[House Hearing, 114 Congress]
[From the U.S. Government Publishing Office]





  HEARING TO REVIEW THE 2016 AGENDA FOR THE COMMODITY FUTURES TRADING
                               COMMISSION

=======================================================================

                                HEARING

                               BEFORE THE

                        COMMITTEE ON AGRICULTURE
                        HOUSE OF REPRESENTATIVES

                    ONE HUNDRED FOURTEENTH CONGRESS

                             SECOND SESSION

                               __________

                           FEBRUARY 10, 2016

                               __________

                           Serial No. 114-40


[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]




          Printed for the use of the Committee on Agriculture
                         agriculture.house.gov




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                        COMMITTEE ON AGRICULTURE

                  K. MICHAEL CONAWAY, Texas, Chairman

RANDY NEUGEBAUER, Texas,             COLLIN C. PETERSON, Minnesota, 
    Vice Chairman                    Ranking Minority Member
BOB GOODLATTE, Virginia              DAVID SCOTT, Georgia
FRANK D. LUCAS, Oklahoma             JIM COSTA, California
STEVE KING, Iowa                     TIMOTHY J. WALZ, Minnesota
MIKE ROGERS, Alabama                 MARCIA L. FUDGE, Ohio
GLENN THOMPSON, Pennsylvania         JAMES P. McGOVERN, Massachusetts
BOB GIBBS, Ohio                      SUZAN K. DelBENE, Washington
AUSTIN SCOTT, Georgia                FILEMON VELA, Texas
ERIC A. ``RICK'' CRAWFORD, Arkansas  MICHELLE LUJAN GRISHAM, New Mexico
SCOTT DesJARLAIS, Tennessee          ANN M. KUSTER, New Hampshire
CHRISTOPHER P. GIBSON, New York      RICHARD M. NOLAN, Minnesota
VICKY HARTZLER, Missouri             CHERI BUSTOS, Illinois
DAN BENISHEK, Michigan               SEAN PATRICK MALONEY, New York
JEFF DENHAM, California              ANN KIRKPATRICK, Arizona
DOUG LaMALFA, California             PETE AGUILAR, California
RODNEY DAVIS, Illinois               STACEY E. PLASKETT, Virgin Islands
TED S. YOHO, Florida                 ALMA S. ADAMS, North Carolina
JACKIE WALORSKI, Indiana             GWEN GRAHAM, Florida
RICK W. ALLEN, Georgia               BRAD ASHFORD, Nebraska
MIKE BOST, Illinois
DAVID ROUZER, North Carolina
RALPH LEE ABRAHAM, Louisiana
JOHN R. MOOLENAAR, Michigan
DAN NEWHOUSE, Washington
TRENT KELLY, Mississippi

                                 ______

                    Scott C. Graves, Staff Director

                Robert L. Larew, Minority Staff Director

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                             C O N T E N T S

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                                                                   Page
Conaway, Hon. K. Michael, a Representative in Congress from 
  Texas, opening statement.......................................     1
    Prepared statement...........................................     2
Peterson, Hon. Collin C., a Representative in Congress from 
  Minnesota, opening statement...................................     3

                                Witness

Massad, Hon. Timothy G., Chairman, Commodity Futures Trading 
  Commission, Washington, D.C....................................     3
    Prepared statement...........................................     5
    Supplementary material.......................................    39
    Submitted questions..........................................    45
 
  HEARING TO REVIEW THE 2016 AGENDA FOR THE COMMODITY FUTURES TRADING
                               COMMISSION

                              ----------                              


                      WEDNESDAY, FEBRUARY 10, 2016

                          House of Representatives,
                                  Committee on Agriculture,
                                                   Washington, D.C.
    The Committee met, pursuant to call, at 10:00 a.m., in Room 
1300 of the Longworth House Office Building, Hon. K. Michael 
Conaway [Chairman of the Committee] presiding.
    Members present: Representatives Conaway, Lucas, King, 
Thompson, Gibbs, Austin Scott of Georgia, Crawford, DesJarlais, 
Davis, Allen, Newhouse, Kelly, Peterson, David Scott of 
Georgia, Costa, Walz, McGovern, DelBene, Lujan Grisham, Kuster, 
Nolan, Bustos, Maloney, Aguilar, Plaskett, Adams, Graham, and 
Ashford.
    Staff present: Caleb Crosswhite, Jackie Barber, Kevin Webb, 
Mollie Wilken, Paul Balzano, Scott C. Graves, Stephanie 
Addison, Faisal Siddiqui, John Konya, Liz Friedlander, Matthew 
MacKenzie, Mike Stranz, Robert L. Larew, Nicole Scott, and 
Carly Reedholm.

