By Shahien Nasiripour in New York
The US agency overseeing futures and derivatives will probably receive a third less in funding than the Obama administration has requested, raising questions over its ability to supervise financial markets in the wake of the 2008 global financial crisis.
US congressional negotiators have agreed to a $205m budget for the Commodity Futures Trading Commission for this fiscal year, $103m less than what the White House originally requested. The budget now has to be approved by the House and the Senate.
The CFTC has warned that without adequate funds, it risks not having sufficient capacity to supervise an ever-growing and evolving industry. The agency also has new responsibilities, like overseeing the over-the-counter derivatives market under the new Dodd-Frank law, last year?s overhaul of US financial regulation.
The funding news comes just weeks after the collapse of MF Global, a futures broker that bet heavily on the debt of distressed European countries as part of a bid to become a trading powerhouse. The CFTC regulated MF Global and is now facing criticism for its alleged failure to properly oversee the company.
?Funding at this level would undermine the CFTC at the very moment that many are criticising the agency for failing to stop the MF Global collapse,? said Carl Levin, a Democratic senator from Michigan.
If armed with $308m, the agency had hoped to significantly boost the number of employees overseeing markets, clearing houses and swap dealers.
As of September 30 2010, the agency employed 265 people tasked with oversight. It had hoped to raise that number to 432. It similarly hoped to increase its enforcement division from 170 people to 235.
Agency officials have indicated they are overwhelmed by their new responsibilities.
Not everyone is disappointed, though. The agency is receiving a slight boost from its current budget of $202m. Scott O?Malia, one of the CFTC?s two Republican commissioners, praised the congressional accord.
?I greatly appreciate the efforts of [Congress] to provide an increase in funding for the CFTC and make technology funding a top priority,? Mr O?Malia said. ?This budget will require the commission to focus on its key mission objectives.?
Mr O?Malia pointed out that the percentage of the agency?s budget devoted to technology increased from last year?s level, a benefit to an agency ?just now entering the 21st century – a decade late.?
?The commission should not miss the opportunity to utilise technology to the fullest and work to automate our surveillance and risk management activities,? Mr O?Malia. said.
? The Financial Times Limited 2011