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ACCOMPLISHMENTS OF THE COMMODITY FUTURES TRADING COMMISSION 

June 2014—January 2017 

Timothy Massad was sworn in as Chairman of the Commodity Futures Trading Commission on June 5, 

2014. The following highlights key accomplishments of the Commission during the Chairman’s tenure. 

Chairman Massad also worked to build consensus within the Commission. Over 95 percent of the more 

than 600 votes taken during Chairman Massad’s tenure were unanimous. 

ACTIONS TO BENEFIT COMMERCIAL END-USERS 

Throughout his time in office, Chairman Massad has focused on addressing the concerns of commercial 

end-users, who use the derivatives markets to hedge routine commercial risk and engage in price 

discovery. In particular, Chairman Massad sought to make sure the rules required by the Dodd Frank Act 

did not create undue burdens on these businesses, which did not cause the financial crisis. 

Margin for Uncleared Swaps. The Commission exempted commercial end-users from its rule on margin 

for uncleared swaps. Specifically, swap dealers are not required to collect margin from commercial enduser counterparties. This distinction was appropriate because the requirements are focused on those 

who create the most risk, which are large financial institutions.

Volumetric Optionality. The Commission clarified when certain agreements that include volumetric 

optionality provisions are forward contracts, rather than swaps. These types of contracts are widely 

used by a variety of end-users, including natural gas utilities. By clarifying that these agreements are not 

subject to swap rules, the interpretation will help make sure commercial companies can continue to 

conduct their daily operations efficiently. 

Trade Options. The Commission made changes to its rules on trade options, which are a type of 

commodity option. These changes recognize that trade options are different from the swaps that were 

the focus of Dodd-Frank reforms. It eliminates reporting and recordkeeping obligations for commercial 

users in connection with trade options, including Form TO, and thereby reduces the burdens on such 

businesses in using these instruments. The Commission also stated its intention to not apply position 

limits to trade options. 

Simplifying Recordkeeping Requirements. The Commission adopted changes to its rules to reduce 

recordkeeping obligations for commercial end-users, particularly with respect to pre-trade 

communications, text messages, and records of final transactions. More detailed 

recordkeeping is appropriate for intermediaries handling customer trades but not for end users. 

Modernizing Recordkeeping and Storage Obligations. The Commission proposed amendments to 

modernize recordkeeping and storage obligations set forth in CFTC rules, and make them technology 

neutral. Among other things, the proposal will provide greater flexibility when it comes to how records 

must be retained and produced. Doing so would reduce costs for businesses and improve the quality of 

record preservation and production. 

Customer Protection/Margin Collection. The Commission adopted a change to its customer-protection 

rules to address a concern of many smaller customers regarding the posting of collateral for their trades. 

The Commission removed a provision that would have automatically accelerated the deadline for when 

futures commission merchants (FCMs) must post “residual interest” to clearinghouses. This deadline 

can affect when customers must post collateral to the FCM. 
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Reporting Requirements for Contracts in Illiquid Markets. CFTC staff took action to make sure new 

swap reporting requirements do not make it more difficult for a commercial end-user to hedge risk. The 

staff permitted delayed reporting for certain less liquid, long-dated swap contracts. 

Treasury Affiliates and Captive Finance Companies. The Commission staff has also taken action to make 

sure that end-users can use the exemptions available to them regarding clearing and swap trading even 

if they enter into swaps through a treasury affiliate. Such entities, which are single-purpose financing 

subsidiaries of commercial companies, could be considered financial institutions and thus are not 

eligible for such exemptions, absent such action. Similarly, the staff made clear that wholly-owned 

securitization vehicles of auto manufacturers, which are used to support the sale and leasing of cars and 

trucks, were eligible to use such exemptions. 

Clearing Relief for Community Banks. CFTC staff also addressed the concerns of community 

development financial institutions, small banks, and small bank holding companies with under $10 

billion in assets with respect to clearing. The staff action allowed these entities to choose not to clear a 

swap subject to the CFTC’s clearing requirement, provided that they elect the Commission’s end-user 

exception and comply with certain other conditions. As with commercial end-users, these institutions 

were not the cause of the crisis, and swap rules should not impose undue burdens on their operations. 

Public Utility Companies. The Commission amended its swap dealer registration threshold rules so that 

local, publicly-owned utility companies can continue to effectively hedge their risks in the energy swaps 

market. These companies, which keep the lights on in many homes across the country, must be able to 

access these markets efficiently in order to provide reliable, cost-effective service to their customers. 

Regional Transmission Organizations. The Commission exempted certain transactions in the regional 

transmission organization (RTO) and independent system operator (ISO) markets from most provisions 

of its rules, while retaining the Commission’s authority to pursue fraud and manipulation in those 

markets. The CFTC did so because these electric markets are subject to regulation by the Federal Energy 

Regulatory Commission (FERC) and state regulators, who work to ensure that energy rates remain 

reasonable, transmission systems function reliably, and the interests of market participants are 

balanced with the protection of electricity consumers. Without taking this action, CFTC rules could lead 

to inconsistent regulation, and adversely affect consumers without enhancing customer protection. 

Position Limits. The Commission re-proposed the 2013 proposed rule on position limits, which was 

originally issued prior to Chairman Massad’s tenure, in order to address a variety of concerns. The 

Commission revised the proposed position limit levels after substantial CFTC staff review of the latest 

and best estimates of deliverable supply. The Commission proposed further adjustments to the bona 

fide hedging position definition, to more closely mirror the statutory definition, which eliminates certain 

requirements determined to be unnecessary, and to address other concerns raised by market 

participants. The Commission also developed a process for exchange recognition of non-enumerated 

bona fide hedging positions and certain enumerated anticipatory hedge positions, and grants of spread 

exemptions, each subject to the Commission’s oversight. Finally, the re-proposal would relieve 

exchanges temporarily from the obligation to establish position limits on swaps subject to federal limits, 

when an exchange lacks access to position information on swaps. 

