, factors outside 

the control of DCIO. All these factors contributed to DCIO

responding to requests, on a percentage basis, as planned.

Division of Market Oversight 

DMO staff respond to numerous requests for guidance and 

advice on the CEA and Commission regulations each year

These requests may be informal, via email or phone calls, 

or formal in the form of requests for no-action, interpretative, or exemptive letters. Staff respond to informal

FY 2007 Performance Results
102 C

guidance and advice request in a very short period of time, 

usually no longer than a period of days. To the extent that

staff are unable to provide an informal response to such 

requests, the requester is advised to submit a formal request 

for guidance. DMO staff strive to address such formal

requests within six months of receipt

Data Source & Validation

Division of Clearing and Intermediary Oversight 

Support-ing documentation is in the form of responses to 

formal (by signed letter) and informal (by email and telephone) requests for responses for guidance and advice

Responses to formal requests are posted on the Commission’s Web site and are maintained by hard copy in the 

chronological files; responses to non-routine, informal 

requests similarly are recorded by hard copy and maintained in the chronological files. The methodology for

collecting these statistics is by comparing the files of 

requests received with responses sent and calculating the 

performance statistic

Division of Market Oversight 

DMO does not track the length of time needed to respond 

to informal requests for guidance. Staff, however, operate

under the presumption that, if guidance cannot be 

provided in response to informal requests, the requester is 

advised to submit a written request for a no-action, interpretative, or exemptive letter. Supporting documentation,

with respect to no-action, interpretative, and exemptive 

requests, is in the form of an email or signed letter from 

the requesting entity and DMO’s signed letter in response

DMO maintains the FILAC internal tracking system for 

recording DMO actions, such as the issuance of no-action, 

interpretative and exemptive letters, which reflects the dates 

of request and responsive letters, as well as the length of 

staff review. Responses to formal requests are posted on

the Commission’s Web site

Performance Highlights 

Division of Clearing and Intermediary Oversight 

In FY 2007, DCIO responded favorably to several requests 

for registration relief from foreign affiliates of U.S.-registered FCMs, such that those affiliates were permitted t

introduce institutional U.S. customers to any registere

FCM for trading on U.S. commodity futures and optio

markets without having to register with the CFTC, e.g., as 

an IB. This action was intended to foster a flexible regulatory environment by being responsive to evolving intermediary activities. For the proper protection of the public

however, DCIO conditioned this relief on the registered 

FCM of a foreign affiliate agreeing to be jointly and severally liable for any violations of the Act or the Commission’s 

regulations committed by the foreign affiliate in connection with the latter’s handling of orders for these 

customers—including those orders executed by the affiliate 

and given up to another FCM. See Staff Letters 07-08,

dated May 30, 2007, and 07-05, dated April 26, 2007, 

wherein DCIO issued this relief

F I N A N C I A L S E C T I O N

A Message from the Chief Financial Officer ........ 105

Limitations of Financial Statements ................... 106

Principal Financial Statements .......................... 107

Notes to the Financial Statements .......................112

Report of the Independent Auditors.....................123
CFTC

F

or the third consecutive year, the public accounting 

firm KPMG LLP, on behalf of our Inspector General, 

reported that the financial statements included in 

this report were presented fairly, in all material respects, 

and in conformity with the U.S. generally accepte

accounting principles (GAAP) for Federal agencies.

We have also greatly improved our audit results over 

previous years by having no material weaknesses, and for 

the first time, becoming compliant with laws and 

regulations. This was greatly facilitated by migrating to a

financial management systems platform operated by the 

U.S. Department of Transportation’s (DOT) Enterpris

Services Center, an OMB-designated financial management 

line of business service provider. During the last year, this

business arrangement has enabled the CFTC to accumulate, 

analyze and present reliable financial information, or 

provide reliable, timely information for managing current 

operations and timely reporting of financial information 

to central agencies. Furthermore, our new system was

found to be in substantial compliance with the Federal 

Financial Management Improvement Act of 1996 (although 

CFTC is not required to comply with FFMIA, it has elected 

to do so)

Since FY 2004, KPMG had disclosed noncompliance with 

the Federal Information Security Management Act (FISMA)

Specifically, KPMG recommended that the Commission 

continue to improve entity-wide security and contingency 

planning programs, access controls, segregation of duties, 

and service continuity to fully meet guidelines of the 

E-Government Act of 2002 and OMB Circular A-130, 

Management of Federal Information Resources. The 

Commission was able to substantially comply with FISMA 

in this audit cycle.

Last year, Commission error and other deficiencies led 

KPMG to find that there were material weaknesses in the 

controls over financial reporting, and that there were 

reportable conditions in the controls over financial 

management systems, undelivered orders, and fixed assets.

Although the three reportable conditions were resolved, 

the Commission was only able to successfully remediate 

two of the three components of the material weakness. The

component of the material weakness in the controls over 

Recording Accruals and Preparing Financial Statements was 

revised and repeated as a significant deficiency. A corrective

action plan to improve the process controls used to estimate 

accounts payable and accruals will be issued within the 

next 30 days. The Commission recognizes that this

condition impacts reporting balances, and if left uncorrected 

it increases the risk that future statements could be 

misstated

Mark Carney

Chief Financial Officer

November 15, 2007

A Message From the Chief Financial 
106 

Management has prepared the accompanying financial statements to report the financial position and operational results 

for the CFTC for FY 2007 and FY 2006 pursuant to the requirements of Title 31 of the U.S. Code, section 3515 (

While these statements have been prepared from the books and records of the Commission in accordance with GAAP for 

Federal entities and the formats prescribed by OMB Circular A-136, Financial Reporting Requirements, these statements 

are in addition to the financial reports used to monitor and control budgetary 

resources, which are prepared from the same books and records

The statements should be read with the understanding that they represent a 

component of the U.S. government, a sovereign entit.  One implication of this 

that the liabilities presented herein cannot be liquidated without the enactment 

of appropriations, and ongoing operations are subject to the enactment of future 

appropriations

Limitations of Financial Statem
CFTC 

Principal Financial State

Commodity Futures Trading Commission

Balance Shee

As of September 30, 2007 and 2006

2007 2006

A

Intra

Fund Balance with Treasury (Note 2) $ 19,507,914 $ 20,055,508

Accounts Receivable (Note 3) 5,806 -

Prepayments (Note 1H) 131,142 461,038

Total Intragovernmental 19,644,862 20,516,546 

Custodial Receivables, Net (Note 3) 620,311 5,756,605 

Accounts Receivable (Note 3) 120,470 63,855 

General Property, Plant and Equipment, Net (Note 4) 2,850,911 3,674,493 

Total Assets $ 23,236,554 $ 30

Liabil

Intra

FECA Liabilities $ 32,787 $ 29,484 

Accounts Payable 274,334 236,108 

Advances Received from Federal Source - -

Total Intragovernmental 307,121 265,592 

Accounts Payable 2,686,039 2,338,427 

Accrued Funded Payroll 2,566,433 4,099,832 

Annual Leave 4,849,189 5,083,005 

Actuarial FECA Liabilities (Note 7) 190,216 281,801 

Custodial Liabilities 620,311 5,756,605 

Contingent Liabilities (Note 9) 310,000 11,600 

Deposit Fund Liabilities 47,563 47,488 

Other - Deferred Lease Liabilities (Note 8) 3,169,541 2,837,403

Other 10,001 -

Total Liabilities $ 14,756,414 $ 20,721,753 

Net P

Cumulative Results of Operations $ (5,700,823) $ (4,568,800)

Unexpended Appropriations 14,180,963 13,858,546 

Total Net Position 8,480,140 9,289,746 

Total Liailities and Net Position $ 23,23

The accompanying notes are an integral part of these financial statements. 
108 C

Commodity Futures Trading Commission

Statements of Net C

For the Years Ended September 30, 2007 and 2006

2007 2006

Goal 1: nsurehe ecnom

Gross Costs $ 37,675,178 $ 33,361,940

Less: Earned Revenue (33,952) (7,407)

Net ost of Opeations- Goal ne $  37,6

Goal 2: Proct 

Gross Costs $ 35,638,682 $ 40,659,866

Less: Earned Revenue (32,117) (9,029)

Net ost of Operations- Goal Two $ 35,6

Goal 3: Ensur met intgr

sou

Gross Costs $ 28,510,946 $ 30,234,259 

Less: Earned Revenue (25,694) (6,714)

Net ost of Opeations- Goal Three $  2

Gra

Gross Costs $ 101,824,806 $ 104,256,065 

Less: Earned Revenue (91,763) (23,150)

Total et Cot of Operations $  101,73

The accompanying notes are an integral part of these financial statements.
CFTC

F I N A N C I A L S E C T I O 

Commodity Futures Trading Commission

Statements of Changes in Net Posit

For the Years Ended September 30, 2007 and 2006

2007 2006

Cumulatie 

Beginning Baances, October1 $  (4,568

Budet

Appropriations Used: 96,725,117 101,840,088

Othe F

Imputed Financing Sources 3,875,903 3,930,110

Net Cost of Operations (101,733,043) (104,232,915)

Net Change 1,132,023 1,537,283

Total Cumuative Result of Operations September 

Unexp

Beginning Balances, October 1 $ 13,

Budet

Appropriations Received 97,981,140 98,386,000

Less: Rescinded - (983,860)

Less: Canceled (933,606) (788,716)

Appropriations Used (96,725,117) (101,840,088)

 Total Budgetary Financing Sources 322,417 (5,226,664)

Total Unexpended Appropriations, September 30 $ 14,180,963 $ 13,858,54

Net Posiion $  8,480,140 $ 9,

The accompanying notes are an integral part of these financial statements. 
110 

Commodity Futures Trading Commission

Statements of Budgetary Resou

For the Years Ended September 30, 2007 and 2006

2007 2006

Budg

Unobligated Balance, October 1 $ 4,734,164 $ 3,768,541

Recoveries of Prior Year Unpaid Obligations 4,715,177 5,598,356

Total Prior Resources 9,449,341 9,366,897

New R

 Appropriations 97,981,140 98,386,000

 Spending Authority from Offsetting Collections

 Collected 98,788 208,371

 Change in Receivables from Federal sources 73,467 (175,595)

Change in Unfilled Customer Orders

 Advance Received 10,001 -

 Without Advance from Federal Sources 951 -

Total New Resources $ 98,164,347 $ 98,418,776

Permanen

Cancellation of Expired Accounts (933,606) (788,716)

Enacted Reduction - (983,860) 

Total Budgetary Resources $ 106,68

Stausof

Obligations Incurred, Direct $ 99,575,548 $ 101,255,783

Obligations Incurred, Reimbursable 118,453 23,150

Total Obligations Incurred (Note 12) 99,694,001 101,278,93

Unobligated Balance Apportioned 3,475,149 552,827

Unobligated Balance Not Available 3,510,932 4,181,337

TotalSttus of Budgetary  Resources $ 

Change i

Net Obligat

Unpaid Obligations $ 15,273,855 $ 19,851,847

Uncollected customer payments from Federal sources - (175,595)

Net Obligated Balance, October 1 $ 15,273,855 19,676,25

Gross Obligations Incurred 99,694,001 101,278,933

Gross Outlays (97,703,992) (100,258,569)

Recoveries of Prior Year Unpaid Obligations (4,715,177) (5,598,356)

Change in Receivables from Federal sources (74,417) 175,595

 $ 12,474,270 $ 15,273,855

Net Obligate

Unpaid Obligations $ 12,548,687 $ 15,273,855

Uncollected customer payments from Federal sources (74,417) -

Net Obligated Balance, September 30 $ 12,474,270 $ 15,273,85

Net 

Gross Outlays $ 97,703,992 $ 100,258,569

Offsetting Collections Received (108,789) (208,371)

Distributed Offsetting Receipts (12,378) (5,499)

Net Outlays $ 97,582,825 $ 100,

The accompanying notes are an integral part of these financial statements.
CFT

F I N A N C I A L S E C T I O 

Commodity Futures Trading Commission

Statements of Custodial Acti

For the Years Ended September 30, 2007 and 2006

2007 2006

Revenu

Sources of

Registration and Filing Fees $ 287,615 $ 1,239,020

Fines, Penalties, and Forfeitures 12,143,639 12,395,880

General Proprietary Receipts 12,378 5,499

Total Cash Collections 12,443,632 13,640,399

Change in Accounts Receivable (5,136,294) (22,907,240)

Total Custodial Revenue $ 7,307,338 $ (9,266,841)

Dispoit

Transfrred o

 Treasury 12,443,632 (13,640,399)

 Change in Custodial Liabilities 5,136,294 22,907,240

Net Custodial Acti

The accompanying notes are an integral part of these financial statements.
112 

Note 1. Summary of Significant 

Accounting Policies

A. Reporting Entity

The Commodity Futures Trading Commission (CFTC) is an 

independent agency of the executive branch of the Federal 

Government. Congress created the CFTC in 1974 under

the authorization of the Commodity Exchange Act (CEA) 

with the mandate to regulate commodity futures and 

option markets in the United States. The agency’s mandate

was renewed and expanded under the Futures Trading 

Acts of 1978, 1982, and 1986; under the Futures Trading 

Practices Act of 1992; and under the CFTC Reauthorization 

Act of 1995. The Commodity Futures Modernization Act

of 2000 reauthorized the Commission. Since its inception,

the CFTC has continuously operated through authorized 

appropriations.

The CFTC is responsible for ensuring the economic utility of 

futures markets by encouraging their competitiveness and 

efficiency, ensuring their integrity, and protecting market 

participants against manipulation, abusive trade practices, 

and fraud

B. Basis of Presentation

The financial statements have been prepared to report the 

financial position and results of operations for the CFTC, as 

required by the Chief Financial Officers’ Act of 1990 along 

with the Accountability of Tax Dollars Act of 2002, and 

the Government Management Reform Act of 1994. They

are presented in accordance with the form and content 

requirements contained in Office of Management and 

Budget (OMB) Circular No. A-136, “Financial Reporting

Requirements,” dated June 29, 2007.

The principal financial statements have been prepared in 

all material respects from the agency’s books and records in 

conformity with U.S. generally accepted accounting principles (GAAP), as prescribed for the federal government b

the Federal Accounting Standards Advisory Board (FASAB)

The application and methods for applying these principles 

are appropriate for presenting fairly the entity’s assets, 

liabilities, net cost of operations, changes in net position, 

and budgetary resources

The financial statements report on the CFTC’s financial 

position, net cost of operations, changes in net position, 

budgetary resources, and custodial activities. The books

and records of the agency served as the source of information for preparing the financial statements in the prescribed 

formats. All agency financial statements and reports used

to monitor and control budgetary resources are prepared 

from the same books and records. The statements should

be read with the understanding that they are for a component of the U.S. Government, a sovereign enti

The Balance Sheets present the financial position of the 

agency. The Statements of Net Cost present the agency’s

operating results; the Statements of Changes in Net Position 

display the changes in the agency’s equity accounts. The

Statements of Budgetary Resources present the sources, 

status, and uses of the agency’s resources and follows the 

rules for the Budget of the United States Government

The Statements of Custodial Activity present the sources 

and disposition of collections for which the CFTC is the 

fiscal agent, or custodian, for the Treasury General Fund 

Miscellaneous Receipt accounts

Throughout these financial statements, assets, liabilities, 

revenues and costs have been classified according to the 

type of entity with whom the transactions were made

Intragovernmental assets and liabilities are those from 

or to other federal entities. Intragovernmental earned

revenues are collections or accruals of revenue from other 

federal entities, and intragovernmental costs are payments 

or accruals to other federal entities. The CFTC does not

transact business among its own operating units, and therefore, intra-entity eliminations were not needed

C. Budgetary Resources and Status 

The CFTC is funded through congressionally approved 

appropriations. The CFTC is responsible for administering

the salaries and expenses of the agency through the execution of these appropriations.

