US. Commodity Futures Trading Commission
Three Lafayette Centre, 1155 21st Street, NW, Washington, DC 20581
lVlVlV. cftc.gov
Gary Gensler
Chairman
Chairman's Transmittal Letter
February 14,2011
(202) 418-5050
(202) 418-5533 Facsimile
ggensler@cftc.gOY
The Honorable Daniel K. Inouye
Chairman
Committee on Appropriations
U.S. Senate
S-128 Capitol Building
Washington, D. C. 20510
The Honorable Harold Rogers
Chairman
Committee on Appropriations
U.S. House of Representatives
H-128 Capitol Building
Washington, D. C. 20515
The Honorable Thad Cochran
Vice Chairman
Committee on Appropriations
U.S. Senate
S-128 Capitol Building
Washington, D. C. 20510
The Honorable Norm Dicks
Ranking Member
Committee on Appropriations
U.S. House of Representatives
Washington, D. C. 20515
Two years ago, the financial system and the financial regulatory system failed.
Last summer, the
Administration and the Congress responded by enacting the Dodd-Frank Wall Street Reform and
Consumer Protection Act (Dodd-Frank Act). The Dodd-Frank Act will- for the first timebring
comprehensive regulation to the swaps marketplace. Derivatives dealers will be subject to
robust oversight. Standardized derivatives will be required to trade on open platforms and be
submitted for clearing to central counterparties, all of which will be subject to Federal regulation
and supervision. The Commodity Futures Trading Commission (CFTC) looks forward to
implementing the Dodd-Frank Act to help lower risk, promote transparency and protect the
American public. To implement these reforms, the Commission will require increased funding.
Page Two
Febmary 14,2011
The CFTC and its predecessor agencies have regulated derivatives since the 1920s. The first
derivatives - called futures - began trading at the time ofthe Civil War, when grain merchants
came together and created this new marketplace. It took nearly 60 years until Congress first
regulated the futures markets. President Franklin Roosevelt and the Congress significantly
strengthened this regulatory regime with the passage of the Commodity Exchange Act (CEA) in
1936.
The CFTC currently ensures that futures and commodity options exchanges have procedures to
protect market participants and ensure fair and orderly trading that is free from fraud,
manipulation and other abuses. The CFTC registers and oversees futures Clearinghouses, known
as derivatives clearing organizations (DCOs), to ensure that they have appropriate risk
management standards. The Commission has wide-ranging transparency efforts designed to
provide aggregate infOlmation about commodity futures markets and trading to the American
public. The agency also uses its broad surveillance powers to police the markets.
The CFTC is now tasked with bringing its regulatory expertise to the swaps marketplace.
Though the Commission has much experience regulating the on-exchange derivatives
marketplace - having done so for more than 70 years - the Dodd-Frank Act presents new
responsibilities and authorities. The futures marketplace that the CFTC cUlTently oversees is a
$40 trillion industry in notional amount. The swaps market that the Dodd-Frank Act tasks the
CFTC with regulating has a notional amount roughly seven times the size of that of the futures
market and is significantly more complex. Based upon figures compiled by the Office of the
Comptroller of the CUlTency as of the 3rd quarter of2010, the largest 25 banle holding companies
cUlTently have $277 trillion notional amount of swaps. Others estimate that the market could be
as big as $300 trillion in the United States alone, or roughly nine times the size of the futures
markets.
Some of the CFTC's expanded authorities will be consistent with our CUlTent authorities but
expanded to also include swaps. Some will be new responsibilities, such as regulating swap
dealers, major swap paliicipants, swap execution facilities (SEFs) and swap data repositories
(SDRs).
In addition to bringing regulation to the swaps market, the Dodd-Frank Act provides the
Commission with specific authorities to address areas of need under its traditional mission in the
regulation of futures markets. Included is specific direction with regard to the regulation of both
on-exchange and off-exchange derivatives markets for agricultural and energy commodities.
The challenge before the agency is significant, but manageable, provided we are sufficiently
resourced.
Page Three
February 14,2011
At the start of Fiscal Year (FY) 2011, the Commission had on-board a staff of 680. Given the
new responsibilities for the CFTC to regulate the swaps market, this is far less than what is
required to properly fulfill our significantly expanded role.
Therefore, I am pleased to transmit to you the CFTC's Budget and Performance Estimate for FY
2012. This budget builds off the FY 2011 Continuing Resolution (CR) appropriation expiring
March 4, 2011.
This budget requests an appropriation of $308,000,000 and 983 staff-years. This is a
$139,200,000 increase over the FY 2011 CR Appropriation of $168,800,000 and 667
full-time equivalents (FTE). The FY 2011 CR appropriation includes no funds for DoddFrank
authorities.
Our FY 2012 Budget thus includes necessary funding to bring on board 78 FTE needed
to implement pre-Dodd-Frank authorities, and 238 FTE needed to implement the DoddFrank
Act and to ensure that the nation's futures and swaps markets operate without
disruption.
The talented and dedicated staff of the CFTC is moving forward with the rules required by the
Dodd-Frank Act and fully implementing both long-standing and new statutory authorities with
respect to its pre-existing mission. To continue to effectively carry out that mission and its new
responsibilities, the Commission requires augmented staffing levels and technology resources.
I am available to discuss this budget request and to answer any questions you may have.
sincerelY?· .J
C.IJ--C
G4nSler···· .
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