The Commission chose to re-propose the rule in December 2016 for two reasons. First, the many 

changes made to the 2013 proposal had only been proposed in pieces, and it is beneficial for the public 

to understand how these components work together as part of a comprehensive proposal. Second, with 

the Commission in a time of transition, the Commission did not wish to adopt a rule that the CFTC would 

choose not to implement or defend in the future, as this would create significant uncertainty and 

inconsistency for many end-users. 
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The Commission also finalized rules that address aggregation of accounts and positions for which a 

person controls the trading decisions and those in which the person has an ownership interest, for 

purposes of determining compliance with the position limits rule. This rule simplifies the standard for 

aggregation. The rule also provides for additional exemptions from aggregation, while providing the 

Commission with notice of exemptions relied on. 

REFORMING THE OVER-THE-COUNTER SWAP MARKET AS REQUIRED BY THE WALL STREET REFORM 

AND CONSUMER PROTECTION ACT 

During Chairman Massad’s tenure, the Commission has completed implementation of nearly all rules to 

regulate over-the-counter (OTC) swaps required by the Dodd-Frank Wall Street Reform Act. Clearing is 

now required for most interest rate and credit default swaps. The Commission also took a variety of 

actions to fine-tune rules previously adopted, in order to address unintended consequences and focus 

the rules on the areas of greatest risk. 

Today, over 80 percent of swap transactions in our markets are being cleared, as compared to only 

about 15 percent in 2007. Margin requirements are in place for uncleared swaps. Trading on regulated 

platforms has been widely adopted, and is bringing increased transparency and integrity to the process. 

Transaction data is being reported and is publicly available, which has already given regulators better 

insight, and has enhanced price discovery and competition for market participants. Specifically during 

the Chairman’s tenure, the Commission took the following actions: 

Margin Requirements. The Commission finalized and is implementing margin requirements for 

uncleared swaps. Requiring margin is perhaps the single most important element of swaps market 

regulation set forth in the Dodd-Frank Act. Margin is the first line of defense in the event of a default, 

and collection of daily variation margin prevents the accumulation of losses, thus minimizing the 

potential for excessive risk buildup in the system. 

The Commission rules focus on where the greatest risk exists– in the transactions between large 

financial institutions. Further, they exempt commercial end-users. Under Chairman Massad, CFTC staff 

worked to harmonize these rules with those of the U.S. prudential regulators, as well as with 

international standards. Initially, there were many differences across jurisdictions and between U.S. 

regulators, pertaining to threshold amounts, scope of coverage, acceptable forms of collateral and other 

areas. But after significant work, there is now substantial harmonization, which is critical to effective 

regulation and to the efficiency of the global market. 

The Commission also adopted a cross-border approach for the implementation of its rules. This 

recognizes that there can be risk to a U.S. entity from a subsidiary’s offshore transactions, even if those 

transactions are not guaranteed by the parent entity. At the same time, the Commission provided a 

broad scope of substituted compliance with the rules of other jurisdictions. 

Capital Requirements for Swap Dealers and Major Swap Participants. Following completion of the 

margin rules, the Commission re-proposed requirements setting capital requirements for swap dealers. 

Capital is also among the most important reforms of the over-the-counter swap market agreed to by the 

leaders of the G20 nations in 2009. While margin for uncleared swaps is the front line defense against a 

default, adequate capital is critical to the ability of swap dealers to absorb losses. 

The re-proposal supports safety and soundness as well as competition, by providing three different 

approaches. For swap dealers that are affiliates of prudentially regulated firms, the proposal permits 
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them to use a method based on the capital rules of U.S. prudential regulators. Swap dealers that are 

also broker-dealers can use an approach that is based on the Securities and Exchange Commission’s net 

liquid assets approach. And for those dealers that are engaged primarily in non-financial activities, the 

Commission proposed a third approach based on net worth. 

Expanding Mandatory Clearing of Swaps. The Commission required mandatory clearing for interest 

rate swaps in several additional currencies, where local jurisdictions have mandated or are expected 

soon to mandate clearing. These jurisdictions include Australia, Canada, European Union, Mexico, Hong 

Kong, Singapore and Switzerland. This supplements the initial clearing mandates that pertained to U.S. 

dollar, euro, British pound sterling and Japanese yen swaps. It further implements the G20 commitment 

to mandate clearing of standardized swaps and harmonize with counterparts abroad. 

Improving Trading of Swaps. The Commission has also taken significant action to implement the 

regulatory framework for swaps trading, as envisaged by the Dodd-Frank Act and the G20, by granting 

permanent registration status to 23 swap execution facilities (SEFs). SEFs now account for a substantial 

amount of overall swaps trading and have promoted greater price transparency and improved liquidity 

in the interest rate swap market. 

CFTC staff also issued several “no-action” letters and guidance on various aspects of this regulatory 

framework to improve the swaps trading process and address unintended consequences. These 

included: 

 Package Transactions. CFTC staff provided no-action relief that has allowed SEFs and market 

participants to develop technical capabilities to execute package transactions on SEFs. 

 Block Trades. CFTC staff has provided no-action relief so that block transactions could continue to 

be negotiated between parties and executed on a SEF, which facilitates credit checks. 

 Correcting Erroneous Trades. CFTC staff has granted relief allowing trades that have been rejected 

from clearing due to clerical or operational errors to be corrected within one hour of rejection. The 

relief also permits new, prearranged trades to offset and replace an erroneous trade that has 

already been accepted for clearing – if executed and submitted for clearing within three days. 

 SEF Confirmations and Confirmation Data Reporting. CFTC staff has provided relief to SEFs from 

the obligation to maintain copies of Master Agreements or other underlying documentation. Staff 

also provided relief for SEFs regarding their obligation to report confirmation data on uncleared 

swaps to swap data repositories, clarifying that SEFs need only report such confirmation data for 

uncleared swaps to which they already have access. 

 Inter-Affiliate Swaps. CFTC staff has provided relief to certain affiliated counterparties from 

exchange-based trading requirements. The relief permits such types of counterparties to execute 

swaps transactions off-SEF that are intended to manage risk. 

 SEF Financial Resources. Staff issued guidance that clarifies the calculation of projected operating 

expenses for the purpose of determining the capital that the law requires SEFs to hold. Specifically, 

the guidance clarifies the variable commissions that SEFs pay do not have to be included in a SEF’s 

calculation of projected operating costs. 