Notes to the Financial Statem

As of and For the Fiscal Years Ended September 30, 2007 and 2006
CFT

F I N A N C I A L S E C T I O 

outside of Treasury. Treasury disburses funds for the agency

on demand. Spending authority from offsetting collections is

recorded in the agency’s expenditure account and is available 

for agency use subject to certain limitations. (See Note 2

F. Accounts Receivable 

Accounts receivable consists of amounts owed by other 

federal agencies and the public to the CFTC and is valued net 

of an allowance for uncollectible amounts. The allowance

is based on past experience in the collection of receivables 

and analysis of the outstanding balances. Accounts receivable arise from reimbursable operations, earned refunds or

the Civil Monetary Sanctions program. (See Note 3

G. Property, Equipment, and Software 

Property, equipment, and software represent furniture, 

fixtures, equipment, and information technology hardware 

and software, which are capitalized and depreciated or 

amortized over their useful lives

The CFTC capitalizes assets annually if they have useful lives 

of at least two years and an individual value of $25,000 or 

more. Bulk or aggregate purchases are capitalized when the

individual useful lives are at least two years and a value of 

$25,000 or more. Property, equipment, and software that

do not meet the capitalization criteria are expensed when 

acquired. Depreciation and amortization is computed on

a straight-line basis using a 5-year life. The Commission’s

assets are valued net of accumulated depreciation. (See

Note 4) 

H. Prepayments

Payments in advance of the receipt of goods and services are 

recorded as prepayments, and recognized as expenses when 

the related goods and services are received. Prepayments

reported on the Balance Sheet were made primarily to the 

Department of Transportation (DOT) for the transit subsidy 

program, and the Postal Service for postage services

I. Liabilities

The CFTC’s liabilities consist of actual and estimated 

amounts that are likely to be paid as a result of transactions 

covered by budgetary resources for which Congress has 

appropriated funds or funding, or are otherwise available 

from reimbursable transactions to pay amounts due

Congress annually enacts one-year appropriations that 

provide the CFTC with the authority to obligate funds within 

the respective fiscal year for necessary expenses to carry 

out mandated program activities. In addition, Congress

enacted a permanent indefinite appropriation that is available until expended. All appropriations are subject to quarterly apportionment as well as Congressional restriction

The CFTC’s budgetary resources for FY 2007 consist of: 

■ Unobligated balances of resources brought forward from 

the prior year, 

■ Recoveries of obligations in prior years, and 

■ New resources in the form of appropriations and 

spending authority from offsetting collections.

Unobligated balances associated with resources expiring at 

the end of the fiscal year remain available for five years after 

expiration only for upward adjustments of prior year obligations, after which they are canceled and may not be used

All unused monies related to canceled appropriations are 

returned to Treasury and the canceled authority is reported 

as a line item on the Statements of Budgetary Resources 

and the Statements of Changes in Net Position

D. Entity and Non-Entity Assets 

Assets consist of entity and non-entity assets. Entity assets

are those assets that the CFTC has authority to use for its 

operations. Non-entity assets are those held by the CFTC

that are not available for use in its operations. Non-entity

assets held by the CFTC include deposit fund balances, 

custodial fines, and interest receivable, net. (See Note 3)

E. Fund Balance with Treasury 

Fund Balance with Treasury is the aggregate amount of the 

CFTC’s funds with Treasury in expenditure, receipt, and 

deposit fund accounts. Appropriated funds recorded in

expenditure accounts are available to pay current liabilities and finance authorized purchases. Custodial collections recorded in the deposit fund account and miscellaneous receipts accounts of the Treasury are not available for

agency use. At fiscal year end, receipt account balances are

cleared and returned to Treasury

The CFTC does not maintain bank accounts of its own, has 

no disbursing authority, and does not maintain cash held 
114

Liabilities include those covered by budgetary resources in 

existing legislation and those not yet covered by budgetary 

resources (See Note 5). The CFTC liabilities not covered by

budgetary resources include: 

■ Annual leave benefits which will be funded by annual 

appropriations as leave is taken,

■ Actuarial Federal Employees Compensation Act (FECA) 

liabilities,

■ Custodial liabilities for custodial revenue transferred to 

Treasury at fiscal year end,

■ Contingent liabilities, 

■ Deposit funds, and

■ Other- Deferred Lease Liabilities

The CFTC’s liabilities that are covered by budgetary 

resources are considered current liabilities

J. Accounts Payable 

Accounts payable consists primarily of contracts for goods 

or services, such as leases, utilities, telecommunications, 

and consulting and support services

K. Accrued Payroll and Benefits and 

Annual Leave Liability

The accrued payroll liability represents amounts for salaries 

and benefits owed for the time since the payroll was last 

paid through the end of the fiscal year. The annual leave

liability is the amount owed employees for unused annual 

leave as of the end of the fiscal year. At the end of each

quarter, the balance in the accrued annual leave account is 

adjusted to reflect current balances and pay rates. Sick leave

and other types of non-vested leave are expensed as taken

The agency’s employees participate in the Civil Service 

Retirement System (CSRS) or the Federal Employees’ 

Retirement System (FERS). On January 1, 1987, FERS went

into effect pursuant to Public Law 99-335. Most employees

hired after December 31, 1983, are automatically covered 

by FERS and Social Security. Employees hired prior to

January 1, 1984, could elect to either join FERS and Social 

Security or remain in CSRS

For employees under FERS, the CFTC contributes an 

amount equal to one percent of the employee’s basic pay to 

the tax deferred Thrift Savings Plan and matches employee 

contributions up to an additional four percent of pay

FERS and CSRS employees can contribute a portion their 

gross earnings to the plan up to IRS limits; however, CSRS 

employee receive no matching agency contribution

L. Leases 

The CFTC does not have any capital lease liabilities. The

operating leases consist of commercial property leases 

for the CFTC’s headquarters and regional offices. Lease

expenses are recognized on a straight-line basis.

M. Deposit Funds 

Deposit funds are expenditure accounts used to record 

monies that do not belong to the Federal government

They are held awaiting distribution based on a legal determination or investigation. The CFTC deposit fund is used to

record and later distribute monetary awards to the appropriate defendants as restitution.

N. Net Position

Net position consists of unexpended appropriations and 

cumulative results of operations. Unexpended appropriations are appropriations that have not yet been

used to acquire goods and services or provide benefits

Appropriations are considered expended, or used, when 

goods and services have been acquired by the CFTC or 

benefits have been provided using the appropriation 

authority, regardless of whether monies have been paid 

or payables for the goods, services, or benefits have been 

established. Appropriations were used primarily to acquire

goods and services to operate the CFTC’s programs or to 

provide benefits

Cumulative results of operations represent the excess of 

financing sources over expenses since inception. Cumulative

results of operations are derived from the net effect of capitalized assets, expenses, exchange revenue, and unfunded 

liabilities.
CFT

F I N A N C I A L S E C T I O 

O. Earmarked Funds 

As of September 30, 2007, the CFTC’s financing sources did 

not have any earmarked funds. Earmarked funds were not

received by the agency for designated activities, benefits or 

purposes as specifically required by statute

P. Revenues

The CFTC receives reimbursement and earns revenue for 

the following activities:

■ Reimbursement for travel, subsistence, and related 

expenses from non-federal sources for attendance at 

meetings or similar functions that an employee has been 

authorized to attend in an official capacity on behalf of 

the Commission.

■ Reimbursement for Intergovernmental Personnel Act 

Mobility Program assignments from state and local 

governments, institutions of higher education, and other 

eligible organizations for basic pay, supplemental pay, 

fringe benefits, and travel and relocation expenses

■ Reimbursement from non-federal sources for registration 

fees to cover the cost of expenses related to the CFTC’s 

annual International Regulators Conference

Q. Net Cost of Operations 

Net cost of operations is the difference between the 

CFTC’s expenses and its earned revenue. The presentation of program results by strategic goals is based on the

CFTC’s current Strategic Plan established pursuant to the 

Government Performance and Results Act of 1993

The mission statement of the CFTC is to protect market 

users and the public from fraud, manipulation, and abusive 

practices related to the sale of commodity and financial 

futures and options, and to foster open, competitive, and 

financially sound futures and option markets. The mission

is accomplished through three strategic goals, each focusing 

on a vital area of regulatory responsibility:

■ Ensure the economic vitality of the commodity futures 

and option markets,

■ Protect market users and the public, and

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

R. Custodial Activity 

The CFTC collects penalties and fines levied against firms for 

violation of laws as described in the Commodity Exchange 

Act as codified at 7 U.S.C. § 1, et seq, and the Commoditi

Futures Modernization Act of 2000, Appendix E of P.L. 10

554, 114 Stat. 2763. Unpaid fines, penalties and accrue

interest are reported as custodial receivables, with an associated custodial liability. The receivables and the liability

are reduced amounts determined to be uncollectible

Revenues earned and the losses from bad debts are reported 

to Treasury

Collections made by the CFTC during the year are deposited and reported into designated Treasury miscellaneous 

receipt accounts for: 

■ Registrations and filing fees, 

■ Fees, fines, penalties and forfeitures, and 

■ General miscellaneous recoveries and refunds.

At fiscal year end, custodial collections made by the CFTC 

are returned to Treasury. The CFTC does not retain any

amount for custodial activities including reimbursement of 

the cost of collection.

S. Use of Management Estimates 

The preparation of the accompanying financial statements 

in accordance with accounting principles generally accepted 

in the United States of America requires management to 

make certain estimates and assumptions that directly affect 

the results of reported assets, liabilities, revenues, and 

expenses. Actual results could differ from these estimate

T. Tax Status

The CFTC is not subject to Federal, state or local income 

taxes. Accordingly, no provision for income taxes is

recorded

U. Reconciliation of Net Obligations 

and Net Cost of Operations 

In compliance with Office of Management and Budget 

(OMB) Circular No. A-136, the Commission has added a

reconciliation of net obligations and net cost of operations 

(See Note 15)
116

Note 2. Fund Balance with Treasury

A. Reconciliation to Treasury

There are no differences between the Fund Balance reflected in the CFTC Balance Sheets and the balance in the Treasury 

accounts

B. Fund Balance with Treasury

Fund Balances with Treasury consist of entity assets such as appropriations and reimbursements for services rendered

Obligation of these funds is controlled by quarterly apportionments made by OMB. Work performed under reimbursable

agreements is initially financed by the annual appropriation and is subsequently reimbursed. Other funds include nonentity deposit fund receipt

Fund Balance with Treasury at September 30, 2007 and 2006 consisted of the following:

2007 2006

Apprpriated Funds $ 19,460,35

Other Funds:

Deposit Fund 47,563 47,488

TOTAL APPROPRIATED FUND BALANCE WITH TREASURY $ 19,507,914 $ 20,05

C. Status of Fund Balance with Treasury

Status of Fund Balance with Treasury at September 30, 2007 and 2006 consisted of the following:

2007 2006

Appr

 Unobligated Fund Balance

Available $ 3,261,296 $ 42,385

Expired 213,853 510,443

Unavailable 3,510,932 4,181,337

Obligated Balance Not Yet Disbursed 12,474,270 15,273,855

Total Appropriated Funds 19,460,351 20,008,020

Deposit Fund 47,563 47,488

TotalFund Balance with Treasury $ 19,

Note 3. Accounts Receivable

Accounts receivable consist of amounts owed to the CFTC by other Federal agencies and the public. Accounts receivable

are valued net of estimated uncollectibles. Non-custodial accounts receivable are primarily for overpayments of expenses

to other agencies, or vendors, and repayment of employee benefits. Historical experience has indicated that most of the

non-custodial receivables are collectible and there are no material uncollectible amounts

Custodial receivables (non-entity assets) are those for which fines and penalties have been assessed and levied against 

businesses for violation of law. The CFTC litigates against defendants for alleged violations of the CEA, as amende
CFTC

F I N A N C I A L S E C T I O 

Violators may be subject to a variety of sanctions including fines, injunctive orders, bars or suspensions, rescissions of 

illegal contracts, disgorgements, and restitutions to customers

Historical experience has indicated that a high percentage of custodial receivables prove uncollectible. The methodology

used to estimate the allowance for uncollectible amounts related to custodial accounts is that custodial receivables are 

considered 100% uncollectible unless otherwise noted in the judgment. An allowance for uncollectible accounts has

been established and included in accounts receivable on the balance sheets. The allowance is based on past experience in

the collection of accounts receivable and analysis of outstanding balances. Accounts are re-estimated quarterly based on

account reviews and the agency determination that changes to the net realizable value are needed

Accounts receivable, as of September 30, 2007 and 2006, consisted of the following:

2007 2006

Custodial Receivables, Net:

Civil Monetary Penalty Interest $ 28,980,636 $ 9,438,316 

Civil Monetary Penalties, Fines, and Administrative Fees 1,145,896,795 530,489,941 

Less: Allowance for Loss on Interest (28,980,222) (9,421,924)

Less: Allowance for Loss on Penalties, Fines, and Administrative Fees (1,145,633,370) (524,749,728)

Registration and Filing Fees 356,472 -

Net Custodial RECEIVABLES $ 620,311 $

Other Intragovernmental Accounts Receivable $ 5,806 $ -

Other Accounts Receivable with the Public $ 120,470 $ 63,855

Other Accounts Receivable $ 

Note 4. Property, Equipment, and Software, Net

Assets are capitalized annually if they have useful lives of at least two years and an individual value of $25,000 or more

Bulk or aggregate purchases are capitalized when the individual useful lives are at least two years and a value of $25,000 

or more. Depreciation and amortization is computed on a straight-line basis using a 5-year life  The CFTC did not defe

any maintenance in FY 2007 or FY 2006. Property and Equipment as of September 30, 2007 and 2006 consisted of the

following:

2007

Service Life and Method Cost

Accumulated 

Amortization/

Major Class Depreciation Net Book Value

Equipment 5 Years/Straight Line $ 1,146,835 $ (564,103) $ 582,732 

IT Software 5 Years/Straight Line 2,966,169 (697,990) 2,268,179

$ 4,113,004 $ (1,262,093) $ 2,850,911 

2006

Service Life and Method Cost

Accumulated 

Amortization/

Major Class Depreciation Net Book Value

Equipment 5 Years/Straight Line $ 1,146,835 $ (334,735) $ 812,100 

IT Software 5 Years/Straight Line 2,966,169 (103,776) 2,862,393 

$ 4,113,004 $ (438,511) $ 3,674,493 
118 

Note 5. Liabilities Not Covered by Budgetary Resources

As of September 30, 2007 and 2006, the following liabilities not covered by budgetary resources exist:

2007 2006

Intragovernmental - FECA Liabil

Annual Leave 4,849,189 5,083,005

Actuarial FECA Liabilities 190,216 281,801

Custodial Liabilities 620,311 5,756,605

Contingent Liabilities 310,000 11,600

Deposit Fund Liabilities 47,563 47,488

Deferred Lease Liabilities 3,169,541 2,837,403

Other 10,001 -

Total Liabilities Not Covered by Budgetary Re

Note 6. Retirement Plans and Other Employee Benefits

The CFTC imputes costs and the related financing sources for its share of retirement systems accruing to its past and present 

employees that are in excess of the amount of contributions from the CFTC and its employees, which are mandated by 

law. The Office of Personnel Management (OPM), which administers federal civilian retirement programs, provides

the cost information to the CFTC. The CFTC recognizes the full cost of providing future pension and Other Retirement

Programs (ORB) for current employees as required by Statement of Federal Financial Accounting Statement (SFFAS) No

5, “Accounting for Liabilities of the Federal Government”

Full costs include pension and ORB contributions paid out of the CFTC’s appropriations and costs financed by OPM. The

amount financed by OPM is recognized as an imputed financing source. This amount was $3,875,903 for the year ended

September 30, 2007 and $3,930,110 for the year ended September 30, 2006. Reporting amounts such as plan assets, accumulated plan benefits, or unfunded liabilities, if any, is the responsibility of OP

Liabilities for future pension payments and other future payments for retired employees who participate in the Federal 

Employees Health Benefits Program and the Federal Employees Group Life Insurance Program are reported by OPM rather 

than CFTC

Note 7. Actuarial FECA Liabilities

FECA provides income and medical cost protections to covered federal civilian employees injured on the job, to employees 

who have incurred work-related occupational diseases and to beneficiaries of employees whose deaths are attributable to 

job-related injuries or occupational diseases. The FECA program is administered by the U.S. Department of Labor (DOL

which pays valid claims against the CFTC and subsequently seeks reimbursement from the CFTC for these paid claims

Accrued FECA liabilities represent amounts due to DOL for claims paid on behalf of the agency. Accrued FECA liabilities

at September 30, 2007 and September 30, 2006 were $32,787 and $29,484, respectively

Actuarial FECA liability represents the liability for future workers compensation (FWC) benefits, which includes the 

expected liability for death, disability, medical, and miscellaneous cost for approved cases. The liability is determined

using a formula provided by DOL annually as of September 30th using a method that utilizes historical benefits payment 

patterns related to a specific incurred period to predict the ultimate payments related to that period. The projected annual

benefits payments are discounted to present value using OMB’s economic assumptions for ten-year Treasury notes and 
CFT

F I N A N C I A L S E C T I O 

bonds. To provide more specifically for effects of inflation on liability for FWC benefits, wage inflation factors (Consumer

Price Index-Medical) are applied to the calculation of projected future benefits. These factors are also used to adjust

historical payments so benefits are stated in current-year constant dollars. Actuarial FECA liabilities at September 30, 2007

and September 30, 2006 were $190,216 and $281,801, respectively.

