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CFTC and SEC to increase budgets through user fees

15 February 2011  |  8604 views  |  0 Washington, capitol hill

US government plans to almost double the budget of the Commodity Futures Trading Commission (CFTC) by enabling it to collect fees from the firms it regulates have received a mixed reaction from Commissioners.

The CFTC has been given responsibility for policing the $600 trillion OTC derivatives industry under the Dodd-Frank law. However, earlier this month the watchdog's chairman Gary Gensler warned lawmakers that his budget was insufficient to deal with the extra workload.

Now, the Obama administration's fiscal 2012 budget plan has outlined proposals to let the body raise $117 million in fees from users, bringing the total budget to $308 million, up from $168 million in 2010. Much of the new money will be used to add over 300 new staff to the current 667.

The plan was praised by Democratic CFTC Commissioner Bart Chilton who says it "presents an admirable equilibrium. It proposes both fiscal restraint and needed resources for market oversight and enforcement."

However, Republican Commissioner Scott O'Malia offered dissent, refusing to back the plan and recruitment drive, arguing that the CFTC should place a greater focus on technology.

"Individuals are simply not equipped to identify trading aberrations or manipulative schemes in futures (and swaps) markets dominated by algorithmic and high frequency traders that are able to execute trades in milliseconds. The Commission must redirect itself and rely on the sophistication of automated surveillance systems if we are to keep pace with the markets we oversee," says O'Malia.

Meanwhile, the Securities and Exchange Commission, which already supplements its income by levying fees, saw the Obama administration request a $300 million increase for its budget bringing it to $1.4 billion in 2012.

Mary Schapiro, chairman, SEC, says: "These funds will provide the SEC with the resources needed to carry out both our longstanding core mission as well as our new responsibilities for derivatives, hedge fund advisers and credit rating agencies. By law, the 2012 funding is entirely offset by transaction fees such that the SEC budget will not add to the deficit."

In total, the federal budget would add about $6.5 billion to financial regulators' spending across both banking and capital markets. It calls for eight agencies to hire more than 5000 people as they implement the 2010 Dodd-Frank Act, according to data compiled by Bloomberg.

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