 Methods of Execution. The CFTC also provided greater flexibility with respect to methods of 

execution on SEFs. During the permanent registration review process, the CFTC found that an 

auction match trading protocol was acceptable as a method of execution for swaps subject to 
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exchange-trading requirements as long as the SEF rulebook provides adequate transparency 

regarding the process for setting the offer price. Further, the CFTC also found that certain types of 

streaming-based trading systems were acceptable methods of execution for swaps subject to 

exchange-trading requirements. 

 Straight-Through Processing. Staff supplemented prior Staff Guidance concerning application of the 

"as soon as technologically practicable" standard requiring straight-through processing of trades 

executed on or pursuant to the rules of a SEF, including trades using middleware, and provided time 

for the industry to achieve compliance. 

Commission staff has also explored how to harmonize trading rules with European standards, has 

developed an “exempt SEF” framework for foreign trading platforms, developed proposed revisions to 

the “made available for trade” process, and developed a proposal to codify many of the above staff 

actions into CFTC rules, all of which will await action by the next Commission. 

De Minimis Threshold. The Commission has delayed the decrease in the de minimis threshold for swap 

dealing in order to consider further what the level should be. This threshold determines when an 

entity’s swap dealing activity requires registration with the CFTC, which triggers margin and capital 

requirements, as well as other oversight and business conduct rules. The rule originally provided for an 

automatic drop in the threshold from $8 billion in notional amount of swap dealing activity over the 

course of a year to $3 billion. 

This action was taken after completion of a staff report on the threshold. It estimated that lowering the 

threshold would not increase significantly the percentage of interest rate swaps (IRS) and credit default 

swaps (CDS) covered by swap dealer regulation, but it would require many additional firms to register. 

This might include some smaller banks whose swap activity is related to their commercial lending 

business. 

The Commission also finalized a rule permitting parties engaging in swaps with public utilities to exclude 

such swaps from the $25 million de minimis threshold for swaps with special entities. 

Increased Focus on Uncleared Swaps. The staff report on the de minimis threshold referenced above is 

just one example of how the Commission has increased its analysis, monitoring, and overall focus on 

uncleared swap data and uncleared swap exposures during Chairman Massad’s tenure. These efforts 

include the development of greater risk surveillance work and the development of an internal weekly 

swaps report. 

Revisions to Reporting Rules. Under Chairman Massad, the Commission has made numerous revisions 

to its reporting requirements and worked to streamline and harmonize reporting requirements. First, 

the Commission adopted a rule to create a simple, consistent process for reporting cleared swaps. The 

rule streamlines the reporting process so there are not duplicate records of a swap, which can lead to 

double counting that can distort the data. It makes sure that accurate valuations of swaps are provided 

on an ongoing basis. It also eliminates some needless reporting requirements for swap dealers and 

major swap participants. 

Commission staff has also put out for comment draft technical specifications for swap data reported to 

swap data repositories (SDRs). The published draft technical specifications addressed the reporting of 

120 priority data elements and described the form, manner and the allowable values that each data 

element can have. CFTC staff also co-chairs the working group tackling this issue internationally, which 

has similarly proposed standardized reporting fields. The staff is also working to evaluate consistency 

between U.S. and international standards. 
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The Commission also proposed changes to its swap data rules that will make it easier for other 

regulators, both domestic and foreign, to gain access to SDR swap data. The proposal would conform 

CFTC rules to various changes Congress made in law, and provide a process for the sharing of 

information. Among other things, Congress removed a requirement that another regulator must 

indemnify both the CFTC and the swap data repository for expenses related to litigation before data 

could be shared. This proposal removes the requirement in the CFTC’s own rules, makes other changes 

consistent with Congressional action, and creates a process for when and how other regulators gain 

access to SDR information that will protect confidentiality. 

In addition, Commission staff issued time-limited, no-action relief to make sure new swap reporting 

requirements do not make it more difficult for a commercial end-user to hedge risk. The staff permitted 

delayed reporting for certain less liquid, long-dated swap contracts.

The CFTC also codified no-action relief related to the timing for filing chief compliance officer (CCO) 

annual reports for swap dealers, futures commission merchants, and major swap participants. 

Specifically, the rule gives participants 90 days following their fiscal year-end to file CCO annual reports 

and clarifies the filing requirements applicable to swap dealers and major swap participants located in 

jurisdictions for which the CFTC has granted a comparability determination with respect to the contents 

of the reports. 

Simplifying and Improving Portfolio Reconciliation Requirements. The Commission amended its 

requirement that swap dealers (SD) and major swap participants (MSP) exchange the terms of swaps 

with their counterparties for portfolio reconciliation by limiting the exchange to only “material terms” of 

swaps and revising the definition of “material terms” so that SDs, MSPs, and their counterparties can 

focus on reconciling data fields that impact swap valuation and counterparty obligations, without 

impairing the CFTC’s ability to oversee and regulate the swaps markets.

Proposed Rule Regarding the Application of Certain Swap Provisions in Cross-Border Transactions. The 

Commission proposed a rule addressing the cross-border application of certain swap provisions of the 

Commodity Exchange Act. Prior to the Chairman’s tenure, the Commission published guidance in this 

area. The proposed rule would enhance clarity and consistency by establishing clear standards on 

certain matters discussed in the guidance. Among other things, the proposal provides a standard for 

determining whether a swap dealing transaction should be included in an entity’s calculation of whether 

it must register as a swap dealer. It provides a consistent definition of “U.S. person” and defines other 

key terms consistent with how they are defined in the Commission’s cross-border margin rule. It would 

apply external business conduct (EBC) standards for cross-border transactions, including those 

transactions that are arranged, negotiated, or executed by personnel in the U.S. 

Working with NFA to Implement Dodd-Frank Rules Efficiently. Under Chairman Massad, the CFTC has 

delegated additional responsibilities to, and enhanced coordination efforts with, the National Futures 

Association (NFA), a self-regulatory organization. By virtue of this, the Commission is now leveraging the 

significant resources of the NFA to better oversee its registrants, and focusing finite CFTC resources on 

NFA oversight, strategic horizontal and direct reviews, industry monitoring/surveillance, and, when 

necessary, critical incident response. 