Note 8. Leases

The CFTC leases office space in publicly owned buildings for its locations in Washington D.C., Chicago, New York, an

Kansas City. The lease contracts for publicly-owned buildings are operating leases  The CFTC has no real propert.  Futu

estimated minimum lease payments are not accrued as liabilities and are expensed on a straight-line basis

As of September 30, 2007, future estimated minimum lease payments through FY 2011, and thereafter, is as follows:

Fiscal Year Dollars

2008 $ 10,608,222

2009 10,801,167

2010 10,970,480

2011 11,268,766

2012 9,898,728

Thereafter 24,737,283

Total Minimum lease payments 78,284,646 

Add: Amount representing estimated executory costs (such as taxes, maintenance, and insurance) 18,329,439

Total inimum leas payments, in

Lease expense is recognized on a straight-line basis. Because the lease payment amounts vary, and in some cases, CFTC

received periods of up-front free rent, a deferred lease liability representing expense amounts in excess of payments to 

date, has been recorded. The deferred lease liabilities at September 30, 2007 and September 30, 2006 were $3,169,541

and $2,837,403, respectively

Note 9. Contingent Liabilities

The CFTC records commitments and contingent liabilities for legal cases in which payment has been deemed probable 

and for which the amount of potential liability has been estimated, including certain judgments that have been issued 

against the agency and which have been appealed. In FY 2007, the Commission estimates a probable liability of $310,000

in connection with a Merit Systems Protection Board suit

Note 10. Undelivered Orders

The amount of budgetary resources obligated for undelivered orders as of September 30, 2007 and 2006 consisted of the 

following:

2007 2006

Undelivered Orders $ 7,204,942 $ 8,599,488 

The amount of undelivered orders represents the value of unpaid and paid obligations recorded during the fiscal year, 

upward adjustments of obligations that were originally recorded in a prior fiscal year, and recoveries resulting from 

downward adjustments of obligations that were originally recorded in a prior fiscal year
120 C

Note 11. Apportionment Categories of Obligations Incurred

Obligations incurred and reported in the Statements of Budgetary Resources in 2007 and 2006 consisted of the 

following:

2007 2006

Direct Obligations, Category A $ 99,575,548 $ 101,255,783 

Reimbursable Obligations, Category A 118,453 23,150

Total Obligations Incurred $ 99,694,

Note 12. Permanent Indefinite Appropriations

The CFTC’s permanent indefinite appropriation as authorized by Public Law 107-38 funds emergency expenses to respond 

to the terrorist attacks on the United States that occurred on September 11, 2001. The fund provides support to deal with

consequences of the attacks and support national security

Note 13. Explanation of Differences between the Statement of Budgetary Resources and 

Budget of the United States Government

The CFTC had no material differences between the amounts reported in the Statement of Budgetary Resources and the 

actual amounts reported in the Budget of the U.S. Government for FY 200.  The Budget of the U.S. Government 

actual numbers for FY 2007 has not yet been published. The expected published date is February 2008  A copy of th

Budget can be obtained from OMB’s Internet site at http://www.whitehouse.gov/omb/.

Note 14. Intra-governmental Cost and Exchange Revenue by Goal

As required by the Government Performance and Results Act of 1993, the agency’s reporting has been aligned with the 

following major goals presented in the 2004 – 2009 CFTC Strategic Plan, Keeping Pace with Change: 

1. Ensure the Economic Vitality of the Commodity Futures and Option Markets;

2. Protect Market Users and the Public; and

3. Ensure Market Integrity in Order to Foster Open, Competitive, and Financially Sound Market

The Net Cost of Operations is derived from transactions between the Commission and public entities, as well as with 

other federal agencies. The details of the intra-governmental costs and revenues, as well as those with the public, are as

follows:
CFTC

F I N A N C I A L S E C T I O 

2007 2006

Goal 1: nsurehe ecnom

Intragovernmental Gross Costs $ 9,335,684 $ 5,254,073

Less: Earned Revenue (1,332) - 

Intragovernmental Net Cost of Operations $ 9,334,352 $ 5,254,07

Gross Costs with the Public $ 28,339,494 $ 28,107,867

Less: Earned Revenue (32,620) (7,407)

Net Cost of Operations with the Public $ 28,306,874 $ 28,100,460

Total et Cost of Operations – Goal One $

Goal 2: Proct 

Intragovernmental Gross Costs $ 8,831,052 $ 6,403,402

Less: Earned Revenue (1,260) - 

Intragovernmental Net Cost of Operations $ 8,829,792 $ 6,403,40

Gross Costs with the Public $ 26,807,630 $ 34,256,464

Less: Earned Revenue (30,857) (9,029)

Net Cost of Operations with the Public $ 26,776,773 $ 34,247,435

Total et Cost of Operations – Goal Two $ 

Goal 3: Ensur met intgr

sou

Intragovernmental Gross Costs $ 7,064,842 $ 4,761,504

Less: Earned Revenue (1,008) - 

Intragovernmental Net Cost of Operations $ 7,063,834 $ 4,761,50

Gross Costs with the Public $ 21,446,104 $ 25,472,755

Less: Earned Revenue (24,686) (6,714)

Net Cost of Operations with the Public $ 21,421,418 $ 25,466,041

Total et Cost of Operations – Goal Three

Net ost of Operations $ 101,733,04

Note 15. Reconciliation of Net Obligations and Net Cost of Operations

The schedule presented in this footnote reconciles the net obligations with the net cost of operations. Resources Used to

Finance Activities reflects the budgetary resources obligated and other resources used to finance the activities of the agency

Resources Used to Finance Items Not Part of the Net Cost of Operations adjusts total resources used to finance the activities of the entity to account for items that were included in net obligations and other resources but were not part of the net 

cost of operations. Components Requiring or Generating Resources in Future Periods identifies items that are recognized

as a component of the net cost of operations for the period but the budgetary resources (and related obligation) will not 

be provided (or incurred) until a subsequent period. Components Not Requiring or Generating Resources includes items
122 C

recognized as part of the net cost of operations for the period but will not generate or require the use of resources. Net

Cost of Operations agrees with the Net Cost of Operations as reported on the Statements of Net cost

2007 2006

Resrces Us

Budget

Obligations Incurred $ 99,694,001 $ 101,278,933

Less: Spending Authority from Offsetting Collections and Recoveries (4,898,384) (5,631,132)

Obligations Net of Offsetting Collections and Recoveries 94,795,617 95,647,801

Less: Offsetting Receipts (12,378) (5,499)

Net Obligations After Offsetting Receipts 94,783,239 95,642,302

Other

Imputed Financing from Cost Absorbed by Others 3,875,903 3,930,110

Total Resources Used to Finance Activities $ 98,659,142 $ 99,572,41

Resrce Useto Fan

Change in Budgetary Resources Obligated for Goods, Services, and Benefits Ordered but 

not yet Provided 1,587,752 6,707,559

Resources That Fund Expenses Recognized in Prior Periods (Decrease in unfunded liabilities) (325,401) (465,635)

Offsetting Receipts 12,378 5,499

Resources that Finance the Acquisition of Fixed Assets - (2,447,064) 

Total Resources Used to Finance Items Not Part of the Net Cost of Operations $ 1,274,729 $ 3,800,3

Coonens of th Net o

Resouces i

Increase in Contingent Liabilities 298,400 11,600

Increase in Unfunded Deferred Leases and FECA Liability 335,441 670,885

Decrease in Prepayments 329,896 -

Increase in exchange revenue receivable from the public (40,300) (53,523)

Total Components of Net Cost of Operations that will Require or Generate Resources 

in Future Periods $ 923,437 $ 628,962 

ComponentsNot R

Depreciation and Amortization 823,582 225,049

Revaluation of Assets or Liabilities - 6,133

Other 52,153 -

Total Components of Net Cost of Operations that will Not Require or

Generate Resources $ 875,735 $ 231,182 

Total Components of Net Cost of Operations that will Not Require or

Generate Resources in the Current Period $ 1,799,172 $ 860,144

Net ost of Operations $ 101,733,04

 
Report of the Independent Audit
124 

KPMG LLP 

2001 M Street, NW 

Washington, DC 20036 

KPMG LLP, a U.S. limited liability partnership, is the U.S. 

member firm of KPMG International, a Swiss cooperative. 

Independent Auditors’ Report

Acting Chairman and Inspector General of the 

U.S. Commodity Futures Trading Commission:

We have audited the accompanying balance sheets of the Commodity Futures Trading 

Commission (CFTC) as of September 30, 2007 and 2006, and the related statements of net cost, 

changes in net position, and custodial activity, and statements of budgetary resources (hereinafter 

referred to as “financial statements”) for the years then ended. The objective of our audits was to 

express an opinion on the fair presentation of these financial statements. In connection with our 

fiscal year 2007 audit, we also considered CFTC’s internal controls over financial reporting and 

performance measures and tested CFTC’s compliance with certain provisions of applicable laws, 

regulations, contracts, and grant agreements that could have a direct and material effect on these 

financial statements. 

SUMMARY

As stated in our opinion on the financial statements, we concluded that CFTC’s financial 

statements as of and for the years ended September 30, 2007 and 2006, are presented fairly, in all 

material respects, in conformity with U.S. generally accepted accounting principles. 

As discussed in our opinion, CFTC changed its method of reporting the reconciliation of 

budgetary resources obligated to the net cost of operations in fiscal year 2007. 

Our consideration of internal control over financial reporting resulted in the following condition 

being identified as a significant deficiency:

x Improvement is Needed over Recording Accruals 

However, we do not consider the significant deficiency above to be a material weakness. 

We noted no deficiencies involving the design of the internal control over the existence and 

completeness assertions related to key performance measures. 

The results of our tests of compliance with certain provisions of laws, regulations, and contracts 

disclosed no instances of noncompliance or other matters that are required to be reported herein 

under Government Auditing Standards and OMB Bulletin No. 07-04, Audit Requirements for 

Federal Financial Statements.

The following sections discuss our opinion on CFTC’s financial statements; our consideration of 

CFTC’s internal controls over financial reporting and performance measures; our tests of CFTC’s 

compliance with certain provisions of applicable laws, regulations, contracts, and grant 

agreements; and management’s and our responsibilities. 
CFTC

F I N A N C I A L S E C T I O 

OPINION ON THE FINANCIAL STATEMENTS 

We have audited the accompanying balance sheets of the Commodity Futures Trading 

Commission as of September 30, 2007 and 2006, and the related statements of net cost, changes 

in net position, and custodial activity, and the statements of budgetary resources for the years then 

ended.

In our opinion, the financial statements referred to above present fairly, in all material respects, 

the financial position of the Commodity Futures Trading Commission as of September 30, 2007 

and 2006, and its net costs, changes in net position, budgetary resources, and custodial activity for 

the years then ended, in conformity with U.S. generally accepted accounting principles. 

As discussed in Note 1 to the financial statements, CFTC changed its method of reporting the 

reconciliation of budgetary resources obligated to the net cost of operations in fiscal year 2007. 

The information in the Management Discussion and Analysis is not a required part of the 

financial statements, but is supplementary information required by U.S. generally accepted 

accounting principles and OMB Circular No. A-136, Financial Reporting Requirements. We have 

applied certain limited procedures, which consisted principally of inquiries of management 

regarding the methods of measurement and presentation of this information. However, we did not 

audit this information and, accordingly, we express no opinion on it. 

The information in the FY 2007 Performance Section, Other Accompanying Information, 

Appendices, and pages 2 and 3 are presented for purposes of additional analysis and are not 

required as part of the financial statements. This information has not been subjected to auditing 

procedures and, accordingly, we express no opinion on it. 

INTERNAL CONTROL OVER FINANCIAL REPORTING 

Our consideration of the internal control over financial reporting was for the limited purpose 

described in the Responsibilities section of this report and would not necessarily identify all 

deficiencies in the internal control over financial reporting that might be significant deficiencies 

or material weaknesses. 

A control deficiency exists when the design or operation of a control does not allow management 

or employees, in the normal course of performing their assigned functions, to prevent or detect 

misstatements on a timely basis. A significant deficiency is a control deficiency, or combination 

of control deficiencies, that adversely affects CFTC’s ability to initiate, authorize, record, 

process, or report financial data reliably in accordance with U.S. generally accepted accounting 

principles such that there is more than a remote likelihood that a misstatement of CFTC’s 

financial statements that is more than inconsequential will not be prevented or detected by 

CFTC’s internal control over financial reporting. A material weakness is a significant deficiency, 

or combination of significant deficiencies, that results in more than a remote likelihood that a 

material misstatement of the financial statements will not be prevented or detected by CFTC’s 

internal control. 

In our fiscal year 2007 audit, we consider the deficiency described in Exhibit I to be a significant 

deficiency in internal control over financial reporting. However, we believe that the significant 

deficiency described in Exhibit I is not a material weakness. Exhibit II presents the status of prior 

year comments. 
126 

We also noted certain additional matters that we reported to the management of CFTC in a 

separate letter dated November 15, 2007. 

INTERNAL CONTROL OVER PERFORMANCE MEASURES 

Our tests of internal control over performance measures, as described in the Responsibilities 

section of this report, disclosed no deficiencies involving the design of the internal control over 

the existence and completeness assertions related to key performance measures. 

COMPLIANCE AND OTHER MATTERS 

The results of our tests of compliance described in the Responsibilities section of this report, 

exclusive of those referred to in FFMIA, disclosed no instances of noncompliance or other 

matters that are required to be reported herein under Government Auditing Standards or OMB 

Bulletin No. 07-04. 

The results of our tests of FFMIA disclosed no instances in which CFTC’s financial management 

systems did not substantially comply with the three requirements discussed in the Responsibilities 

section of this report.

 * * * * * 

RESPONSIBILITIES

Management’s Responsibilities. The United States Code Title 31 Section 3515 and 9106 require 

agencies to report annually to Congress on their financial status and any other information needed 

to fairly present their financial position and results of operations. To meet these reporting 

requirements, CFTC prepares and submits financial statements in accordance with OMB Circular 

No. A-136. 

Management is responsible for the financial statements, including: 

x Preparing the financial statements in conformity with U.S. generally accepted accounting 

principles;

x Preparing the Management Discussion and Analysis (including the performance measures); 

x Establishing and maintaining effective internal control; and 

x Complying with laws, regulations, and contracts applicable to CFTC, including FFMIA. 

In fulfilling this responsibility, management is required to make estimates and judgments to 

assess the expected benefits and related costs of internal control policies. 

Auditors’ Responsibilities. Our responsibility is to express an opinion on the fiscal year 2007 

and 2006 financial statements of CFTC based on our audits. We conducted our audits in 

accordance with auditing standards generally accepted in the United States of America; the 

standards applicable to financial audits contained in Government Auditing Standards, issued by 

the Comptroller General of the United States; and OMB Bulletin No. 07-04. Those standards and 

OMB Bulletin No. 07-04 require that we plan and perform the audits to obtain reasonable 
CFTC 

F I N A N C I A L S E C T I O 

assurance about whether the financial statements are free of material misstatement. An audit 

includes consideration of internal control over financial reporting as a basis for designing audit 

procedures that are appropriate in the circumstances, but not for the purpose of expressing an 

opinion on the effectiveness of CFTC’s internal control over financial reporting. Accordingly, we 

express no such opinion.

An audit also includes: 

x Examining, on a test basis, evidence supporting the amounts and disclosures in the financial 

statements; 

x Assessing the accounting principles used and significant estimates made by management; and 

x Evaluating the overall financial statement presentation. 

We believe that our audits provide a reasonable basis for our opinion. 

In planning and performing our fiscal year 2007 audit, we considered CFTC’s internal control 

over financial reporting by obtaining an understanding of CFTC’s internal control, determining 

whether internal controls had been placed in operation, assessing control risk, and performing 

tests of controls as a basis for designing our auditing procedures for the purpose of expressing our 

opinion on the financial statements. We limited our internal control testing to those controls 

necessary to achieve the objectives described in Government Auditing Standards and OMB 

Bulletin No. 07-04. We did not test all internal controls relevant to operating objectives as 

broadly defined by the Federal Managers’ Financial Integrity Act of 1982. The objective of our 

audit was not to express an opinion on the effectiveness of CFTC’s internal control over financial 

reporting. Accordingly, we do not express an opinion on the effectiveness of CFTC’s internal 

control over financial reporting. 

