Commodity Futures Trading Commission Commodity Futures Trading Commission CFTC _9ec12d2c-4f6e-418a-a301-7a6494f82b49 a738582e-b3cf-41be-ac5e-079db6c31821 To protect market users and the public from fraud, manipulation, and abusive practices related to the sale of commodity futures and options, and to foster open, competitive, and financially sound commodity futures and option markets. _aecc507c-8d0b-4520-b61b-77bbf454eb24 Commodity Futures and Option Markets Ensure the economic vitality of the commodity futures and option markets. _ed0c3298-76e0-4c23-9661-5ce8984b98ff 1 In order for commodity futures and option markets to fulfill their vital role in the national and global economy, they must operate efficiently, accurately reflect the forces of supply and demand, and serve market users by fulfilling an economic need. Through direct market surveillance and through oversight of the surveillance efforts of the exchanges themselves, the Commission works to ensure that markets operate free of manipulation or congestion. The heart of the Commissions direct market surveillance is a large-trader reporting system, under which clearing members of exchanges, futures commission merchants (FCMs), and foreign brokers electronically file daily reports with the Commission. These reports show all trader positions above specific reporting levels set by CFTC regulations. Because a trader may carry futures positions through more than one FCM and because a customer may control more than one account, the Commission routinely collects information that enables its surveillance staff to aggregate information across FCMs and for related accounts. Using these reports, the Commissions surveillance staff closely monitors the futures and option market activity of all traders whose positions are large enough to potentially impact the orderly operation of a market. For contracts, which at expiration are settled through physical delivery, such as contracts in the energy complex, staff carefully analyze the adequacy of potential deliverable supply. In addition, staff monitor futures and cash markets for unusual movements in price relationships, such as cash/futures basis relationships and inter-temporal futures spread relationships, which often provide early indications of a potential problem. The Commissioners and senior staff are kept apprised of market events and potential problems at weekly surveillance meetings and more frequently when needed. At these meetings, surveillance staff briefs the Commission on broad economic and financial developments and on specific market developments in futures and option markets of particular concern. If indications of attempted manipulation are found, the Commission investigates and prosecutes alleged violations of the Act or regulations. Subject to such actions are all individuals who are or should be registered with the Commission, those who engage in trading on any domestic exchange, and those who improperly market commodity futures or option contracts. The Commission has available to it a variety of administrative sanctions against wrongdoers, including revocation or suspension of registration, prohibitions on futures trading, cease and desist orders, civil monetary penalties, and restitution orders. The Commission may seek Federal court injunctions, restraining orders, asset freezes, receiver appointments, and disgorgement orders. If evidence of criminal activity is found, matters may be referred to state authorities or the Department of Justice for prosecution of violations not only of the Act but also of state or Federal criminal statutes, such as mail fraud, wire fraud, and conspiracy. Over the years, the Commission has brought numerous enforcement actions and imposed sanctions against firms and individual traders for attempting to manipulate prices, including the well-publicized attempted manipulation cases by several energy companies and the market power manipulation of worldwide copper prices. Outcomes for Strategic Goal One are: .. Markets that accurately reflect the forces of supply and demand for the underlying commodity and are free of disruptive activity. .. Markets that are effectively and efficiently monitored so that the Commission receives early warning of potential problems or issues that could adversely affect their economic vitality. Supply and Demand Markets that accurately reflect the forces of supply and demand for the underlying commodity and are free of disruptive activity. _dabb3d35-4ed5-457e-b1ca-48f5d9fa81fd 1.1 Business Process: 1. Conduct financial surveillance 2. Conduct market surveillance 3. Conduct trade practice surveillance 4. Conduct economic research 5. Review trading facility filings and clearing organization contracts and rules 6. Conduct cooperative enforcement 7. Investigate violations 8. File and prosecute cases 9. Take appropriate remedial or punitive action e36fe19c-c8e2-44e6-b285-24c94e9a507f cc0b2500-9374-4dbd-9522-64e1eabb9a4b Monitoring Markets are effectively and efficiently monitored to ensure early warning of potential problems or issues that could adversely affect their economic vitality. _1fc7e025-7af5-4112-a1b6-8fba34bc3ac9 1.2 Business Process: 1. Conduct financial surveillance 2. Conduct market surveillance 3. Conduct trade practice surveillance 4. Conduct economic research 5. Review trading facility filings and clearing organization contracts, and rules 6. Investigate violations 7. File and prosecute cases 8. Share information externally 9. Coordinate with domestic regulators ff583ef0-b795-4197-8878-ddab77cd2e15 4fed0894-31af-40a0-82b3-639d8f2a225f Market Users and the Public Protect market users and the public. _0610f822-b357-45ce-ab97-9c27d55eecbc 2 The focus of the second goal is protection of the firms and individual market users who come to the marketplace to fulfill their business and trading needs. Market users must be protected from possible wrongdoing on the part of the firms and commodity professionals with whom they deal to access the marketplace, and they must be confident that the marketplace is free of fraud, manipulation, and abusive trading practices. The Commission has promulgated requirements that mandate appropriate disclosure and customer account reporting, as well as fair sales and trading practices by registrants. The Commission has also sought to maintain appropriate sales practices by screening the fitness of industry professionals and by requiring proficiency testing, continuing education, and supervision of these persons. Extensive record-keeping of all futures transactions is also required. The Commission also monitors compliance with those