Specifically, at Chairman Massad’s direction, the NFA has taken on additional responsibilities with 

respect to the review of swap dealer registration applications, the ongoing examination of swap dealers, 

swap valuation disputes, the review of swap dealer margin models for uncleared swaps, and (upon 

finalization of a capital rule) the review of swap dealer capital models. Separately, the Commission 

issued an order authorizing the NFA as a designee to secure access to data maintained by swap data 

repositories in order to facilitate NFA’s performance of its functions as a registered futures association. 
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CENTRAL CLEARING AND CLEARINGHOUSE RESILIENCE 

In 2009, the G20 leaders made a decision to require clearing of standardized swaps through central 

counterparties or CCPs, which enables market participants to reduce exposures, mitigate counterparty 

credit risk, and mutualize tail risk. But while clearing reduces risk, it does not eliminate it. Therefore, as 

use of central clearing has increased, it has become even more important to focus on making sure 

clearinghouses are strong and stable. Chairman Massad has made clearinghouse strength and resilience 

a priority during his tenure. 

Equivalence accord with European Commission. In February 2016, European Commissioner Jonathan 

Hill and Chairman Massad announced an agreement that resolved longstanding issues regarding the 

recognition and oversight of clearinghouses. As a result, European market participants can continue to

clear derivatives on U.S. clearinghouses, which has leveled the playing field for U.S. and EU 

clearinghouses and allowed the derivatives market to continue to be global. The agreement helped

bring the two regulatory regimes closer together, and helped ensure that central clearinghouses on both 

sides of the Atlantic are held to high standards. That contributes to financial stability and the potential 

for growth. 

Soon after this announcement, the CFTC took action to implement this agreement, approving a 

comparability determination that identified the rules regarding regulation of clearinghouses for which 

the CFTC will recognize substituted compliance. The Commission also streamlined the process for 

European clearinghouses to register with the CFTC, which will further harmonize the two regimes. 

Following this accord, four U.S. clearinghouses have received formal recognition in the EU: CME 

Clearing, ICE Clear Credit, ICE Clear U.S, and Minneapolis Grain Exchange. 

Recovery Rules and Plans. The CFTC has worked to ensure that CME and ICE Clear Credit, the two 

clearinghouses under the Commission’s jurisdiction that are designated as systemically important by the 

Financial Stability Oversight Council, complete their recovery and wind down plans and rules. CFTC staff 

released detailed guidance on what must be part of these plans and rules. 

Enhancing Risk Surveillance and Stress Tests. Chairman Massad has also made surveillance and testing 

of clearinghouse resilience top priorities. The CFTC’s examination and risk surveillance programs focus 

on clearinghouse resilience on an ongoing basis. There are extensive daily margin and position reporting 

requirements that enable the Commission to engage in daily risk surveillance. This involves looking at 

risk at the clearinghouse, clearing member, and trader levels, and examining market risk, liquidity risk, 

credit risk, and concentration risk, in order to identify who is at risk, the magnitude of that risk, and how 

that risk compares to available financial resources. The clearinghouses are also required to oversee the 

risk management policies and practices of their members. 

CFTC staff also released a report in November 2016 on the results of a series of supervisory stress tests 

they performed on the five largest clearinghouses under the CFTC’s jurisdiction, located in the U.S. and 

the United Kingdom. These tests assessed the impact of stressful market scenarios across these 

clearinghouses and across the largest clearing members. The results showed that the clearinghouses 

had ample resources to withstand extremely stressful market scenarios on the test date. They further 

showed that risk was diversified across clearing members and across scenarios— for example, a clearing 

member that had a loss at one clearinghouse might actually have gains at others. The CFTC’s ability to 

conduct these tests is directly related to our framework for oversight of foreign and domestic 

clearinghouses registered with the Commission. No other regulator of clearinghouses is currently able to 

look across national boundaries like this. 
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Working with FDIC on Resolution Planning. The CFTC is working closely with staff of the Federal Deposit 

Insurance Corporation (FDIC), the statutory resolution authority for systemically important 

clearinghouses. The agencies are working to develop resolution strategies in light of Dodd-Frank and 

international standards. In addition, the first Crisis Management Groups for those clearinghouses have 

been planned for early 2017. 

Actions to Protect Customer Funds. The Commission also took action to further ensure the safety of 

customer funds, by issuing an order that made it possible for systemically important clearinghouses to 

deposit customer funds at Federal Reserve Banks, and by working with clearinghouses and the Federal 

Reserve to open such accounts. The order makes clear that a Federal Reserve Bank that opens such an 

account would be subject to the same standards of liability that generally apply to it as a depository, 

rather than any potentially conflicting standard under the commodity laws. These accounts have been 

formally authorized and are now in the process of being opened. 

International Work on CCP Resilience, Recovery and Resolution. CFTC staff is also helping to lead a 

major effort involving regulators from around the world to look at clearinghouse resilience, recovery 

and resolution planning. The effort has four main components, and the Commission is participating in all 

of them. 

First, the CFTC is co-chairing a working group looking at clearinghouse resilience and recovery issues. 

This includes examining whether international regulatory standards are sufficiently granular in several 

areas, such as margin methodologies, liquidity, governance and stress testing. In addition, there are 

other working groups assessing the implementation of these standards at ten representative 

clearinghouses, examining resolution planning for clearinghouses, and examining the interdependencies 

among global clearinghouses and major clearing members. 

ADDRESSING NEW CHALLENGES AND OPPORTUNITIES IN THE DERIVATIVES MARKETS 

Regulators must not just look backwards to address the causes of past failures or crises. They also must 

look ahead—ahead to the new opportunities and challenges facing our markets. Financial markets 

constantly evolve, and Chairman Massad has taken a number of steps to ensure our regulatory 

framework is adapting to these changes. 

Cybersecurity/System Safeguard Rules. Today, the risk of cyberattack probably represents the single 

greatest threat facing the stability and integrity of the markets the Commission regulates. Early in his 

tenure, Chairman Massad directed the staff to examine ways to improve cybersecurity protection. This 

led to the proposal and finalization of rules to bolster protections against cyberattacks and other types 

of operational risk. These rules require the firms that run the core market infrastructure – the 

exchanges, clearinghouses, trading platforms, and trade repositories – to regularly evaluate cyber risks 

and test their cybersecurity and operational risk defenses. The rules require specific types of testing, 

ensure the independence with which testing is applied and assessed, and impose principles-based 

standards that rely on best practices. 