As required by OMB Bulletin No. 07-04 in our fiscal year 2007 audit, with respect to internal 

control related to performance measures determined by management to be key and reported in the 

Management Discussion and Analysis and Performance sections, we obtained an understanding 

of the design of internal controls relating to the existence and completeness assertions and 

determined whether these internal controls had been placed in operation. We limited our testing 

to those controls necessary to report deficiencies in the design of internal control over key 

performance measures in accordance with OMB Bulletin 07-04. However, our procedures were 

not designed to provide an opinion on internal control over reported performance measures and, 

accordingly, we do not provide an opinion thereon. 

As part of obtaining reasonable assurance about whether CFTC’s fiscal year 2007 financial 

statements are free of material misstatement, we performed tests of CFTC’s compliance with 

certain provisions of laws, regulations, and contracts, noncompliance with which could have a 

direct and material effect on the determination of the financial statement amounts, and certain 

provisions of other laws and regulations specified in OMB Bulletin No. 07-04, including certain 

provisions referred to in FFMIA. We limited our tests of compliance to the provisions described 

in the preceding sentence, and we did not test compliance with all laws, regulations, and contracts 

applicable to CFTC. However, providing an opinion on compliance with laws, regulations, and 

contracts was not an objective of our audit and, accordingly, we do not express such an opinion. 

Under OMB Bulletin No. 07-04 and FFMIA, we are required to report whether financial 

management systems for executive departments and agencies subject to the Chief Financial 
128 C

Officers Act of 1990 substantially comply with (1) Federal financial management systems 

requirements, (2) applicable Federal accounting standards, and (3) the United States Government 

Standard General Ledger at the transaction level. As an agency requiring financial statement 

reporting under the Accountability of Tax Dollars Act of 2002, CFTC is not subject to FFMIA. 

However, it has elected to implement the provisions as described above. Therefore, we performed 

tests of compliance with FFMIA Section 803(a) requirements. 

______________________________

CFTC’s response to the finding identified in our audit is presented in Exhibit I. We did not audit 

CFTC’s response and, accordingly, we express no opinion on it. 

This report is intended solely for the information and use of CFTC’s management, CFTC’s Office 

of Inspector General, OMB, the U.S. Government Accountability Office, and the U.S. Congress 

and is not intended to be and should not be used by anyone other than these specified parties. 

November 15, 2007 
CFTC

F I N A N C I A L S E C T I O 

Exhibit I 

U.S. COMMODITY FUTURES TRADING COMMISSION 

Significant Deficiency 

Improvement is Needed over Recording Accruals 

Condition:

Although CFTC has developed and implemented a process for estimating its interim and year-end 

accounts payable and accruals, the process needs improvement. At year-end, each individual 

Contracting Officer’s Technical Representative (COTR) evaluates contracts for open obligations 

to determine whether a liability should be accrued, and informs the Office of Financial 

Management. 

We noted that CFTC did not properly record accruals for five out of eight items tested, resulting 

in a net overstatement of $466,650. In addition, we identified six unrecorded liabilities and one 

improperly recorded liability out of 35 subsequent cash disbursements tested, resulting in a net 

understatement of $189,399. 

As part of our accruals testing, we noted that certain amounts recorded into Markview, CFTC’s 

online procurement approval system, by the COTR as being payable as of September 30, 2007 

were not properly recorded in the general ledger because they were awaiting approval in the 

system. Per further investigation by CFTC, approximately $2,425 of invoices entered into 

Markview were not recorded in the general ledger in addition to the exceptions noted above. 

Separately, we noted an overstatement of $71,772 in CFTC’s year-end reconciliation of the 

Accounts Payable sub-ledger to the general ledger.

Criteria:

Office of Management and Budget’s Circular No. A-136, Financial Reporting Requirements,

defines accounts payable as the amounts owed by the reporting agency for goods and services 

received from other entities, progress in contract performance made by other entities, and rents 

due to other entities. 

Statement of Federal Financial Accounting Standards No. 1, Accounting for Selected Assets and 

Liabilities, paragraph 74, states that when the entity accepts title to goods, whether goods are 

received or in transit, the entity should recognize a liability for the unpaid amount of the goods. If 

invoices for those goods are not available when the financial statements are prepared, the 

amounts should be estimated. 

Cause:

Differences in the accrual amount are a result of inadequate knowledge of the COTRs over the 

purpose of the accrual and inadequate review of the estimated payables. The Office of Financial 

Management (OFM) did not discover these errors during its review of the accruals. 
130 

Exhibit I 

U.S. COMMODITY FUTURES TRADING COMMISSION 

Significant Deficiency 

Unrecorded liabilities which were identified through subsequent disbursements were not included 

in CFTC’s year end accrual because these contracts were not reviewed or were overlooked by the 

COTRs. CFTC did not identify these contracts as having potential unrecorded liabilities and 

therefore they were not reviewed in the accrual process. 

CFTC did not accrue for some liabilities which were not approved in Markview. In these 

instances, CFTC assumed that all invoices entered into Markview prior to year end were posted to 

USSGL account 2110, Accounts Payable (AP). This was not true. Only invoices that were 

approved in Markview were posted to USSGL account 2110. Therefore, all invoices that were 

pending approval were not recorded in AP as of September 30, 2007. 

The difference noted in the AP reconciliation was due to cancelled invoices in the AP subledger, 

which were not properly reversed in the accounting system due to management oversight. 

Effect:

The aggregated amount of all known differences identified in our sample totaled to a net 

overstatement of accounts payable of $346,598. CFTC management adjusted its general ledger 

for most of the errors, resulting in a remaining understatement of accounts payable of $2,500. 

Recommendations: 

We recommend that CFTC Office of Financial Management, in coordination with the COTRs: 

1 Ensure that COTRs receive the necessary training over the purpose and intent of estimating 

accruals, and understand the proper year-end cutoff procedures; 

2 Review a sample of estimated accruals submitted by the COTRs for reasonableness by 

examining the related contracts, or inquiring of the COTRs if the payment details are not 

clearly set out in the contract; 

3 Ensure that all invoices entered into Markview are approved in a timely manner; 

4 Review the posting processes in Delphi to ensure all invoices entered into Markview are 

included in accounts payable; and 

5 Perform monthly reconciliations between the AP subledger to the general ledger and resolve 

any discrepancies. 

Agency Response: 

We concur with this finding and agree with the recommendations. 
CFT

F I N A N C I A L S E C T I O 

Exhibit II 

U.S. COMMODITY FUTURES TRADING COMMISSION 

Fiscal Year 2007 – Status of Prior Year Comments 

The status of prior year material weaknesses, reportable conditions, and compliance matters is 

presented below. 

Internal Control Over Financial Reporting Fiscal Year 2007 Status 

Material Weakness 

Improvement Needed over Financial Reporting 

x Allowance for Custodial Fines Receivable 

x Accounting for Leases and Knowledge of 

Accounting Principles 

x Recording Accruals and Preparing Financial 

Statements 

x Resolved.

x Resolved.

x Revised and repeated as a 

significant deficiency. 

Reportable Conditions 

Financial Management Systems Need Improvement Resolved.

Improvement is Needed in the Fixed Asset System Resolved. 

Improvement is Needed in Evaluating Undelivered 

Orders and Recording Budgetary Transactions 

Resolved.

Compliance with Laws and Regulations 

Noncompliance with the Federal Information 

Security Management Act 

Resolved.

Noncompliance with the Federal Financial 

Management Improvement Act of 1996 (although 

CFTC is not required to comply with FFMIA, it has 

elected to do so) 

Resolved.
O he r  com

Management Challenges...................................... 133

Summary of Audit and Management Assurances .... 135
CFT

Management Address Inspector General’s 

FY 2006 Assessment

The Commission has addressed or is addressing the 

concerns identified in the FY 2006 PAR. In FY 2006, the IG

identified two “serious management challenges” facing the 

Commission: 1) Industry Consolidations, and 2) Exchange 

Traded Revolutions

The following is the IG’s FY 2006 assessment for each challenge and the Commission’s actions taken in FY 2007 to 

address these challenges

Challenge #1, Industry Consolidations

FY 2006 IG Assessment: “Recently, the two largest floor based 

derivatives exchanges have agreed to merge. This consolidation wave in the derivatives industry will likely continue and 

combined with the trend towards demutualization in ownership 

result in fewer non-publicly traded exchanges. Consequently, the 

CFTC will have to evaluate its decisions and actions relative to 

other regulatory agencies such as the SEC and others (exchange 

shareholders, non-U.S. regulators and other stakeholders) that 

are now directly affected by actions undertaken by the CFTC 

affecting the consolidated entity. Active consultation with 

members of the President’s Working Group on Financial Markets 

will be essential in order to effectively address any unanticipated 

market disruptions.”

FY 2007 Actions Taken or Actions in Progress:

■ Guidance issued to strengthen futures exchange governance by calling for increased public representation 

at key levels of decision-making, including boards of 

directors

Challenge #2, Exchange Traded Revolutions 

FY 2006 IG Assessment: “The passage of the Commodity 

Futures Modernization Act on December 15, 2000 fundamentally changed the role of the CFTC from a prescriptive regulator 

to more of a principles based regulator. Since then the sheer 

volume of on exchange trading of derivatives has grown dramatically to over 2 billion derivative contracts traded annually on 

U.S.-based exchanges. Along with this tremendous growth in 

trading volume we have witnessed structural changes in the 

industry that challenge the flexibility and resourcefulness of the 

regulatory paradigm ushered in by the CFMA. Recently the 

agency has responded to these changes by expanding its views 

on best practices issues such as corporate governance which may 

foster greater responsiveness to exchange stakeholders.

Further the agency has historically relied on floor based surveillance of derivatives markets which now are rapidly dwindling 

in trading volume prominence. Currently over sixty percent 

of exchange traded derivatives are conducted on an electronic 

platform. This raises the question of whether the agency has 

the information technology infrastructure and staff to efficiently 

and effectively conduct timely surveillance of these dynamic and 

economically essential global markets.”

Management Challenge
134

FY 2007 Actions Taken or Actions in Progress:

■ As part of the Commission’s overall mission to ensure 

market integrity and customer protection, it collects 

trade data from all U.S. future exchanges and conduct

investigations to detect possible trading abuses through 

the Exchange Database System (EDBS), which was developed in the mid-1980s. Presently, the Commission is

developing a new trade surveillance system, TSS, to 

replace EDBS because it has not been significantly 

upgraded since its inception. New technology will

enhance staff’s ability to effectively detect and deter 

trade practice violations in a rapidly changing environment, especially with respect to electronic trading 

data, and will provide staff with greater efficiency and 

flexibility. TSS also will fill a vacuum in inter-market

surveillance that only the Commission can address, 

e.g., side-by-side and simultaneous trading of a contract 

on a DCM’s floor and the DCM’s electronic trading 

platform

■ In addition, the Commission is in the process of 

purchasing a software product that will be used in 

conjunction with the database system in order to 

support its TSS program. Full deployment of the

database system and new software began in FY 2007 and 

should be fully operational in late FY 2009. The new

software will perform sophisticated pattern recognition 

using advanced data analysis techniques to automate 

basic trade practice surveillance. The software will also

have the capability to detect novel and complex abusive 

practices in today’s high-speed, high-volume global 

trading environment. Several new and important functions that do not exist in its current systems will enable

the Commission to conduct inter-market surveillance 

across different trading platforms and exchanges
CFT

Summary of FY 2007 Financial Statement Audit

Audit Opinion: Unqualified

Restatement: No

Material Weakness Begi

Financial Reporting 1 0 1 0 0

Summary of Management Assurances

Efftieness of Internal

Statement of Assurance: Unqualified

Material Weakness Beginn

Financial Reporting 1 0 1 0 0 0

Efftieness of Inte

Statement of Assurance: Unqualified

Material Weakness Beginn

No Items to Report 0 0 0 0 0 0

Conformance with Financial M

Statement of Assurance: Systems conform to financial management system requirements

Non-Conformance Beginni

Federal Information 

Security Act

1 0 1 0 0 0

Compliance wit Federal

Agen

Overall Substantial 

Compliance

Yes Yes

1. System Requirements Yes

2. Accounting Standards Yes

3. USSGL at Transaction 

Level

Yes

Summary of Audit a

Management Assuran
A p

FY 2007 Commissioners.................................................137

Enforcement Litigation by Strategic Goal..........................140

CFTC Information Technology Systems ............................153

Glossary of Abbreviations and Acronyms ..........................154
CFTC

The Commissioners

Walter L. Lukken, Acting Chairman

Walter Lukken was appointed Acting Chairman by the 

Commission on June 27, 2007

In September 2007, President 

Bush nominated Mr. Lukken to be

Chairman of the Commission. He

was first appointed Commissioner 

in 2002 and is now serving his 

second term due to expire in 2010

Acting Chairman Lukken has testified several times before 

Congress and represents the agency as part of the President’s 

Working Group on Financial Markets. He works frequently

with other domestic and foreign financial regulators

Acting Chairman Lukken serves as chairman of the CFTC’s 

Global Markets Advisory Committee (GMAC). The

GMAC was created by the Commission to provide an 

industry forum in which it can discuss the many complex 

and novel issues raised by the ever-increasing globalization of futures markets. In this role, he frequently represents the Commission before international organizations

and forums, including the International Organization of 

Securities Commissions (IOSCO) and the Committee of 

European Securities Regulators (CESR). He spoke before

the U.S.-China Joint Economic Committee hosted by th

U.S. Department of Treasury on the developing role o

derivatives markets in China

Prior to joining the CFTC, Acting Chairman Lukken served 

for five years as counsel on the professional staff of the U.

Senate Agriculture Committee under Chairman Richard 

Lugar (R-IN), specializing in futures and derivatives 

markets. In this capacity, he was prominently involved

in the development, drafting and passage of the CFMA 

(H.R. 566

A native of Richmond, Indiana, he received his B.S. degre

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. Acting Chairman

Lukken is a member of the Illinois Bar.

PHOTO ABOVE: Acting Chairman Lukken and Commissioner Sommers stand in the foreground of a photograph of the brass CFTC seal recovered from the Ground Zero rubble of

the World Trade Center in the aftermath of the September 11, 2001 terrorist attack. The original seal is in remarkably fine condition and presently displayed in the main reception area 

of the CFTC’s relocated New York Office at 140 Broadway. Thankfully, all CFTC employees were safely evacuated on September 11. (See http://www.cftc.gov/newsroom/cftcevents/archive/opaspotlight080703.html for more information on the Homecoming Ceremony for the CFTC’s seal held at the New York Office on August 7, 2003.)

FY 2007 Commissione
138 

Michael V. Dunn, Commissione

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 ha

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 

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

degrees from the University of New Mexico

Jill E. Sommers, Commissioner

J

ill E. Sommers was sworn in as a

CFTC Commissioner on August 

8, 2007 to a term that expires April 

13, 2009. Commissioner Sommers

has worked in the commodity 

futures and options industry in a 

variety of capacities throughout her 

career. In 2005, she was the Policy

Director and Head of Government 

Affairs for the International Swaps and Derivatives 

Association, where she worked on a number of over-thecounter derivatives issues

Prior to that, Ms. Sommers worked for the Chicago

Mercantile Exchange, including overseeing regulatory and 

legislative affairs for the exchange. During her tenure with

the exchange, she had the opportunity to work closely 

with congressional staff drafting the Commodity Futures 

Modernization Act of 2000

Commissioner Sommers started her career in Washington 

in 1991 as an intern for Senator Robert J. Dole (R-KS),

where she worked in various capacities until 1995. She

later worked as a legislative aide for two consulting firms 

specializing in agricultural issues, Clark & Muldoon, P.

and Taggart and Associates

A native of Fort Scott, Kansas, Ms. Sommers holds a

Bachelor of Arts degree from the University of Kansas. She

and her husband, Mike, currently reside in the Washington, 

DC area and have three children ages 5, 4, and 3
CFT

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Bart Chilton, Commissioner

Bart Chilton was sworn in as CFTC Commissioner on 

August 8, 2007. He was formerly

the Chief of Staff and Vice President 

for Government Relations at the 

National Farmers Union—one of 

the oldest and largest trade associations

In 2005, Mr. Chilton was a

Schedule C political appointee of President Bush at the 

U.S. Farm Credit Administration where he served as a

Executive Assistant to the Board. From 2001 - 2005, M

Chilton was a Senior Advisor to Senator Tom Daschle, the 

Democrat Leader of the U.S. Senate where he worked o

myriad issues including, but not limited to, agriculture and 

transportation policy

From 1995 - 2001, Mr. Chilton was a Schedule C political

appointee of President Clinton where he rose to Deputy 

Chief of Staff to the U.S. Secretary of Agriculture Da

Glickman. In this role, Chilton became a member of the

Senior Executive Service (SES)—government executives 

selected for their leadership qualifications to serve in the 

key positions just below the top Presidential appointees

As an SES member, Chilton served as a major link between 

Secretary Glickman and the rest of the Federal work force 

at USDA

From 1985 - 1995, Mr. Chilton worked in the U.S. Hou

of Representatives as Legislative Director for three different 

Members of Congress on Capitol Hill. He also worked in

the U.S. House as the Executive Director of the bipartisa

Congressional Rural Caucus

Mr. Chilton previously served on the Board of Directors

of Bion Environmental Technologies, and the Association 

of Family Farms—where he also served on the Executive 

Committee and as Treasurer

Mr. Chilton was born in Delaware and spent his youth

in Indiana where he attended Purdue University (1979 - 

1982). He studied political science and communications

and was a collegiate leader of several organizations. M

Chilton and his wife, Sherry Daggett Chilton, reside on the 

Western Shore of the Chesapeake Bay
140 

Enforcement Litigation by Goal One

Manipulation, Attempted Manipulation 

& False Reporting

■ CFTC v. Amaranth Advisors, L.L.C., et al. 