requirements and supervises the work of the exchanges and National Futures Association (NFA) in enforcing the requirements. The Commission also plays an important role in deterring behavior that could affect market users confidence by investigating and taking action against unscrupulous commodity professionals who engage in a wide variety of fraudulent sales practices against the public. Outcomes for Strategic Goal Two are: .. Violations of Federal laws concerning futures and option contracts are detected and prevented. .. Commodity professionals meet high standards. .. Customer complaints against persons or firms registered under the Act are handled effectively and expeditiously. Violations Violations of Federal commodities laws are detected and prevented. _2796ed43-9219-4e55-8300-a689da93bfee 2.1 Business Process: 1. Conduct financial surveillance 2. Conduct cooperative enforcement 3. Investigate violations 4. File and prosecute cases 5. Resolve administrative enforcement cases 6. Resolve appeals 7. Share information externally 8. Take appropriate remedial or punitive action 9. Represent Commission in litigation or other disputes 10. Collect monetary penalties from violators. 77f71c1d-24de-408c-9524-cc3674db43c7 ca044348-664a-438e-8a62-89a37d287810 Commodity Professionals Commodity professionals meet high standards. _aa79a3fd-c9e0-4d58-9530-837b209dd45d 2.2 Business Process: 1. Provide guidance, advice, and regulate business, financial, and sales practices 2. Review self-regulatory organizations and clearing organizations 3. Investigate, file, and prosecute cases 7f51b7d3-ad01-45d3-ac89-23d904bb5baa 295d0d5c-b388-4010-aed0-a9834a17e9ef Customer Complaints Customer complaints against persons or firms registered under the Act are handled effectively and expeditiously. _3087ac03-a24e-43d7-ae4d-582ecd3bb74a 2.3 Business Process: 1. Manage reparations program 2. Resolve appeals 3. Represent Commission in litigation or other disputes 3778816a-8273-4f46-ba11-c4e3d6e8e240 d30cb9a8-fcb4-474b-bd20-dd98b0bf3a62 Market Integrity Ensure market integrity in order to foster open, competitive, and financially sound markets. _e7bdf080-8b63-4139-9e93-7571cfdfcc22 3 In fostering open, competitive, and financially sound markets, the Commissions 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 exchange system. together, they protect against the financial difficulties of one trader becoming a systemic problem for other traders. Several aspects of the oversight framework help the Commission achieve this goal with respect to traders: 1) requiring that market participants post margin to secure their ability to fulfill obligations; 2) requiring participants on the losing side of trades to meet their obligations, in cash, through daily (sometimes intraday) margin calls; and 3) requiring FCMs to segregate customer funds from their own funds. The Commission also works with the exchanges and the NFA to monitor closely the financial condition of the FCMs themselves, who must provide the Commission, exchanges, and NFA with various monthly, quarterly, and annual financial reports. The exchanges and NFA also conduct annual audits and daily financial surveillance of their respective member FCMs. Part of this financial surveillance involves looking at each FCMs exposure to losses from large customer positions that it carries. As an oversight regulator, the Commission reviews the audit and financial surveillance work of the exchanges and NFA but also monitors the health of FCMs directly, as appropriate. The Commission also periodically reviews clearing organization procedures for monitoring risks and protecting customer funds. The Commission investigates and prosecutes FCMs alleged to have violated financial and capitalization requirements or to have committed other supervisory or compliance failures in connection with the handling of customer business. Such cases can result in substantial remedial changes in the supervisory structures and systems of FCMs and can influence the way particular firms conduct business. This is an important part of fulfilling the Commissions responsibility for ensuring that sound practices are followed by FCMs and that markets remain financially sound. The Commission also seeks to ensure market integrity by investigating a variety of trade and sales practice abuses. For example, the Commission brings actions alleging unlawful trade allocations, trading ahead of customer orders, misappropriating customer trades, and non-competitive trading. Outcomes for Strategic Goal Three are: .. Clearing organizations and firms holding customer funds have sound financial practices. .. Commodity futures and option markets are effectively self-regulated. .. Markets are free of trade practice abuses. .. Regulatory environment is flexible and responsive to evolving market conditions. Financial Practices Clearing organizations and firms holding customer funds have sound financial practices. _2abbf5ef-d194-41c4-ab34-55639c3152d0 3.1 Business Process: 1. Conduct financial surveillance 2. Provide guidance, advice, and regulate business, financial, and sales practices 3. Review self-regulatory organization enforcement 4. Investigate violations 5. File and prosecute cases 6. Take appropriate remedial or punitive action 5fcb53a9-9d21-42de-99f6-6ffa81026d55 9adc1e64-b4d4-4c87-9925-7bba8b10e84a Self-Regulation Commodity futures and option markets are effectively self-regulated. _6820d10b-c678-4281-b58e-ea8b9d511616 3.2 Business Process: 1. Conduct financial surveillance 2. Provide guidance, advice, and regulate business, financial, and sales practices 3. Review exchange applications, contracts, and rules 4. Review self-regulatory organization enforcement f9430541-bd3c-424f-8f60-c636ee16cb35 f9ed489d-3049-4d89-bf5b-aaa94b8063ea Abuses Markets are free of trade practice abuses. _9209e140-c90f-4bbd-8734-076e92b1f858 3.3 Business Process: 1. Investigate violations 2. File and prosecute cases 9c826bed-0701-4892-a23d-f0086f9e50e1 d67b0d8e-a5f5-4a93-b250-bdda39eaeace Regulatory Environment Regulatory environment is flexible and responsive to evolving market conditions. _0bd74477-1e0e-4945-8d4c-bb72928bd108 3.4 Business Process: 1. Coordinate with domestic regulators 2. Coordinate with foreign and international regulators 3. Draft, review, and comment on legislation 4. Provide guidance, advice, and regulate business, financial, and sales practices 149b3a96-f7f8-461e-8b2b-a45da98b158c 64fe844e-f5ca-42ed-9a4e-19f7313b7203 2003-10-01 2009-09-30 2010-02-08 http://www.cftc.gov/aboutthecftc/2009strategicplan-txt.html Arthur Colman (www.drybridge.com) colman@drybridge.com Submit error.