The Commission is also continuing to make cybersecurity a priority in its examinations. The 

examinations look at an entity’s policies and procedures, vigilance and responsiveness to identified 

weaknesses, the resources being devoted to cybersecurity, and the priority placed on it by the board or 

senior management. 
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The Commission has also made it a priority to facilitate greater sharing of information between 

government and businesses on potential cyber threats and preparations to prevent attacks. There has 

been a significant increase in such cooperation across the government during the last two years. As an 

example, the CFTC hosted an exercise involving participants from several government agencies—

including law enforcement agencies and Homeland Security—as well as CME, ICE, clearing firms, and 

trading firms—to discuss what would happen if derivatives trading platforms were hit by a cyberattack. 

These exercises assist regulators in planning for and understanding how such an attack could unfold. 

In addition to guarding against technological threats among the entities the CFTC regulates, Chairman 

Massad has also pushed increased vigilance regarding the Commission’s internal cybersecurity. The 

Office of Management and Budget’s annual evaluation of all federal agencies for cybersecurity 

performance, which is conducted pursuant to the Federal Information Security Management Act, ranks 

the CFTC among the highest for smaller agencies, receiving compliance scores of over 90 percent for two 

consecutive years. 

Automated Trading. The markets the CFTC regulates have changed fundamentally in the last several 

years. The days of pit-based, open outcry trading have transformed into a machine dominated market 

where a millisecond is considered slow. At the CFTC, Chairman Massad has worked to ensure that our 

oversight and regulatory framework keep up. The Commission proposed rules designed to address the 

risk of disruption or other operational problems that can be caused by automated trading. The proposal 

requires pre-trade risk controls such as message throttles and maximum order size limits, and other 

measures such as “kill switches,” which facilitate emergency intervention in the case of malfunctioning 

algorithms. The types of controls required were based on market participant input as to what were best 

practices. But the proposal does not prescribe the parameters or limits of such controls, leaving those 

specifics to market participants. The proposal sets general requirements pertaining to the design, testing 

and supervision of automated trading systems, but again leaves the details of those to market 

participants. The proposal also requires that source code and similar records be preserved and made 

available to the Commission when necessary, but requiring such access to be authorized by the 

Commission itself. 

The CFTC has also enhanced its surveillance and enforcement efforts in light of the increased use of 

automated trading. The Commission has increased its capabilities to receive and analyze message data 

and developed its own sophisticated analytical tools to examine trading by the millisecond. Notably, the 

Commission also obtained new statutory authority under Dodd-Frank to prevent illegal behavior such as 

“spoofing.” Under Chairman Massad, the Commission has brought several spoofing cases, where market 

participants used complex algorithmic strategies to generate and then cancel massive numbers of bids 

or offers without the intention of actually consummating those transactions in order to affect price. See 

additional discussion under “Enforcement.”

Financial Technology. Chairman Massad has also focused on the innovations that may be created 

through financial technology, such as blockchain technology. Although meaningful applications of this 

technology in our markets is probably some time away, Chairman Massad has emphasized that 

Commission rules should not stand in the way of its potential. To that end, the Commission proposed 

amendments to modernize recordkeeping and storage obligations set forth in CFTC rules, and make 

them technology neutral. As mentioned above, the proposal would provide greater flexibility when it 

comes to how records must be retained and produced, which reduces costs and improves the quality of 

preservation and production. 
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INTERNATIONAL MATTERS 

Chairman Massad has focused on working closely with other regulators from around the world. 

Extensive international coordination and cooperation is extremely necessary to have modern, global 

regulation of markets. This includes harmonizing rules as much as possible, and working together on 

oversight. This also includes the development and implementation of registration or exemption 

processes for non-U.S. exchanges, trading platforms and clearinghouses that recognize where foreign 

laws provide comparable oversight. During the Chairman’s tenure, the Commission has actively 

engaged with the European Union and the UK, as well as Australia, Canada, China, Hong Kong, India, 

Japan, Malaysia, Mexico, Singapore, South Korea, Switzerland and others on important initiatives, such 

as clearinghouse regulation, automated trading, cybersecurity and surveillance and enforcement 

matters. Specific accomplishments include the following: 

Margin Requirements. Chairman Massad and the CFTC staff worked to harmonize the CFTC’s margin 

rules with international standards. See discussion under “Reforming the Over-The-Counter Swap 

Market.” The Commission staff also issued a comparability determination for Japan with respect to 

margin rules. 

Equivalence accord with Europe. Chairman Massad reached an accord with the European Union on 

clearinghouse recognition and oversight. See discussion under “Central Clearing.”

European Commission (EC) Equivalence Decision for Designated Contract Markets. Chairman Massad 

and the CFTC staff also worked to secure an equivalence decision from the European Commission with 

respect to U.S. derivatives exchanges. Under the EC decision, fifteen DCMs were determined to be 

equivalent, including CME, ICE Futures and Nasdaq Futures. 

Registration of Eurex Clearing. The Commission approved the registration of Eurex Clearing as a 

derivatives clearing organization, making it the sixth non-U.S. clearinghouse to be registered as a DCO. 

Foreign Boards of Trade. The Commission is also improving cross-border regulation when it comes to 

futures trading as well. Chairman Massad made it a priority to enhance the review process so that 

foreign exchanges seeking to provide direct electronic access to persons in the U.S. register with the 

CFTC as a foreign board of trade, or FBOT, without undue delay. The registration is conditioned upon, 

among other things, the exchange being subject to standards that are comparable with CFTC 

regulations. During his tenure, the Commission approved the registration of 12 exchanges as FBOTs. 