On July 25, 2007, the Commission filed a civil enforcement action charging Amaranth Advisors, L.L.C., Amaran

Advisors (Calgary) ULC (collectively Amaranth), and Brian 

Hunter with attempted manipulation. Specifically, the

complaint alleges that the defendants intentionally and 

unlawfully attempted to manipulate the price of natural gas 

futures contracts on the NYMEX on February 24 and April 

26, 2006. February 24, 2006 was the last day of trading

(expiry day) for the March 2006 NYMEX natural gas futures 

contract and April 26, 2006 was the expiry day of the May 

2006 NYMEX natural gas futures contract. The settlement

price of each NYMEX natural gas futures contract is determined by the volume weighted average of trades executed 

from 2:00-2:30 p.m. (the closing range) on the expiry da

of such contracts. The complaint alleges that, for each of

the expiry days at issue, the defendants acquired more than 

3,000 NYMEX natural gas futures contracts in advance 

of the closing range, which they planned to, and for the 

most part did, sell during the closing range. The complaint

also alleges that defendants held large short natural gas 

financially-settled swaps positions, primarily held on the 

IntercontinentalExchange (ICE). The settlement price of

the ICE swaps is based on the NYMEX natural gas futures 

settlement price determined by trading done during the 

closing range on expiry day. The complaint alleges that

defendants intended to lower the prices of the NYMEX 

natural gas futures contracts to benefit defendants’ larger 

swaps positions on ICE and elsewhere. The complaint

also alleges that, in response to an inquiry from NYMEX 

about the April 26, 2006 trading, Amaranth Advisors L.L

made false statements to NYMEX to cover up defendants’ 

attempted manipulation. The Commission received cooperation from the Federal Energy Regulatory Commission

(FERC), SEC, and NYMEX in connection with this matter

CFTC v. Amaranth Advisors, L.L.C., et al., No. ’07 CIV 6682

(S.D.N.Y. filed July 25, 20

■ CFTC v. Energy Transfer Partners, L.P. 

On July 26, 2007, the Commission filed a civil enforcement 

action charging Energy Transfer Partners, L.P. (ETP), an

three ETP subsidiaries (Energy Transfer Company (a/k/a La 

Grange Acquisition, L.P.) (ETC), Houston Pipeline Compan

(HPLC), and ETC Marketing, Ltd. (ETC Marketing)) with

attempted manipulation. Specifically, the complaint

alleges that the defendants attempted to manipulate the 

price of physical natural gas at the Houston Ship Channel 

(HSC) delivery hub during September and November 

2005. The complaint further alleges that the defendants

attempted to manipulate the October 2005 and December 

2005 HSC monthly index prices of natural gas published 

by Platts (a division of The McGraw-Hill Companies, Inc.)

in its Inside FERC’s Gas Market Report (Inside FERC). The 

complaint alleges that the defendants used Hurricane Rita 

as a pretext for their scheme. Specifically, the complaint

states that Hurricane Rita made landfall in the Texas and 

Louisiana Gulf region on September 24, 2005, and demand 

Enforcement Litigat

by Strategic G
CFT

A pendI

for natural gas in Houston dropped as residents fled the 

hurricane. Anticipating this occurrence, the defendants

allegedly devised a four-step plan to take advantage of—

and financially benefit from—Hurricane Rita’s impact. As

alleged, the first step in the defendants’ plan was to build 

their short position in the October 2005 HSC financial 

basis swap. A basis swap is a swap whose cash settlement

price is calculated based on the basis between a futures 

contract and the spot price of the underlying commodity 

or a closely related commodity on a specified date. In this

instance, the two legs of the swap are the monthly HSC 

index price published by Inside FERC and the final settlement price of the Henry Hub futures contract traded on 

the NYMEX. As a short, the defendants were obligated

to pay the longs the HSC index price; thus they benefited 

from a lower HSC index price. Second, in the days just

before and after Hurricane Rita, the defendants allegedly 

built up a huge inventory of physical gas with the intent to 

deliver that gas to HSC, despite the lack of demand in the 

Houston area. Third, on September 28, 2005, the defendants sold a vast quantity of natural gas for delivery during

October 2005 at HSC with the intent to push down, or cap, 

the price of physical natural gas at HSC. They purportedly

made most of these sales on ICE. In fact, the defendants

represented 96 percent by volume of all the trades that took 

place that day on ICE in the HSC contract. The fourth and

final step in the defendants’ plan allegedly occurred when 

they reported the September 28, 2005, sales to Platts with 

the intent and belief that Platts would use these transactions in calculating the October Inside FERC monthly price 

index at HSC—presumably at lower or stabilized prices to 

the benefit of the defendants’ short swaps positions. The

complaint further alleges that the defendants attempted to 

manipulate the price for November 2005 physical natural 

gas at HSC and attempted to manipulate the December 

Inside FERC monthly index price. Defendants purportedly repeated the same course of action in the November

December 2005 time period as they did during September/

October 2005. The Commission received cooperation

from the FERC in connection with this matter. CFTC v.

Energy Transfer Partners, L.P., No. 3-07CV1301-K (N.D. 

filed July 26, 2007)

■ In re Marathon Petroleum Company. 

On August 1, 2007, the Commission filed and simultaneously settled an administrative enforcement action against 

Marathon Petroleum Company (MPC), a subsidiary of 

Marathon Oil Corporation, finding that MPC attempted to 

manipulate a price of spot cash WTI crude oil delivered at 

Cushing, Oklahoma on November 26, 2003, by attempting 

to influence downward the Platts market assessment for 

spot cash WTI for that day. The Platts market assessment

for WTI is derived from trading activity during a particular 

30-minute period of the physical trading day. The Platts

market assessment for WTI is used as the price of crude oil 

in certain domestic and foreign transactions. At the time

in question, MPC priced approximately 7.3 million barrels

of physical crude oil per month off the Platts market 

assessment for WTI. As a net purchaser of foreign crude

oil priced off the Platts spot cash WTI assessment, if its 

conduct was successful, MPC would have benefited from 

a lower Platts spot cash WTI assessment. The order finds

that, on November 26, 2003, MPC purchased NYMEX WTI 

contracts with the intention of selling physical WTI during 

the Platts window at prices intended to influence the Platts 

WTI spot cash assessment downward. Further, during

the Platts window, MPC knowingly offered WTI through 

the prevailing bid at a price level calculated to influence 

downward the Platts WTI assessment. The Commission

assessed sanctions, including a cease and desist order, and 

a civil monetary penalty ($1,000,000). In re Marathon

Petroleum Company, CFTC Docket No. 07-09 (CFTC filed

Aug. 1, 2007

Enforcement Litigation by Goal Two

Commodity Pools, Hedge Funds, Commodity Pool 

Operators, and Commodity Trading Advisors

■ CFTC v. Hoffman. 

On November 28, 2006, the Commission filed a civil 

enforcement action against Peter D. Hoffman alleging

that, while acting as an unregistered CTA, Hoffman fraudulently solicited customers to open discretionary trading 

accounts and violated the trading prohibition in a previous 

Commission order. Specifically, the complaint alleges

that, since at least February 2000 and continuing through 

April 2004, Hoffman circumvented the trading prohibition 

against him by funding and/or directing trading in a series 

of commodity futures accounts. See In re Hoffman, CFTC

Docket No. 99-9 (CFTC March 30, 1999) (simultaneously

filing and settling an administrative action finding that 

Hoffman fraudulently solicited customers for a commodity 

trading advisory service while acting as an unregistered 
142 

CTA and imposing sanctions including a five-year trading 

ban). The complaint further alleges that, during that same

time period and thereafter, Hoffman defrauded his clients 

by falsely claiming he was a successful trader, failing to 

disclose the prior Commission order against him, and 

acting as a CTA without the benefit of Commission registration. On November 29, 2006, the court entered a statutory restraining freezing assets and preserving books and

records. CFTC v. Hoffman, No. 06C 6473 (N.D. Ill

28, 2006)

■ In re Acceleration Capital, LLC. 

On January 16, 2007, the Commission simultaneously 

filed and settled an administrative enforcement action 

against Acceleration Capital, LLC (Acceleration Capital), 

a registered CPO and CTA. The charges are based on the

activities of Toby Wayne Denniston II, a former agent of 

Acceleration Capital, who in August 2006 settled identical 

charges brought by the Commission. See In re Denniston,

CFTC Docket No. 06-05 (CFTC filed Aug. 7, 2006.  T

order finds that between November 2004 and August 

2005, Denniston misappropriated more than $190,000 

from Acceleration Mercury Fund 4X LP, a commodity 

pool located in Northridge, California, for his own use 

and benefit. Denniston carried out the misappropriation

by forging signatures on at least 58 checks. According to

the order, to conceal his misappropriation, Denniston 

regularly altered the pool’s bank and trading account statements and created false account statements to be sent to 

pool participants. Based on the liability of the company

for its agents’ activities, the order accordingly finds that 

Acceleration Capital is liable for Denniston’s misappropriation of funds and false statements to customers in violation 

of the CEA. Without admitting or denying the findings,

Acceleration Capital consented to entry of the order that 

included the following sanctions: a cease and desist order; 

revocation of Acceleration Capital’s registration; payment 

of $218,000 restitution; and order to comply with certain 

undertakings, including not applying for registration with 

the Commission. The order further orders Acceleration

Capital’s principal, Yuri Plyam, and any entities controlled 

by him, to comply with the undertaking to neither act as a 

CPO or AP of a CPO, or claim exemption from registration 

as a CPO or AP of a CPO. In re Acceleration Capital, LLC,

CFTC Docket No. 07-03 (CFTC filed Jan. 16, 200

■ CFTC v. Renaissance Asset Management, LLC, et al. 

On January 24, 2007, the Commission filed an injunctive enforcement action against Renaissance Asset 

Management, LLC (RAM), a registered CPO and CTA, 

and Anthony Ramunno, Jr., RAM’s chief operating officer,

alleging commodity pool fraud. The complaint alleges

that, since at least June 2005, RAM and Ramunno have 

received investor funds and operated a commodity pool 

sequentially under the names RAM 1 LLP and RAM 1 LLC

The complaint alleges that, during the week of January 15-

29, 2007, NFA commenced an emergency audit of RAM 

based on a potential RAM investor’s suspicions regarding 

the Pool Annual Reports. During the audit, Ramunno

purportedly provided NFA staff with copies of what he 

claimed were RAM’s audited Pool Annual Reports prepared 

by Grant Thornton LLP for 2004 and 2005—despite 

the fact that Grant Thornton LLP has never performed 

any services for RAM. An internal RAM report, for the

period ending December 31, 2006, reflects that there are 

approximately 94 investor accounts and total pool assets 

of at least $32 million. Furthermore, according to the

complaint, Ramunno contacted staff at the Atlanta FBI 

office and admitted to “committing fraud.” On the same

day the complaint was filed, the court entered a statutory 

restraining order freezing assets and preserving books 

and records. To date, the Federal Bureau of Investigations

(FBI) has seized an estimated $5.5 million in assets from

Ramunno and RAM. The Commission received cooperation from the NFA, the FBI field office in Atlanta, and the

DOJ in connection with this matter. CFTC v. Renaissance

Asset Management, LLC, et al., No. 1:07-CV-0200 (N.D.

filed Jan. 24, 2007

■ CFTC v. Cornerstone Capital Management, LLC. 

On January 31, 2007, the Commission filed an injunctive enforcement action against Cornerstone Capital 

Management, LLC (Cornerstone), which is a hedge fund 

that is registered as a CPO and CTA, and Joseph Profit II, 

Cornerstone’s CEO. The complaint alleges that, from at

least May 2005 through January 24, 2007, the defendants 

employed schemes to defraud actual and prospective 

commodity pool participants and clients by misrepresenting the rates of return Cornerstone generated for its 

pool participants and the value of assets it managed in 

its Icon Fund. For example, the defendants claimed that

Cornerstone had assets under management ranging from 
CFT

A pendI

$20 million to $60 million, though Profit admitted that as 

of January 23, 2007, the Cornerstone Capital Management 

Icon Fund had at most received a little more than $2.25

million in assets from participants. In addition to the

U.S. mail and other means, defendants allegedly solicite

participants and clients through the Web site www.cornerstonecapitalmanagement.co.  The complaint furth

alleges that Profit willfully concealed material information 

from the NFA, and further failed to submit an NFA-required 

Annual Report for 2005. On the same day the complaint

was filed, the court entered a statutory restraining order 

freezing assets and preserving books and records. The

Commission received cooperation from the NFA and 

the U.S. Attorney for the Northern District of Georgia i

connection with this matter. CFTC v. Cornerstone Capital

Management, LLC, No. 1:07-CV-0274 (N.D. Ga. filed

31, 2007)

■ CFTC v. Parish, et al. 

On April 17, 2007, the Commission filed an injunctive enforcement action against Parish Economics, LLC 

(Parish Economics) and its president and owner, Albert E

Parish Jr., alleging commodity pool fraud  Specifically, th

complaint alleges that the defendants, among other things, 

offered and sold interests in four investment pools. One

of these pools, the Futures Pool, purportedly invested in 

“the commodity and stock futures and options markets.”

Beginning in January 2003, the defendants misrepresented 

the total amount of funds contained in the investment 

pools as a whole and the total amount of funds invested 

in the Futures Pool individually, the complaint charges

Additionally, defendants purportedly provided Futures 

Pool participants with false periodic account statements 

showing that participants’ funds were invested in the 

Futures Pool when, in fact, such participants’ funds were 

misappropriated by the defendants. Specifically, the defendants represented on their Web site, www.parisheconomi

com, and to an investment advisor (IA) that at the end of 

2006 the total value of the investment pools was approximately $134 million, and that the value of the Futures 

Pool was approximately $52 million. On March 21, 2007,

defendants provided the IA with a futures account trading 

statement purporting to show that the Futures Pool had an 

account value as of February 28, 2007, of approximately 

$52 million. However, according to the complaint, the

defendants only had three open futures accounts that, 

as of February 28, 2007, had a cumulative value of only 

$120,000. The complaint further alleges that the defendants provided account statements to at least three Futures

Pool participants that, in the aggregate, represented that 

the Futures Pool had a value of at least $407,244 at the end 

of 2005, $645,181 at the end of 2006, and $970,300 as of 

February 28, 2007. In reality, since January 1, 2005, the

total value of Futures Pool assets never exceeded $150,000, 

the complaint alleges. Finally, the complaint charges the

defendants with failing to register with the CFTC and to 

operate the Futures Pool consistent with Federal law. The

Commission received cooperation form the SEC and the 

U.S. Attorney’s Office for the District of South Carolin

in connection with this matter. CFTC v. Parish, et al., N

2:07-cv-01044-DCN (D.S.C. filed Apr. 17, 2

■ CFTC v. Demasi, et al. 

