CFTC May Move Enforcement Staff to Dodd-Frank Oversight Roles

The U.S. Commodity Futures Trading Commission says it will shift enforcement staff to meet Dodd-Frank Act demands in 2012, after failing last year to adequately oversee CME Group Inc., the world’s largest futures exchange.

The CFTC didn’t meet its own goals to review CME, the Chicago Board of Trade, and ICE Futures U.S. in the year ending Sept. 30, 2011 for compliance with the agency’s core principles for exchange-traded markets, according to an agency report on its own performance. In a separate spending plan for fiscal 2013, the agency said it would reassign staff this year from enforcement to oversee new applications for registration with the agency that stem from the Dodd-Frank regulatory overhaul.

“The commission acknowledges that this realignment creates risks in its critical oversight roles,” the agency said in the budget and performance plan describing its priorities for 2012. “The agency’s performance is affected by the challenges of limited resources,” CFTC Chairman Gary Gensler said in the budget request.

The Securities and Exchange Commission and CFTC are leading U.S. efforts to write new regulations required under the 2010 Dodd-Frank financial-overhaul. The agencies aim this year to complete rules designed to have most swaps guaranteed by central clearinghouses and traded on exchanges or other venues.

The CFTC received authority to oversee the bulk of the swaps market, which was largely unregulated prior to Dodd-Frank and blamed by congressional lawmakers for fueling the 2008 credit crisis.

MF Global’s Impact

Changes to oversight of the futures market have been considered by the CFTC since MF Global Holdings Ltd. collapsed last year. Gary Gensler, CFTC chairman, has asked the agency’s staff to develop recommendations for new oversight of the industry’s self-regulatory organizations and brokers. The review may include recommendations for changes requiring congressional action, according to a Jan. 26 letter from Jill E. Sommers, a Republican commissioner, to Senator Pat Roberts, a Kansas Republican.

“If major exchanges are not reviewed annually, it is difficult to provide any assurance to the public or other regulators of the exchanges’ ongoing core principle compliance,” the agency said in the report about its 2011 work. The CFTC also fell short of its goals for setting up automated surveillance alerts for the futures market and automating systems for market data.

Commissioners’ Dissent

“In light of the MF Global insolvency, we must remain vigilant in our oversight of the futures markets for both systemic and operational risks,” Sommers and Scott O’Malia, a Republican commissioner, said in a dissent from the CFTC report. “Unfortunately, resources have been redirected to Dodd-Frank-related rulemakings and reduce our capacity to appropriately oversee these markets.”

President Barack Obama requested $308 million to fund the CFTC in fiscal 2013, a 50 percent increase from its current $205 million budget. The CFTC’s budget has been the focus of a debate between Democrats seeking additional resources to complete Dodd-Frank rules and Republicans trying to reduce the agency’s spending as part of a broader effort to rein in deficits.

Congress last year rejected Obama’s request for $308 million to support the current fiscal 2012 budget.

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