They include: 

 BM&F Bovespa S.A. (BVMF) (Brazil) 

 Bursa Malaysia 

 Cleartrade Exchange Pte. Limited (Singapore) 

 CME Europe Limited (CMEEL) 

 Eurex Deutschland (Eurex) 

 ICE Futures Canada 

 ICE Futures Europe (IFEU) 

 London Metal Exchange (LME) 

 London Stock Exchange Derivatives (LSED) 

 Montreal Exchange 

 Singapore Exchange Ltd. (SGX-DT) 

 Tokyo Commodity Exchange (TOCOM) 
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Exempt Clearinghouses. Under Chairman Massad’s direction, the staff developed a process to permit 

non-U.S. clearinghouses that seek to clear swaps for their U.S. clearing members only, and not for U.S. 

customers, to obtain an exemption from CFTC registration requirements. The Commission has issued 

such exemptive orders for clearinghouses located in Australia, Japan, South Korea and Hong Kong. In 

these cases, the clearinghouse need not comply with many CFTC regulations as long as it has 

comparable and comprehensive supervision and regulations—and complies with the international 

standards set forth in the Principles for Financial Market Infrastructures. 

Exemptions to Solicit Orders or Funds from U.S. Customers. The Commission has also issued several 

exemptions so that firms can solicit and accept orders or funds directly from U.S. customers for trading 

on specified non-U.S. exchange(s) without having to register with the CFTC. These include the Hong 

Kong Securities and Futures Commission and the Korea Exchange. 

Foreign Swaps Trading Platforms. The Commission staff have been working with European Commission 

staff on methods for recognizing swap trading platforms. The staff also extended no-action relief for 

Australian-based trading platform Yieldbroker Pty Limited. 

Memoranda of Understanding and Similar Arrangements. The Commission entered into memoranda 

of understanding and similar arrangements with authorities in many non-U.S. jurisdictions to promote 

greater international cooperation and information sharing with respect to the supervision of crossborder regulated entities. Such arrangements were entered into with authorities in the following 

jurisdictions: Australia, Canada, the European Union, Germany, Hong Kong, Korea, Mexico, and the 

United Kingdom. 

Alternative Processes for Registration of Foreign Persons. The Commission amended its rules to permit 

alternative means for foreign persons to comply with certain registration requirements. Such persons’ 

firms can complete criminal background checks in lieu of submitting fingerprints. 

ENFORCEMENT ACTIONS 

The CFTC’s enforcement responsibilities are more important than ever, due to its expanded mission, 

increasing market complexity, increasing cross-border nature of unlawful schemes due to the 

globalization of the markets, and the continued threats to the integrity of the markets through 

manipulative or deceptive schemes, disruptive trading practices, such as spoofing, and other unlawful 

practices. During Chairman Massad’s tenure, the Commission has pursued cases involving manipulation, 

false reporting of market information, spoofing, as well as a wide range of fraudulent schemes, including 

Ponzi schemes, precious metals frauds and deceptive practices related to commodity pools, which 

preyed upon the retail public. 

The agency’s actions have led to billions of dollars in restitution being ordered, which helps compensate 

a victimized party, and in disgorgement and civil monetary penalties, which goes directly to the U.S. 

Treasury. See the table below for the number of new enforcement actions filed and a summary of 

monetary sanctions ordered in all pending cases each fiscal year. 

Year Enforcement 

Actions

Civil Monetary 

Penalties

Restitution and 

Disgorgement

Total Monetary 

Sanctions

2014 67 $1.8 Billion $1.4 Billion $3.27 Billion

2015 69 $3.144 Billion $59 Million $3.2 Billion

2016 68 $484 Million $543 Million $1.29 Billion
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Some of the types of cases pursued under the Chairman’s term include the following:

Integrity of Benchmarks. During Chairman Massad’s tenure, the Commission has brought twelve actions 

against banks and brokers to address abuses and ensure the integrity of critical, global financial 

benchmarks, such as foreign exchange, LIBOR, and ISDAFIX benchmarks. These cases required 

remediation measures including strengthening internal controls and improvements to benchmark 

setting processes, as well as the payment of penalties totaling over $3.4 billion. 

 The CFTC issued six orders filing and settling charges against Barclays Bank PLC (Barclays), 

Citibank N.A. (Citibank), HSBC Bank plc (HSBC), JPMorgan Chase Bank N.A. (JPMorgan), The 

Royal Bank of Scotland plc (RBS), and UBS AG (UBS) for attempted manipulation of, and for 

aiding and abetting other banks’ attempts to manipulate, global foreign exchange benchmark 

rates to benefit the positions of certain traders. A total of more than $1.8 billion in penalties has 

been imposed on these banks for misconduct. 

 The CFTC issued an order against Deutsche Bank AG finding that Deutsche Bank routinely 

engaged in acts of false reporting and attempted manipulation and, at times, succeeded in 

manipulating the LIBOR for U.S. Dollar, Yen, Sterling, and Swiss Franc, and the Euro Interbank 

Offered Rate (Euribor), and did so to benefit cash and derivatives trading positions that were 

priced off LIBOR or Euribor. The CFTC ordered Deutsche Bank to pay an $800 million civil 

monetary penalty, the largest fine in the CFTC’s history. 

 The Commission ordered CitiBank, N.A. and its Japanese affiliates to pay a $175 million penalty 

for attempted manipulation of Yen LIBOR and Euroyen Tokyo Interbank Offered Rate (TIBOR), as 

well as false reporting of Euroyen TIBOR and U.S. Dollar LIBOR. 

 The Commission issued three orders against financial institutions for attempted manipulation 

and false reporting of U.S. dollar ISDAFIX benchmark swap rates: Citibank ($250 million civil 

monetary penalty; Barclays, Barclays Bank PLC, and Barclays Capital ($115 civil monetary 

penalty); Goldman Sachs Group, Inc., and Goldman, Sachs, & Co., N.A. ($120 million). 

Spoofing and Manipulation. The Commission has brought numerous cases involving manipulation of 

and disruptive trading, through spoofing, involving multiple markets, including crude oil, wheat, e-mini 

500, copper and precious metals. Notably, the Commission charged Navinder Singh Sarao and his 

company Nav Sarao with manipulation, attempted manipulation, and spoofing with regard to the E-mini 

S&P 500 futures contracts over a five-year period, including when the Defendant’s alleged misconduct 

contributed to the market conditions that led to the “Flash Crash.” The CFTC brought this action to 

resolution through settlement and obtained over $38 million in disgorgement and penalties. Mr. Sarao 

also pled guilty to criminal charges brought by the Department of Justice (DOJ). In addition, the 

Commission worked with the U.S. Attorney’s Office for the Northern District of Illinois on a criminal 

conviction against Panther Energy Trading LLC and Michael J. Coscia for engaging in “spoofing,”

following a civil case brought by the Commission. 