On April 26, 2007, the Commission filed a civil enforcement action charging Anthony A. Demasi and his

company, Tsunami Capital, LLC (Tsunami Capital), with 

fraud in their operation of a commodity pool. Specifically,

the complaint alleges that, from at least December 2004 

to the present, Demasi and Tsunami Capital fraudulently 

solicited and accepted at least $300,000 from at least three 

individuals for the purpose of trading financial futures as 

part of a commodity pool called Tsunami Lakeshore. As

alleged, Demasi convinced at least one pool participant 

to invest by providing him with a false track record that 

showed two years of trading profits, when, in fact, Tsunami 

Lakeshore did not have an active account during most of 

the period and had lost money during the months when it 

did. The complaint also alleges that Demasi and Tsunami

Capital distributed false statements to at least two pool 

participants throughout 2005 showing that their investments were earning substantial profits in 2005 and the 

first quarter of 2006. However, the Tsunami Lakeshore

trading account was closed in January 2005, and the only 

other trading accounts maintained by Tsunami Capital 

sustained losses or were less profitable than represented in 

five of the six quarterly statements they received. On the

same day the action was filed, the court entered a statutory 

restraining order freezing assets and preserving books and 

records. CFTC v. Demasi, et al., No. 07C 2256 (N.D.

filed Apr. 26, 2007
144

■ CFTC v. Heierle, et al.

On September 12, 2007, the Commission filed a civil 

enforcement action charging Joerg Heierle and the 

company he managed, INH-Interholding SA (INH), 

alleging commodity pool fraud. Specifically, the complaint

alleges that, since at least October 2001 through April 2007, 

defendants fraudulently solicited at least $4.4 million

from participants to invest in an INH commodity futures 

and options pool that Heierle would operate and manage, 

and concealed trading losses by issuing false statements 

to participants regarding the profitability of their INH 

investments. As alleged, defendants’ solicitations falsely

represented that the INH commodity pools were historically profitable and that Heierle was a successful trader

However, as alleged, there are no trading accounts in the 

name of INH, and the known trading accounts controlled 

by Heierle sustained losses during that time period 

totaling $80,000. Moreover, during the relevant time

period, the known trading accounts controlled by Heierle 

allegedly sustained overall net trading losses of approximately $1,000,000. In addition to the fraud charges, the

complaint charges INH and Heierle with registration and 

other regulatory violations. According to the complaint,

Heierle disappeared in April 2007, and pool participants 

have not been able to access their funds since that time

On September 18, 2007, the court entered a statutory 

restraining order freezing assets and preserving books and 

records. The Commission received cooperation from the

State of Florida Office of Financial Regulation in connection with this matter. CFTC v. Heierle, et al., No. 07-2239

CIV-LENARD/TORRES (S.D. Fla. filed Sept. 12, 2

■ CFTC v. Amerman, et al.

On September 18, 2007, the Commission filed a civil 

enforcement action charging Gregg R. Amerman, and

three companies he controlled (World Alliance Group, 

Inc. (World Alliance), Gregg Amerman Companies, In

(Amerman Inc.), and Zero Doubt, LLC (Zero Doubt)  Th

complaint alleges that, from at least September 2002 to 

April 2004, Amerman solicited nearly $1.2 million from

22 customers to invest in a commodity pool he operated 

named Dream Venture Group LLC (DVG). DVG, in turn,

allegedly invested the funds in a hedge fund named Tech 

Traders, Inc. (Tech Traders), and negotiated an undisclosed

fee arrangement that would ultimately provide Amerman 

funding for his companies, World Alliance, Amerman Inc.,

and Zero Doubt. Tech Traders, along with other companies

and individuals, is a subject in an ongoing Commission 

action in which it and other defendants have been ordered 

by the U.S. District Court for the District of New Jerse

to pay more than $30 million in sanctions (See CFTC v. 

Equity Financial Group LLC, et al., No. 04 CV 1512 (D.

entered June 28, 2007)). As alleged, during the relevant

time period, Amerman invested more than $1 million of 

the solicited funds with Tech Traders. In turn, Tech Traders

sent almost $1.3 million back to the DVG bank accoun

Though, at best, Amerman was entitled to approximately 

$135,000 in fees under the undisclosed fee agreement, he 

allegedly took more than $810,000 for himself and the 

companies he controlled. Accordingly, at least $675,000

of the $810,000 that Amerman retained from the funds 

he received from Tech Traders was misappropriated. The

CFTC’s complaint also alleges that Amerman: 1) distributed false account statements to customers, which reported 

profits that were higher than the profits Tech Trader 

reported to him; 2) commingled pool funds with his 

personal funds and the funds of the relief defendants; and 

3) acted illegally as an unregistered CPO. The Commission

received cooperation from the Office of the U.S. Attorne

for the Northern District of Georgia in connection with 

this matter. CFTC v. Amerman, et al., No. 1:07-CV-228

(N.D. Ga. filed Sept. 18, 2

CTAs, Managed Accounts, and Trading Systems

■ In re Camp, et al. 

On February 20, 2007, the Commission filed and simultaneously settled an administrative enforcement action 

against Man Financial, Inc. (Man), a registered FCM,

and Steven M. Camp, a registered AP of Man  The orde

finds that Camp fraudulently solicited customers to open 

commodity futures and options on futures accounts at 

Man, and finds that Man failed to diligently supervise 

Camp. Specifically, the CFTC order, entered on February

20, 2007, finds that, from September 2002 through March 

2003, Camp solicited customers of a Web-based membersonly trading system called the Natural Trigger Point System 

(NTPS) to trade through Man. NTPS provided online

signals for the purchase and sale of commodity futures and 

options on commodity futures. While Camp knew that the

trading for his customers using NTPS signals was not prof-
CFT

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itable, Camp, nevertheless, misrepresented that the system 

was successful and that his customers who traded the 

system had made profits. Customers who funded accounts

at Man to be traded pursuant to NTPS signals collectively 

lost a total of approximately $73,000. Meanwhile, supervisory employees at Man did not reasonably monitor Camp’s

sales solicitations of accounts to be traded pursuant to 

letters of direction in favor of third-party system developers. Separately, the order also finds that, during the

period August 2004 through June 2005, Camp fraudulently 

solicited customers to open accounts at Man to be traded 

by a CTA, who purportedly created a program for trading 

commodity futures and options on commodity futures

Camp defrauded at least six customers during that period 

by misrepresenting the profitability of the CTA’s purported 

trading program and failing to disclose that customers for 

whom he placed trades using the CTA’s recommendations 

sustained overall losses. Those six customers collectively

sustained losses totaling approximately $165,000. At the

time, due to deficiencies in Man’s supervisory system, Man 

did not detect that Camp was making material misrepresentations about the profitability of the CTA’s trading 

system and failing to disclose to prospective customers 

losses sustained by the CTA’s accounts. Without admitting

or denying the findings, the defendants consented to entry 

of the order that included the following sanctions, among 

others: permanent trading ban against Camp; injunction 

from Camp applying for registration or acting in a capacity 

requiring such registration; and payment of restitution 

(Man – $196,990) and civil monetary penalties (Man – 

$120,000, and Camp – $120,000). Also, Man was ordered

to strengthen its supervisory system for overseeing sales 

solicitations by employees pursuant to letters of direction 

in favor of third-party providers. In re Camp, et al., CFTC

Docket No. 07-04 (CFTC filed Feb. 20, 200

■ CFTC v. Evors.

On September 17, 2007, the U.S. District Court for th

Middle District of Florida against Edward J. Evors of Tampa,

Florida, and two Nevada companies controlled by him: 

Bally Lines Ltd. (Bally Lines) and GPS Fund, Ltd. (GP

The complaint alleges that Evors solicited and received 

at least $450,000 from members of the general public 

to invest with Tech Traders to trade commodity futures 

contracts. However, as alleged, instead of investing the

customer funds with Tech Traders, Evors purportedly spent 

the funds for his personal use, and attempted to conceal his 

misappropriation by sending customers false account statements that misrepresented the nature of their investment

The complaint against Evors alleges that he solicited funds 

for investment with Tech Traders as many as 12 months 

after Tech Traders had ceased doing business. As noted

above in the discussion of Amerman, Tech Traders, along 

with other companies and individuals, is a subject of an 

ongoing Commission action. On September 18, 2007, the

court entered a statutory restraining order freezing assets 

and preserving books and records. CFTC v. Evors, No. 8:0

cv-01658-RAL-MAP (M.D. Fla. filed Sept. 17, 2

■ In re Miklas.

On September 20, 2007, the Commission filed an administrative enforcement action against Maros Miklas alleging 

that he misappropriated a customer’s funds under the guise 

of trading commodity futures. Specifically, the complaint

alleges that Miklas became acquainted with the customer, 

Kim Lim, in late 2005 through an Internet chat room 

Miklas ran on Paltalk.com. Miklas provided Lim with fictitious trading reports that portrayed Miklas as a successfu

futures trader. In January 2006, Miklas persuaded Lim to

open two futures trading accounts and to sign a power of 

attorney to Miklas to trade those accounts. As alleged, on

December 21, 2006, Miklas, while trading his own account 

and Lim’s accounts on the Chicago Board of Trade’s eCBOT 

electronic trading platform, cheated and defrauded Lim by 

engaging in a series of illegal trades that resulted in losses 

totaling $213,066 to Lim and gains of $211,304 to Miklas

In re Miklas, CFTC Docket No. 07-10 (CFTC filed Sept. 20

2007)

Foreign Currency

■ CFTC v. Financial Risk Int’l, et al. 

On December 4, 2006, the Commission filed an injunctive 

enforcement action against Financial Risk International, 

Inc. (FRI), Financial Risk Management, Inc. (FRM), an

Stephanie Ann Gallitano, the incorporator and a director 

of both FRI and FRM, alleging fraud in connection with 

forex option transactions. Specifically, the complaint

alleges that, between approximately March and June 2004, 

FRI employees, including Gallitano, engaged in the fraudulent solicitation of at least 257 members of the retail 

public to open accounts and engage in speculative forex 

options trading at both registered and unregistered FCMs
146

According to the complaint, FRI and Gallitano’s fraudulent sales pitches included false representations that large 

profits were likely or virtually guaranteed; that risks were 

minimal or could be substantially eliminated; that profit 

opportunities were only available if investments were made 

quickly; that previous FRI customers had made substantial 

profits and new customers could expect similar profits; 

that any previous losses could be recouped with additional 

investments; and that Gallitano was an expert in trading 

commodity options. In fact, as the complaint alleges, FRI

customers sustained more than $3 million in losses during 

the relevant period. While making these false representations, FRI and Gallitano failed to disclose material

information, including the substantial risks associated 

with trading forex options; and FRI’s consistently losing 

trading track record, including that nearly 100 percent of 

FRI’s customers lost money during the relevant period, 

according to the complaint. The complaint also alleges

that FRI is liable as principal for the fraud violations of its 

employees, Gallitano is liable for FRI’s fraud as controlling 

person of the firm, and both Gallitano and FRM aided and 

abetted FRI’s commission of fraud. On the same day the

complaint was filed, the court entered an ex parte statutory 

restraining order freezing assets and preserving books and 

records. CFTC v. Financial Risk Int’l, et al., No. 06-6181

(S.D. Fla. filed Dec. 4, 2

■ CFTC v. UForex Consulting, LLC, et al. 

On January 9, 2007, the Commission filed a civil enforcement action against UForex Consulting, LLC, (UForex), 

Paulo Correa (UForex’s president and CEO), and Mario 

Garcia (UForex’s chief forex advisor) alleging fraudulent solicitation of customers to trade off-exchange forex 

futures. Specifically, the complaint alleges that, from

January 2002 through at least November 2004, Correa 

(individually, doing business as, and as the controlling 

person of UForex) and Garcia fraudulently solicited and 

accepted more than $3.7 million from at least 127 retail

customers for the purported purpose of trading OTC forex 

contracts that purportedly cleared through yet another 

company controlled by Correa. As alleged, Correa’s and

Garcia’s sales pitches touted historical returns of between 

five percent and 10 percent per month and promised high 

profits with limited or no risk. According to the complaint,

for months, UForex sent customers monthly account statements that falsely reported that their accounts were profitable. However, in October 2004, UForex sent customers

statements, accompanied by a letter from Correa, informing 

them that most of the funds were lost trading foreign 

currencies. Based on the October 2004 statements, UForex

customers in aggregate lost approximately 70 percent—

or $2.9 million—of their investment  Additionally, a

alleged, Correa misappropriated at least $2 million of the 

customers’ funds for his personal use. On the same day the

complaint was filed, the court issued an ex parte statutory 

restraining order freezing defendants’ assets and preserving 

books and records. CFTC v. UForex Consulting, LLC, et al.

No. 6:07-CV-0046 (W.D. La. filed Jan. 9, 

■ CFTC v. Rusfeldt, et al. 

On March 12, 2007, the Commission filed an injunctive enforcement action against Rusfeldt Investments LLP 

and its owner, Aden Rusfeldt, alleging fraudulent solicitation of customers to trade forex futures. Specifically,

the complaint alleges that, beginning in at least October 

2005, defendants fraudulently solicited members of the 

retail public to engage in speculative forex futures trading 

through accounts managed by Rusfeldt. According to the

complaint, Rusfeldt’s fraudulent sales pitches included false 

representations that large profits were likely or virtually 

guaranteed, that risks were minimal or could be substantially eliminated, and that new customers could expect to 

benefit from Rusfeldt’s profitable past trading performance

In fact, Rusfeldt’s customers sustained more than $1.5

million in losses during the relevant period. Additionally,

while their Web site represented that Rusfeldt was compensated only if his trading made profits in client accounts, 

in reality the defendants received commission rebates on 

all trades made in client accounts regardless of whether 

those trades were profitable. Further, the complaint alleges

that the defendants failed to disclose material information, 

including Rusfeldt’s losing trading track record and his 

collection of commission rebates from the FCMs at which 

his clients opened trading accounts. On March 13, 2007,

the court entered a statutory restraining order preserving 

books and records. On March 31, 2007, the Court issued

an Order of Preliminary Injunction, which, among other 

things, prohibits the defendants from engaging in any 

commodity interest trading. CFTC v. Rusfeldt, No. 07-13

(S.D. Tex. filed Mar. 12, 2
CFTC

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■ CFTC v. Millenium Trading Group, Inc., et al. 

On April 9, 2007, the Commission filed an injunctive 

enforcement action against Millenium Trading Group, Inc

(MTG), Cedric R. Stanton, the president and owner of MTG,

and Worldwide Clearing, LLC (WWC), a registered FCM

The complaint alleges that MTG and Stanton fraudulently 

solicited customers to open commodity trading accounts 

by misrepresenting 1) the company’s profitability, 2) the 

risks involved in trading forex futures, 3) MTG’s purported 

success, and 4) the commissions charged to customers

The complaint further alleges that MTG was an agent of 

WWC, thereby making WWC liable for MTG’s fraudulent activities. Also, as alleged, WWC was significantly

involved in supervising MTG’s activities and furthered the 

fraudulent activity by, for example, informing at least one 

MTC customer that WWC was so satisfied with MTG and 

Stanton’s trading guidelines and strategies that it was using 

those same guidelines and strategies with other IBs with 

whom it worked. CFTC v. Millenium Trading Group, Inc., et

al., No. 2:07-cv-11626 (E.D. Mich. filed Apr. 9, 

■ CFTC v. Addison Financial Group, Inc., et al. 

On May 16, 2007, the Commission filed a civil enforcement action charging The Liberty Mutual Group, Inc.,

Addison Financial Group, Inc., Hamlin Mercer Group, Inc.

Colfax Management Group, Inc. (collectively, the Addison

Enterprise), Alan Lerner, Forefront Investment LP, Todd 

Guthrie, and Benji Dayan for, among other things, fraud in 

connection with the offer and sale of illegal off-exchange 

forex options. Specifically, the complaint alleges that, from

at least February 2005 through at least June 2006, Lerner, as 

president of the Addison Enterprise, induced and/or caused 

its account executives to fraudulently solicit members of 

the retail public to engage in illegal off-exchange forex 

options transactions with Forefront Investments LP. The

account executives failed to disclose the abysmal trading 

results in Addison Enterprise customers’ accounts. The

complaint further alleges that, while Addison Enterprise 

account executives touted the large profit potential and 

minimal risk of loss in trading forex options, most, if not 

all, customers were losing money. During the relevant

period, Addison Enterprise customers suffered losses of 

more than $7 million—$3 million of which was paid to 

the Addison Enterprise as commissions. On the same

day the action was filed, the court entered a statutory 

restraining order freezing assets and preserving books and 

records. The Commission received cooperation from the

Florida Office of Financial Regulations in connection with 

this matter. CFTC v. Addison Financial Group, Inc., et al.,

No. 07-21267 CIV-LENAR/TORRES (S.D. Fla. filed May 

2007)

■ CFTC v. Lavin, et al. 