 Igor B. Oystacher and his proprietary trading company, 3Red Trading LLC, were charged with 

engaging in a manipulative and deceptive spoofing scheme while trading at least five different 

futures contracts on four exchanges for more than two years. The CFTC charged the defendants 

pursuant to its new Dodd-Frank authorities, which prohibit certain disruptive trading practices, 

including spoofing, and provide the Commission additional anti-fraud and anti-manipulation 

authority, prohibiting the intentional or reckless use of a manipulative or deceptive device or 

contrivance. In settlement, a federal court ordered the defendants pay a $2.5 million penalty 

and required that an independent monitor assess and monitor for three years all 3Red’s and 
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Oystacher’s futures trading for the purpose of identifying any future violations. 

 Heet Khara and Nasim Salim were charged with engaging in unlawful disruptive trading practices 

in the gold and silver futures markets, specifically by “spoofing” over several months in early 

2015. In the subsequent settlement of this litigation, the Commission obtained over $2.9 million 

in penalties and permanent trading and registration bans. 

Frauds Against Retail Investors. The Commission has brought actions for failing to properly protect of 

customer funds, for retail fraud schemes, for illegal, off-exchange contracts, and failure to register with 

the Commission. In addition, Dodd-Frank gave the Commission additional authority to go after financed 

transactions in precious metals. Under Chairman Massad, the Commission was vigorous in its 

enforcement efforts in this area, as this was an area of considerable abuse that often targeted retirees. 

 The CFTC was granted a default judgment and permanent injunction against Defendants Alvin 

Guy Wilkinson and his entities, Chicago Index Partners, L.P. and Wilkinson Financial Opportunity 

Fund, L.P., for commodity pool fraud that victimized 30 investors. The Order found that 

Wilkinson misappropriated pool funds, fraudulently solicited pool participants, issued false 

statements to customers and provided false financial information to the National Futures 

Association (NFA). The judgment totaled $21 million in sanctions. 

 The Commission obtained a consent order against Banc de Binary, Ltd, its affiliates and CEO for 

violations of CFTC’s ban on trading binary options off-exchange and obtained more than $9 

million in restitution and penalty. 

Other Notable Cases. The Commission has also has brought actions for other violations of trade 

practices, such as wash trades, fictitious trades, position limits, trading ahead, and in many other areas. 

Notable cases include the following: 

 The Commission brought a $100 million action against JP Morgan Chase Bank, N.A. for failure to 

disclose certain conflicts of interest to clients of its wealth management business. 

 The Commission obtained consent order against U.S. Bank National Association requiring US 

Bank to pay $18 million to customers of Peregrine Financial Group Inc. Peregrine and its CEO 

Russell Wassendorf held segregated funds at the bank that CEO used to defraud customers and 

misappropriate over $200 million. 

 The Commission ordered Jon Ruggles to disgorge more than $3.5 million in trading profits and 

pay a $1.75 million penalty or engaging in fraudulent, fictitious, and noncompetitive trades in 

crude and heating oil futures and options, among others. 

 CFTC brought an action against Arya Motazedi for engaging in fraudulent transactions related to 

gas and oil futures. Motazedi was ordered to pay a civil monetary penalty of $100,000 and 

restitution in the amount of $217,000—and was permanently banned from trading and 

registering as a futures professional in any capacity with the CFTC. 

Reporting Violations. The Commission has also brought several actions charging reporting violations, 

including its first enforcement actions enforcing the new Dodd-Frank Act large trader reporting 

requirements for physical commodity swap positions, for real time public reporting of swap 

transactions, and for the reporting of swap data. The CFTC also took action against an exchange for 

recurring data reporting problems, sending a clear message that all persons must be held accountable to 

meet their regulatory responsibilities. 
14

 Société Générale SA failed to properly report certain non-deliverable forward transactions to a 

swap data repository (SDR), and failed to timely report to an SDR a large number of foreignexchange swap, foreign-exchange forward, and non-deliverable forward transactions. Société 

Générale was ordered to pay a $450,000 civil monetary penalty. 

 Deutsche Bank AG, a provisionally registered swap dealer, has been subject to two actions by 

the Commission relating to significant reporting violations. In the Commission’s first acton, the 

Commission found that Deutsche failed to properly report its swaps transactions, did not 

diligently address and correct the reporting errors until the bank was notified of the CFTC’s 

investigation, and failed to have an adequate swaps supervisory system governing its swaps 

reporting requirements. The bank was ordered to pay a $2.5 million civil monetary penalty. In 

August of 2016, the Commission filed a federal court action against Deutsche for further swap 

reporting and supervisory violations as well as for violating the Commission’s prior order. Based 

on the Commission’s allegations of ongoing violations, the court appointed a monitor to ensure 

Deutsche Bank’s compliance with its reporting responsibilities. 

 ICE Futures U.S., Inc. (ICE), a designated contract market, failed to submit accurate and 

complete reports, which errors included incorrect clearing member reports, permanent record 

data, and transaction-level trade data. ICE was ordered to pay a $3 million civil monetary 

penalty. 

Whilstleblower Program. The Dodd Frank Act authorized for the first time a Whistleblower Program for 

the CFTC. The agency has been implementing this new authority and building out the program, and the 

number of tips, complaints and referrals that the Enforcement Division receives has increased year over 

year. The CFTC made its first Whistleblower award in 2014 and has made a total of four awards to 

individuals who provided specific and credible information about violations that lead to a successful 

enforcement action. In 2016, CFTC issued a whistleblower award of more than $10 million, marking the 

largest such award since Congress created the CFTC Whistleblower program in 2010, and reflecting the 

continued growth and impact of the Agency’s Whistleblower Office.