On August 1, 2007, the Commission filed a civil enforcement action charging Joseph Clark Lavin (a/k/a Joseph 

Ivcevic) and his companies (Global Asset Partners, LTD (a/

k/a Global Asset Partners, LLC); Global Currency Trading 

Group, LLC; and Global Currency Trading Fund, LLC) with 

fraudulent solicitation of retail customers throughout the 

United States, Canada, France, and Panama to trade forex 

options. Specifically, the complaint alleges that, beginning

in or about January 2001, Lavin, individually, and as the 

agent of his Global companies, engaged in a scheme to 

defraud customers of more than $16 million. Lavin allegedly told potential customers that customer funds would

earn profits of 2.5 percent per month, or greater, and

failed to disclose that the defendants were receiving one 

percent per month as a commission. As further alleged

in the complaint, the defendants, after accepting money 

from customers, issued false reports to these customers 

that misrepresented “profits” and concealed the commissions. The Commission received cooperation from the

SEC, the U.S. Attorney’s Office for the Western District o

Washington, the F.B.I, and the Internal Revenue Service i

connection with this matter. CFTC v. Lavin, et al., No. 2:0

cv-01185-RSL (W.D. Wash. filed Aug. 1, 2

Other Illegal Off-Exchange

■ CFTC v. New York Options Exchange, et al., CFTC v. 

International Energy Exchange, et al., New York Petroleum 

Option Exchange, et al., and American Futures and Options 

Exchange, et al. 

On March 22, 2007, the Commission filed four injunctive 

enforcement actions against 1) New York Options Exchange 

(NYOEX) and Tahoe Futures (Tahoe), 2) International 

Energy Exchange (INTENX) and Vitol Capital Management 

(Vitol), 3) New York Petroleum Option Exchange 

(NYPOE) and HPR Commodities (HPR), and 4) American 

Futures and Options Exchange (AFOEX), Metro Financials 
148 

(Metro), and American Futures and Options Trading 

Commission (AFOTC) alleging fraud in the solicitation 

of customers to purchase commodity futures and options 

contracts. Combined, the complaints allege that the

defendants, through misrepresentations on their Web sites, 

defrauded customers out of millions of dollars. In each

of the cases, customers were solicited to trade commodity 

futures and/or options, including on energy and currency

Customers were duped into believing that: 1) NYOEX, 

INTENX, NYPOE and AFOEX are futures exchanges; 2) 

Tahoe, Vitol, HPR and Metro are their respective brokers; 

and 3) all these entities are located in the United States

As alleged, Tahoe, Vitol, HPR and Metro leased the use of 

fax numbers with U.S. area codes to deceive customers int

believing that they are all U.S.-based companie.  As part 

the fraud, the complaints allege that INTENX, NYOEX and 

NYPOE on their Web sites listed firms as their members 

when, in fact, none were members and had never heard of 

INTENX, NYOEX and NYPOE. In addition, Metro, in order

to bolster its credibility, directed customers to AFOTC’s 

Web site, which purported to be the regulatory body that 

regulates the commodity futures and option markets in 

the United States when, in fact, AFOTC is a fictitious entity

CFTC v. New York Options Exchange, et al., No. 07 CV 2376

(S.D.N.Y. filed March 22, 2007); CFTC v. International Ene

Exchange, et al., No. 07 CV 2378 (S.D.N.Y. filed March

2007); CFTC v. New York Petroleum Option Exchange, et al., 

No. 07 CV 2379 (S.D.N.Y. filed March 22, 2007); and 

v. American Futures and Options Exchange, et al., No. 07 CV

2377 (S.D.N.Y. filed Mar. 22, 

Statutory Disqualification

■ In re Worldwide Commodity Corporation and In re 

South Coast Commodities, Inc. 

On December 7, 2006, the Commission filed Notices 

of Intent to Revoke Registration against registered IBs 

Worldwide Commodity Corporation (Worldwide) and 

its successor corporation South Coast Commodities, 

Inc. (South Coast)  The Commission seeks to determin

whether Worldwide’s and South Coast’s registrations 

should be revoked based upon entry of a consent order of 

permanent injunction against them. CFTC v. Worldwide

Commodities Corp., et al., No. CV 2-04-cv 3461 (E.D.

entered Sept. 19, 2006)  The consent order found, amon

other things, that Worldwide and South Coast fraudulently 

solicited customers to trade options on commodity futures 

contracts, and imposed sanctions including a permanent 

injunction from further violations, ordered the payment of 

restitution ($5 million) and civil monetary penalties ($3.5

million). In re Worldwide Commodity Corp., CFTC Docket

No. SD 07-02 (CFTC filed Dec. 7, 2006), and In re Sout

Coast Commodities, Inc., CFTC Docket No. SD 07-01 (CFTC

filed Dec. 7, 2006

■ In re Next Financial Services, et al. 

On July 23, 2007, the Commission issued a Notice of Intent 

to Revoke Registration against registered IBs Next Financial 

Services Unlimited, Inc. (Next) and New World Trading,

LLC (New World) seeking to determine whether registrants 

were subject to statutory disqualification of their registrations based upon the entry of a permanent injunction 

order and final judgment against them in a Commission 

civil enforcement action. CFTC v. Next Financial Services

Unlimited, Inc., et al., No. 04-80562-CIV-RYSKAMP

VITUNAC, Consent Order (S.D. Fla. entered Jan. 12, 20

(imposing sanctions including permanent injunction, 

trading and registration bans, restitution ($3 million) and 

civil monetary penalties ($2 million)). The district court

found that the registrants, from at least September 2003 

through at least June 2004, fraudulently solicited nearly 

$3.4 million from at least 199 retail customers in and

outside the United States to invest in options on forex. The

order further found that the defendants misrepresented the 

profit potential and risk involved in trading forex options, 

and also misrepresented the level of trading experience 

of Next and New World employees. In re Next Financial

Services, et al., CFTC Docket No. SD 07-03 (CFTC filed July

23, 2007)

■ In re Commodity Investment Group, Inc. 

On July 26, 2007, the Commission issued a Notice of Intent 

to Revoke Registration against registered IB Commodity 

Investment Group, Inc. (CIG) seeking to determine

whether CIG was subject to statutory disqualification of its 

registration based upon the entry of a permanent injunction order and final judgment against it in a Commission 

civil enforcement action. CFTC v. Commodity Investment

Group, Inc., et al., No. 05-CV-5741 (HB), Consent Order

(S.D.N.Y. entered Feb. 27, 207).  The consent order 

that CIG, through its APs, engaged in fraudulent sales 
CFT

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solicitations by, among other things: misrepresenting the 

likelihood of profiting from trading commodity options; 

minimizing the risk of loss; and (in light of the profit 

representations made) failing to disclose that more than 90 

percent of CIG’s customers lost money trading commodity 

options. The consent order prohibits CIG from, among

other things, seeking registration with the Commission in 

any capacity and imposes $11,819,785 in restitution and 

$7 million in civil monetary penalties. In re Commodity

Investment Group, Inc., Docket No. SD 07-04 (CFTC filed

July 26, 2007)

■ In re Rotmistrenko. 

On July 30, 2007, the Commission issued a Notice of 

Intent to Revoke Registration against registered CTA and 

AP Udo Rotmistrenko seeking to determine whether 

he was subject to statutory disqualification based on a 

Federal criminal action in which Rotmistrenko pled guilty 

to 24 counts of mail and wire fraud in soliciting investments in forex trading. On June 18, 2007, the U.S. Distri

Court for the Southern District of New York sentenced 

Rotmistrenko to 51 months in prison and ordered him 

to pay $1,800,410 in restitution. On March 18, 2005,

prior to Rotmistrenko’s May 31, 2005 entering of a guilty 

plea in the criminal action, the Commission suspended 

Rotminstrenko’s registrations based on the filing of the 

criminal charges. In re Rotmistrenko, CFTC Docket No. S

04-05, Order (CFTC entered March 18, 2005). Under the

Act, Rotmistrenko’s suspension remains in effect until his 

indictment is disposed of or until the Commission terminates the suspension. Rotmistrenko’s guilty plea and

sentencing disposes of the criminal indictment against 

him and now constitutes a basis for revoking his registration. In re Rotmistrenko, CFTC Docket No. SD 07-05 (CFT

filed July 30, 2007)

Enforcement Litigation by Goal Three

Financial, Supervision, Compliance 

and Recordkeeping

■ In re Rosenthal Collins Group. 

On January 10, 2007, the Commission simultaneously filed 

and settled an administrative enforcement action against 

Rosenthal Collins Group (RCG), a registered FCM. The

order finds that RCG failed to collect trading cards from 

a FB in a timely fashion, and, that during the course of a 

Commission investigation, RCG failed to produce trading 

cards of that FB to the Commission. Specifically, the order

finds that the Division of Enforcement issued document 

requests to RCG to produce trading cards, records that 

FCMs are required to maintain and produce upon request

RCG was unable to produce 49 of the requested trading 

cards. Without admitting or denying the findings, RCG

consented to entry of the order that included, among other 

sanctions, a $25,000 civil monetary penalty. In re Rosenthal

Collins Group, CFTC Docket No. 07-02 (CFTC filed Jan. 10

2007)

■ In re Pioneer Futures Inc. 

On March 7, 2007, the Commission simultaneously filed 

and settled an administrative enforcement action against 

Pioneer Futures Inc. (Pioneer), a registered FCM, for failure

to maintain and produce required trading records to the 

Commission upon request. Specifically, the order finds

that, during the course of an investigation of trading at 

the CME and in response to document requests from the 

Commission’s Division of Enforcement, Pioneer failed 

to produce trading cards of two local traders and trading 

records relating to customer orders filled by FBs on behalf 

of Pioneer customers. Pioneer’s failure to produce the

requested trading records impaired the Division’s ability 

to fully investigate the trading activities of persons under 

investigation. The Commission assessed sanctions against

Pioneer, including a $25,000 civil monetary penalty. In re

Pioneer Futures Inc., CFTC Docket No. 07-05 (CFTC filed

Mar. 7, 2007

■ CFTC v. Forefront Investments Corporation. 

On March 20, 2007, the Commission filed an injunctive enforcement action against Forefront Investments 

Corporation (Forefront), a registered FCM, alleging violations of the Commission’s minimum net capital and 

recordkeeping requirements. Specifically, the complaint

alleges that, as of January 31, 2007, and perhaps earlier, 

Forefront’s net capitalization was below the adjusted 

net capital required by the Act and a Commission regulation. As of March 19, 2007, the complaint charges,

Forefront’s adjusted net capitalization remained below 

the required adjusted net capital with Forefront’s total 

liabilities equaling $8,000,000 while its assets were 

only $6,760,000. Furthermore, the complaint charges
150 

Forefront with failing to maintain books and records that 

it is required to maintain pursuant to a Commission regulation. On March 21, 2007, the court issued a statutory

restraining order freezing assets and preserving books and 

records. On March 27, 2007, the court issued a preliminary injunction appointing a receiver to marshal the assets

of Forefront. The Commission received cooperation from

the NFA and the U.S. Attorney for the Eastern District o

Virginia in connection with this matter. CFTC v. Forefront

Investments Corporation, No. 3:07CV152 (E.D. Va. filed

20, 2007)

■ CFTC v. Lake Shore Asset Management Limited. 

On June 26, 2007, the Commission filed a civil enforcement action charging Lake Shore Asset Management 

Limited (LAM), a registered CPO and CTA, refused to 

make its books and records available for inspection and 

was unable or unwilling to provide required information 

about its pool participants and trading performance. The

complaint alleges that LAM’s director, Laurence Rosenberg, 

told the NFA that none of LAM’s business is conducted 

in Bermuda and that all telephone calls to the Bermuda 

office are forwarded to an office in Toronto, Canada, where 

all trading is done and all books and records are maintained. Nevertheless, the address for the Toronto office

provided by LAM in NFA registration materials is actually a 

mail drop, not a business address. The complaint further

alleges that on June 14, 2007, Rosenberg represented that 

LAM managed approximately 250 accounts and operated 

several commodity pools, and the total assets of the pools 

and managed accounts were approximately $1 billion

However, a day later, Rosenberg provided the NFA with 

access to LAM’s protected Web pages and the NFA learned 

that assets for all commodity pools and managed accounts 

totaled $466,710,761, dramatically less than Rosenberg’s 

estimate of $1 billion. The complaint also alleges that,

between June 14, 2007 and the present, LAM’s principals, 

including Rosenberg, made several inconsistent statements 

concerning assets in the pools and managed accounts, 

LAM’s ownership, U.S. investors in the pools, and th

location of its books and records. On June 27, 2007, the

court issued an ex parte restraining order preserving books 

and records and freezing assets, which was vacated by the 

Seventh Circuit on August 2, 2007. CFTC v. Lake Shore

Asset Management Limited, No. 07 C 3598 (N.D. Ill. fi

June 26, 2007)

■ In re Interactive Brokers LLC. 

On July 17, 2007, the Commission filed and simultaneously settled an administrative enforcement action against 

registered FCM Interactive Brokers LLC (IBL) finding that 

IBL failed to diligently supervise its compliance employees’ 

handling of a customer account. Specifically, Commission

found that IBL failed to supervise diligently its compliance employees’ handling of a commodity futures trading 

account maintained in the name of Kevin J. Steele, a

Canadian who used the account to defraud more than 200 

Canadian, German, and U.S. citizens of approximately $8

million in a commodity pool fraud that was the subject 

of an earlier Commission enforcement action. CFTC

v. Steele, No. 05-3130 (N.D.Ill. filed May 25, 205). 

Commission found that, from February 2003 through May 

2005, IBL accepted 135 third-party deposits in the form of 

wire transfers and checks totaling $7.7 million into Steele’s

personal account, but did not have procedures reasonably 

designed to detect the deposit of third-party funds in an 

individual trading account. The frequency and magnitude

of deposits and withdrawals to Steele’s account, relative 

to his stated liquid net worth, and the pattern of deposits 

followed by withdrawals suggested that Steele might be 

operating as an unregistered CPO. IBL compliance staff

telephoned Steele on at least three occasions to inquire 

about the trading activity in his account. Each time, IBL

compliance staff accepted Steele’s explanations as reasonable without conducting any additional or independent 

inquiries. The Commission assessed sanctions against IBL

including: a cease and desist order; and an order for IBL to 

disgorge $175,000 in commissions it earned from Steele’s 

account and to remit those funds to the Clerk of the 

Provincial Court of British Columbia, which will distribute 

the funds to the defrauded investors. The Commission

received cooperation from the NFA, the Integrated Market 

Enforcement Branch of the Royal Canadian Mounted 

Police’s Federal and International Operations Directorate, 

and the British Columbia Securities Commission in 

connection with this matter. In re Interactive Brokers LLC,

CFTC Docket No. 07-07 (CFTC filed July 17, 2007)

■ In re Merrill Lynch Investment Managers, LLC, et al. 

On July 31, 2007, the Commission simultaneously filed 

and settled an administrative enforcement action against 

registered CPOs Merrill Lynch Investment Managers, LLC 
CFT

A pendI

(MLIM) and Merrill Lynch Alternative Investments, LLC 

(MLAI). The Commission found that, beginning in 2001

and continuing through at least 2005, MLIM and MLAI 

repeatedly failed to distribute to pool participants and 

file with the NFA their commodity pools’ annual reports 

in a timely manner. The Commission assessed sanctions

including: a cease and desist order; and a civil monetary 

penalty ($500,000). In re Merrill Lynch Investment Managers,

LLC, et al., CFTC Docket No. 07-08 (CFTC filed July 31,

2007)

■ CFTC v. Nations Investments, LLC.

On July 30, 2007, the Commission filed a civil enforcement action charging Nations Investments, LLC (Nations), 

a registered FCM, with violations of the minimum net 

capital requirements of the Act and Commission regulations. Specifically, the complaint alleges that, as of July

21, 2007, and perhaps earlier, Nations’ net capitalization 

was below the adjusted net capital required by the Act 

and a Commission regulation with Nations’ total liabilities equaling $5 million while its assets were less than $2 

million. On July 30, 2007, the court entered a statutory

restraining order freezing assets and preserving books 

and records. The court also froze the assets of relief

defendants, Sulaiman “Sal” Husain, a Director, Chief 

Financial Officer, and principal of Nations, and Sammy 

Joe Goldman, an owner and former principal of Nations

Husain and Goldman allegedly contributed to the undercapitalization—which ultimately rose to approximately 

$4.5 million—by withdrawing a total of $1 million

from Nations’ accounts. On August 7, 2007, the court

approved the appointing of a receiver to marshal the assets 

of Nations. The Commission received cooperation from

the NFA in connection with this matter. CFTC v. Nations

Investments, LLC, No. 07-61058 CIV-COOKE (S.D. Fla. fi

July 30, 2007)

■ In re Russell Investments Ireland Limited, et al.

On September 27, 2007, the Commission simultaneously filed and settled an administrative enforcement 

action against Russell Investments Ireland Limited (RIIL) 

and Russell Investments Cayman Ltd. (RICL), both of

whom were registered with the Commission as CPOs, 

finding that they failed to timely file with NFA annual 

reports for commodity pools they operated. Specifically,

the Commission found that RIIL and RICL are CPOs for 

commodity pools that operate as funds and as funds 

of funds, whose fiscal year on March 31st. Accordingly,

RIIL and RICL were required to file with the NFA their 

commodity pools’ annual reports on or around June 30th 

for the fund, and August 31st for the fund of funds. The

order finds that, for the fiscal years ending March 31, 2002 

and March 31, 2004, RIIL and RICL failed to distribute 

to pool participants and to file with the NFA in a timely 

manner any of their commodity pools’ annual reports

The Commission assessed sanctions against RIIL and RICL 

including, an order to pay a civil monetary penalty of 

$120,000. In re Russell Investments Ireland Limited, et al.

CFTC Docket No. 07-12 (CFTC filed Sept. 27, 200

Trade Practice

■ In re Karkazis. 

On December 27, 2006, the Commission simultaneously 

filed and settled an administrative enforcement action 

against Harry Karkazis, a registered FB. The Commission

found that, between April 2002 and July 2002, Karkazis 

profited from indirectly trading opposite his customers 

orders in the Standard and Poor’s 500 commodity futures 

contract at the CME. That is, Karkazis took the opposite

side of his customer orders into his own account through 

noncompetitive round-turn trades. The order also finds

that 64 percent of Karkazis’ trading cards produced by 

his clearing member during the investigation were timestamped late. Finally, the order finds that Karkazis was

unable to account for the whereabouts of one of his prenumbered trading cards that he had failed to submit 

to his clearing member. Without admitting or denying

the findings, Karkazis consented to entry of the order 

that included the following sanctions among others: a 

three-month registration suspension and a $35,000 civil 

monetary penalty. In re Karkazis, CFTC Docket No. 07-0

(CFTC filed Dec. 27, 2006

■ In re Lui. 

On April 25, 2007, the Commission simultaneously filed 

and settled an administrative action against Pak Tong Lui 

(a/k/a Patrick Lui) finding that Lui knowingly prearranged 

trading in customer accounts he controlled. Specifically,

the Commission found that Lui, who is not registered 
152 

with the Commission, traded during thinly traded overnight hours in November and December 2005 at least 

15 customer accounts opposite each other in the E-Mini 

Russell 2000 futures contract traded on the CME’s Globex 

electronic trading platform. The electronic trading resulted

in 11 of the 15 customer accounts losing an aggregate of 

$55,505 and the remaining four accounts realizing profits 

of roughly the same aggregate amount found that these 

prearranged trades negated market risk and price competition, and therefore constituted both fictitious sales under 

the CEA and noncompetitive trades under CFTC regulations. Lui also was found to have illegally traded customer

accounts without being properly registered with the CFTC 

as a CTA. The Commission assessed sanctions including:

a cease and desist order; an order to pay a civil monetary 

penalty ($30,000) and restitution ($55,505); and an order 

to comply with specific undertakings, including not to 

apply for, or seek exemption from, registration with the 

Commission for a period of four years. In re Lui, CFTC

Docket No. 07-06 (CFTC filed Apr. 25, 200

■ CFTC v. Supama International DMCC, et al.

On April 5, 2007, the Commission filed a civil enforcement action against Supama International DMCC, Naresh 

Kumar Jain, Aaristo Commodities and Futures DMCC, 

Kanta Nath Jain, and Hainke & Anderson Trading LLC, all 

of Dubai, United Arab Emirates, alleging non-competitive 

trading. Specifically, the complaint alleges that the defendants engaged in a series of illegal commodity futures transactions in copper, gold, crude oil, and natural gas offered

by the NYMEX on the Globex electronic trading platform 

involving back-month, illiquid contracts. The complaint

further charges that the defendants passed hundreds of 

thousands of dollars among their futures trading accounts 

through these illegal commodity futures transactions

Moreover, the complaint alleges that the defendants 

engaged in a pattern of trading activity on several days in 

March and April 2007, whereby one defendant bought 

commodity futures contracts at low prices from another 

defendant and immediately sold them back to that defendant at higher prices. In each series of offsetting transactions, one defendant profited and another defendant

incurred a loss, with no change in open positions held by 

those defendants. On April 5, 2007, and April 20, 2007,

the court entered statutory restraining orders freezing 

certain of the defendants’ assets and preserving books and 

records. The Commission received cooperation from the

NYMEX, Man Financial Inc, and Dubai FSA in connection 

with this matter. CFTC v. Supama Int’l DMCC, et al., No. 0

CV 2770 (S.D.N.Y. filed Apr. 5, 

■ In re CIC Banque Credit Industriel D’Alsace Et De 

Lorraine Société Anonyme.

On September 27, 2007, the Commission filed and 

simultaneously settled an administrative enforcement 

action against CIC Banque Credit Industriel D’Alsace Et 

De Lorraine Société Anonyme (Banque CIAL), based in 

Strasbourg, France, finding that it engaged in wash sales 

in the Five Year and Two Year Treasury Note Futures 

Markets on June 30, 2004. Banque CIAL is part of Crédit

Industriel et Commercial (CIC), a French banking group

Specifically, the Commission found that on June 30, 2004, 

a trader at Banque CIAL in France placed orders through 

a Canadian broker to simultaneously buy and sell 2,940 

contracts of September 2004 Five Year Treasury Note 

futures contracts. After being transmitted to a U.S. broke

the orders were executed by brokers on the trading floor 

of the CBOT at the same price and approximately at the 

same time. Upon receiving confirmations for the Five Year

Note futures, the Banque CIAL trader placed a second set 

of orders to simultaneously buy and sell 2,363 contracts of 

September 2004 Two Year Treasury Note futures contracts

These orders were also executed at approximately the same 

time and at the same price on the CBOT. According to the

Commission’s order, these transactions were not intended 

to make a profit or loss for Banque CIAL or expose Banque 

CIAL to market risk, and they did not result in a net change 

in market position. Indeed, Banque CIAL’s avowed purpose

in entering the transactions was to assess its internal risk 

management system. The Commission assessed sanctions

against Banque CIAL including: an order to comply with 

its undertaking to implement compliance procedures that 

insure that transactions made by it on U.S. markets full

comply with all laws, rules and regulations governing those 

markets; and an order to pay a civil monetary penalty of 

$80,000. In re CIC Banque Credit Industriel D’Alsace Et De

Lorraine Société Anonyme, CFTC Docket No. 07-11 (CFTC

filed Sept. 27, 2007
CFT

CFTC Information Technology S

Integrated Surveillance System (ISS)

User: Market Oversight

Functionality: ISS collects futures and options position data 

for large traders from reporting firms and open interest, 

volume, price, and clearing member data from exchanges 

that is used to monitor future and options trading in order 

to detect any market anomalies that may occur

Regulatory Statement Review (RSR)

User: Clearing and Intermediary Oversight

Functionality: RSR Express is a tool used by the Commission 

staff to review monthly and annual 1-FR and Focus reports 

from firms and to monitor the financial status of firms and 

the changes to that status over time

Stressing Positions at Risk (SPARK)

User: Clearing and Intermediary Oversight and Market 

Oversight

Functionality: SPARK is a tool used by Commission staff to 

perform “what if” analysis to determine the effect of market 

movement on maintenance margin

Filings and Actions (FILAC)

User: Clearing and Intermediary Oversight and Market 

Oversight

Functionality: FILAC manages data associated with the 

approval organizations, products, rules, foreign filings, and 

actions

Exchange Database System (EDBS)

User: Market Oversight, Enforcement, Chief Economist

Functionality: EDBS is used for trade practice surveillance, 

trading analyses, statistical studies, and research projects 

for the Commission

Trade Surveillance System (TSS)

User: Market Oversight, Enforcement, Chief Economist

Functionality: TSS is a new system that will enable CFTC 

staff to conduct surveillance in the rapidly expanding area 

of electronic trading, both intra and inter-exchange and 

across side-by-side platforms. TSS will retain the important legacy data and functionality of EDBS, which it will

gradually replace

Project eLaw 

User: Enforcement, General Counsel, and Proceedings

Functionality: The eLaw Program is an automated law office 

that seamlessly integrates technology and work processes 

to support Commission managers and staff in their investigative, trial, and appellate work
154

A Guide to the Language of the Futures Industry

http://www.cftc.gov/educationcenter/glossary/

Because the acronyms of many words and phrases used throughout the futures industry are not 

readily available in standard references, the Commission’s Office of External Affairs compiled a 

glossary to assist members of the public.

This glossary is not inclusive, nor are general definitions intended to state or suggest the views of 

the Commission concerning the legal significance, or meaning of any word or term. Moreover,

no definition is intended to state or suggest the Commission’s views concerning any trading 

strategy or economic theory

Glossary of Acronyms

AE............................

AFOEX...................................

AFOTC..............................................

ALJ........................

AP.................

BTEX........................

CBOT.....................

CCORP........................

CCX............................

CDXCHANGE...................................

CCFE................................

Glossary of Abbreviations and Acro
CFT

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CEA......................

CESR.........................................

CFE.....................

CFFE.................................

CFTC....................................

CFMA...........................................

CIC..............................

CIG..............................

CME...........................

CME AM................................

COMEX..........................

COSRA................................................

CPO.......................

CSCE...............................

CSRC......................................

CSRS...............................

CTA.........................

DCIO.....................................................

DCM..........................

DCO.................................

DME.................................

DMO...................................

DOJ........................

DOL......................

DOT...............................

DVG........................

DTB...................

ECM.........................

EDBS.......................

EPFE...........................

ETC.......................

ETP............................

FASAB..........................................
156

FB............

FBI.............................

FCA..........................

FCM...........................

FCOM.........

FECA..................................

FERC....................................

FERS....................................

FIA...........................

FILAC...................

FISMA..........................................

FLETT..............

FMC..........................

FMFIA........................................

FMHA...........................

FOREX...............

FRI................................

FRM..............................

FSA............................

FT............

FTE....................

FTPA.....................................

FY...........

GAAP...........................................

GAO................................

GCC.............................

GFI............

GFI FOREXMATCH.......................

GINNIE MAE......................................

GMAC.................................

GPRA......................................

GPS.............

HPLC........................
CFTC

A pendI

HPR...............

HSC...................

HSE...........................

IA.................

IB................

IBL.....................

ICAP........................................

ICAP ETC................................

ICAP HYDE...............................

ICC...............................

ICE .........................

IMAREX.............................

INET....................

INH..................

INTENX...........................

INTRADE.....................

IOSCO...................................................

ISDA..............................................

ISS.............................

JO................

KCBT........................

LAM...................................

LCH.....................

LLC.............................

LONGITUDE............

MACE.............................

MAN..................

MATCHBOXX ATS...............................

MDA....................................

ME..................

MGE..........................

MLAI.........................................

MLIM.....................................
158 

MOU.........................

MPC..........................

MTG............................

NAFTA...................................

NFA............................

NFU.....................

NGX...................

NODEL...................

NQLX......

NTP..........

NTPS.............................

NYBOT......................

NYCC.............................

NYCE........................

NYFE.........................

NYMEX...........................

NYOEX........................

NYPOE..................................

OCC................................

OCX..........................

OGC....................................

OIA.....................................

OIG.................................

OITS...................................................

OMB..............................

ONXCC..............................

OPEX..............

OPM..............................

OPTIONS ATS...............

ORB........................

OTC................

PBOT..........................

PWG........................
CFT

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RAM.................................

RCG.......................

RER........................

RFA..............................

RICL.............................

RIIL.................................

RSR...........................

SEC..................................

SL........................

SPARK..........................

SRO............................

SSFAS...................................................

STORM...................

SWAPSTREAM.................................

TCX.....................

TFS......................................................

TFSE...............

TFX............................

TREASURY............................

TS..............

TSS.........................

UK............

USAID................................................

USDA...........................

USFE..................

USSGL....................................

WBOT....................

WTI.....................

WWC.....................

WXL....................

XBOT....................

YELLOW JACKET.........................
160 

Page Photo Credits:

Clark Day Photography; Pages 1, 2, 4, 5, 16, 26, 29, 32, 35, 38, 39, 40, 50, 73, 76, 99, 100 (photos 1, 2, and 5), 

101, 102, 128, 129, 131, 132, (photos 1, 2 ,4, 5), 133, 135, 152, and 153; photos by Clark Day

History at a Glance Photo Credits:

Page 2-5, Top of page, from left to right: 

1. KCBT Trading Floor, 1930’s  Photo provided by Kansas City Board of Trad

2. Trading Floor Board of Trade, Kansas City, January 9, 1925  Photo provided by Kansas City Board of Tra

3. KCBT Building, 1925 – 1966  Photo provided by Kansas City Board of Trad

4. CME Trading Floor, 1950’s  Photo provided by Chicago Mercantile Exchan

5. Ticker Tape Parade with CBOT Building in the Background  Photo provided by Chicago Board of Tra

6. CME, 1940’s  Photo provided by Chicago Mercantile Exchan

7. KCBT 80th Anniversary, February 6, 1936  Photo provided by Kansas City Board of Tra

8. KCBT Building, 1877  Photo provided by Kansas City Board of Tra

9. CBOT Trading Floor  Photo provided by Chicago Board of Tra

Individual Photos, Page 2 from left to right:

1. KCBT Trading Floor, July 19, 1932  Photo provided by Kansas City Board of Tra

2. CME Trading Floor Soon After 1928 Opening  Photo provided by Chicago Mercantile Exchan

3. KCBT Building, 1887 – 1924  Photo provided by Kansas City Board of Tra

Individual Photos, Page 3 from left to right:

1. The last day in the old Board of Trade Building, January 1, 1925  Photo provided b  Kansas City Board of Tra

2. Trading Floor Board of Trade, Kansas City, January 9, 1925  Photo provided by Kansas City Board of Tra

3. New KCBT Building on 48th Street  Photo provided by Kansas City Board of Trad

Individual Photos, Page 4 from left to right:

1. CME Trading Floor, 2002  Photo provided by Chicago Mercantile Exchan

2. CME Trading Floor  Photo provided by Chicago Mercantile Exchan

Individual Photos, Page 5 from left to right:

1. CBOT Trading Floor  Photo provided by Chicago Board of Tra

2. CBOT  Photo provided by Chicago Board of Tra

3. CME S&P Pit  CME-NYSE AP photo provided by Chicago Mercantile Exchan

4. CBOT Trading Floor, 2005  Photo provided by Chicago Board of Tra

Acknowledgements

This Performance and Accountibility Report was produced with the energies and talents of Commission staff. To these

individuals, the Office of Financial Management would like to offer our sincerest thanks and acknowledgement

We would also like to acknowledge the Office of Inspector General and KPMG, LLP for the professional manner in 

which they conducted the audit of the Fiscal Year 2007 Financial Statements

We offer our special thanks to The DesignPond, in particular Sheri Beauregard and Michael James, for their outstanding 

contribution to the design of this report

Photo Credits and Acknowledgeme
Additional copies of the Commodity Futures Trading Commission FY 2007 Performance and Accountability Report

are available by contacting the Office of Financial Management:

Office of Financial Management

Commodity Futures Trading Commission

Three Lafayette Centre

1155 21st Street, N.W.

Washington, DC 20581

Telephone: Emory Bevill, 202.418.5187 or Lisa Malone, 202.418.5184

Fax: 202.418.5414

E-mail: ebevill@cftc.gov or lmalone@cftc.gov

Web: http://www.cftc.gov/aboutthecftc/cftcreports.htm

The CFTC’s Strategic Plan is available on the Web at: http://www.cftc.gov/aboutthecftc/cftcreports.html
C O M M O D I T Y F U T U R E S T R A D I N G C O M M I S S I O N

Three Lafayette Centre • 1155 21st Street

202.418.5000 • www.cft