The Commission has proposed amendments to the Whistleblower rules to, among other things, improve 

the review process, strengthen the anti-retaliation protection and improve confidentiality protections. 

Registration Deficient (“RED”) List. As part of its ongoing efforts to help protect Americans from fraud, 

the CFTC created the “Registration Deficient List” (RED List), which contains the names of unregistered 

foreign entities that the CFTC has reason to believe are soliciting and accepting funds from U.S. residents 

at a retail level for, among other things, trading in foreign currency or binary options, and who are 

required to register with the CFTC but, in fact, are not registered. 

LITIGATION 

During Chairman Massad’s tenure, the Commission has achieved a number of litigation victories in 

various federal courts around the country. These cases include the following: 

 CFTC v. Parnon Energy, 593 Fed.Appx. 32 (2nd Cir. 2014), which affirmed the district court order 

rejecting allegations that CFTC violated discovery obligations. 

 CFTC v. Driver, 585 Fed.Appx. 366 (9th Cir. 2014), which affirmed judgment in favor of the CFTC 

in a commodity pool fraud case. 
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 Bolze v. CFTC, 13-5484 (6th Cir. 2014), which affirmed judgment in favor of the CFTC in a 

commodity pool fraud case. 

 CFTC v. Hall, 632 Fed. Appx. 111 (4th Cir. 2015), which affirmed judgment in favor of the CFTC 

against a commodity trading advisor for failure to register. 

 CFTC v. Battoo, 790 F.3d 748 (7th Cir. 2015), which affirmed an asset freeze order against a 

fraud defendant. 

 CFTC v. Kratville, 796 F.3d 873 (8th Cir. 2015), which affirmed a judgment in favor of the CFTC in 

a commodity pool fraud case. 

 Scott v. Frankel, 77 F.Supp.3d 124 (D.D.C. 2015), which granted the Commission’s motion to 

dismiss various Constitutional and other tort claims. This was affirmed by the U.S. Court of 

Appeals for the D.C. Circuit on June 8, 2016. 

 Chu v. CFTC, 823 F.3d 1245 (9th Cir. 2016), which affirmed a CFTC reparations decision. 

 CFTC v. Amerman, 645 Fed. Appx. 938 (11th Cir. 2016), which affirmed judgment in favor of the 

CFTC in a commodity pool fraud case. 

 CFTC v. Monex Deposit Co., et al., 824 F.3d 690 (7th Cir. 2016), which affirmed order enforcing 

CFTC’s investigative subpoena in a precious-metals fraud investigation under the Commodity 

Exchange Act. 

 In re Peregrine Fin’l Grp., 510 B.R. 190 (Bnkr. Ct. N.D. Ill. 2014), aff’d, Secure Leverage Grp., Inc., 

et al. v. Bodenstein, 558 B.R. 226 (N.D. Ill. 2016), which affirmed judgment in favor of the CFTC in 

the Peregrine bankruptcy; agreeing with the CFTC that futures customers have priority in 

bankruptcy over forex customers. 

 CFTC v. JBW Capital, LLC, 812 F.3d 98 (1st Cir. 2016), which affirmed judgment against 

unregistered CPO fraud defendant. 

 Witter v. CFTC, 832 F.3d 745 (7th Cir. 2016), which affirmed a CFTC reparations decision. 

CUSTOMER EDUCATION AND OUTREACH 

Under the Chairman’s tenure, the Commission has grown its Office of Customer Education and Outreach 

(OCEO), which was created under authority in the Dodd-Frank Act to develop customer and public 

education initiatives. Among its duties, the OCEO creates and distributes financial education messages 

and materials designed to help customers spot, avoid, and report fraud and other violations of the CEA. 

SmartCheck. The OCEO launched the SmartCheck initiative in 2015, which connects investors to tools to 

check the registration, license, and disciplinary history of certain financial professionals. This collection 

of tools allows the responsible investor to confirm the credentials of investment professionals, uncover 

any past bad behavior, and stay ahead of scam artists with news and information. 

IMPROVING COMMISSION MORALE, TECHNOLOGY AND EFFICIENCY 

The Federal Employee Viewpoints Survey reported declining ratings for the agency for several years. 

This began to change in 2015, as the CFTC had a six percent increase in global satisfaction compared to 

2014, which was followed by a further nine percent increase in 2016 over 2015. 

Chairman Massad has sought to enhance efficiency and technological capabilities despite severe budget 

constraints. The CFTC was among the highest rated small agencies in cybersecurity protections in 2015 

and 2016 (see “Addressing New Challenges”). The agency has increased its capabilities to receive and 

analyze message data on its markets and developed its own sophisticated tools for analyzing that data. 

The agency has significantly increased the use of electronic reporting for its registrants. The Chairman 

has also made the Commission more data-driven through the development of cross-divisional working 
16

groups to make maximum use of reported data and the development of more internal metrics and 

reports. The Chairman has also expanded the Office of the Chief Economist, although Congress has 

denied the funding the Chairman sought to expand the office further. 

Chairman Massad also directed staff to overhaul the Commission’s website to improve its visual design 

and make a number of technical improvements to make it more user-friendly. The new site, which 

launched in 2016, features an improved search function, updated content, and will soon have new 

educational resources from the Office of Customer Education and Outreach. It offers a modern design 

that is simpler, less cluttered, and mobile-friendly. This layout has been informed by research that takes 

into account visitor feedback as well as web traffic data. 

The Commission has received unqualified reports on its financial statements and its internal controls 

from its independent auditors. In each, there were no material weaknesses or significant deficiencies 

cited in every year for the last 10 years, except fiscal year 2015. For that year, a GAO report on lease 

accounting practices led to material weaknesses in the audit reports. The underlying problems dated 

back to 1994 but had never been identified by the Commission’s independent accountants, nor by the 

staff until 2015, when the staff responded to a GAO inquiry. Under Chairman Massad, the Commission 

reported the matter fully to the GAO and Congress and took action to improve internal controls. The 

Commission also took the initiative to enter into an agreement with GSA to turn over certain agency 

leasing responsibilities to the GSA. In fiscal year 2016, the Commission cleared the material weakness 

related to leases and regained its clean audit opinion, with no material weaknesses or significant 

deficiencies reported.