OPENING STATEMENT OF HON. K. MICHAEL CONAWAY, A REPRESENTATIVE 
                     IN CONGRESS FROM TEXAS

    The Chairman. Good morning. This hearing of the Committee 
on Agriculture to review the 2016 agenda for the Commodity 
Futures Trading Commission, will come to order.
    Good morning and welcome. Today's hearing is held against a 
bleak backdrop for many commodity producers, especially in farm 
country. The past 2 years have seen a dramatic fall in 
commodity prices across the board, creating significant 
operational challenges for producers. It is in uncertain times 
that futures and other derivatives markets provide their 
greatest benefit to our producers. These markets allow hedgers 
to look over time's horizon and see what the collective wisdom 
of the crowd says about the future.
    The long range price forecasts by futures markets provide 
invaluable information to farmers, helping them to decide 
whether to plant, what to plant, and how to plant. Those same 
prices are used in crop insurance policies that farmers 
purchase to protect against risk. Bottom-line, the futures 
markets are instrumental in providing risk management to 
commodity producers. But, for many, managing risk in the market 
isn't as easy as it once was.
    Many producers face markets that are more brittle than they 
used to be markets with more volatility and less liquidity than 
in the past. They also face increased costs to access essential 
dealing and clearing services. Some smaller market participants 
have been fired by their brokers because the FCM can no longer 
afford the regulatory costs of keeping them as clients.
    For too many end-users, Dodd-Frank has created more 
complicated and more intrusive, and more costly regulatory 
mandates that force hedgers to choose between paying more to 
manage their risk or risking more to manage their cash. This is 
not what Congress intended when it enacted Dodd-Frank. I 
believe that my colleagues who supported Dodd-Frank believed 
that end-users, the hedgers for whom risk management markets 
are an essential business tool, would not be harmed by that 
legislation. To that end, I want to commend the Commissioners 
for the work they have done to find common ground on reforms to 
several important regulations that posed needless burdens to 
end-users.
    That said, the Chairman's work on end-user issues, I don't 
believe, is not done. I am still deeply concerned with the 
Commission's position limits proposal and the impact the new 
bona fide hedging restrictions will have on agricultural 
producers, especially when they are struggling with low 
commodity prices. The proposed reg AT also needs significantly 
more work to narrow its definitions and eliminate the potential 
impact on smaller market participants that should not be swept 
up in it.
    Finally, the CPA in me cannot close without touching on the 
importance of getting to the bottom of the accounting mess the 
CFTC finds itself in. First, I want to thank Chairman Massad 
for the CFTC's responsiveness to our inquiries on this matter. 
The Commission's continued openness will help in this process. 
But, I am troubled by the accounting irregularities. Any 
mistake is cause for concern, but especially one that goes 
unnoticed for years. In this case, the failure of the 
Commission's internal accounting systems has led to at least 
one law being broken. That is clearly unacceptable, and I look 
forward to hearing a plan from the Chairman on how to fix the 
problem.
    I want to welcome Chairman Massad back to our Committee. 
Thank you for putting the time in to prepare for our hearing 
today.
    [The prepared statement of Mr. Conaway follows:]

  Prepared Statement of Hon. K. Michael Conaway, a Representative in 
                          Congress from Texas
    Good morning and welcome to the Agriculture Committee's hearing to 
review the 2016 agenda for the Commodity Futures Trading Commission.
    Today's hearing is held against a bleak backdrop for many commodity 
producers, especially those in farm country. The past 2 years have seen 
a dramatic fall in commodity prices, across the board, creating 
significant operational challenges for producers. It is in uncertain 
times that futures and other derivatives markets provide their greatest 
benefit to producers. These markets allow hedgers to look over time's 
horizon and see what the collective wisdom of the crowd says about the 
future.
    The long range price forecasts by futures markets provide 
invaluable information to farmers, helping them to decide whether to 
plant, what to plant, and how much to plant. Those same prices are used 
in the crop insurance policies that farmers purchase to protect against 
risk. Bottom-line, the futures markets are instrumental in providing 
risk management to commodity producers.
    But, for many, managing risk in the market isn't as easy as it once 
was.
    Many producers face markets that are more brittle than they used to 
be, with more volatility and less liquidity than in the past. They also 
face increased costs to access essential dealing and clearing services. 
Some smaller market participants have even been ``fired'' by their 
brokers, because the FCM can no longer afford the regulatory costs of 
keeping them as clients.
    For too many end-users, Dodd-Frank has created more complicated, 
more intrusive, and more costly regulatory mandates that force hedgers 
to choose between paying more to manage their risk or risking more to 
manage their cash.
    This is not what Congress intended when it enacted Dodd-Frank. I 
believe that my colleagues who supported Dodd-Frank believed that end-
users, the hedgers for whom risk management markets are an essential 
business tool, would not be harmed by this legislation. To that end, I 
want to commend the Commissioners for the work they have done to find 
common ground on reforms to several important regulations that posed 
needless burdens to end-users.
    That said, the Chairman's work on end-user issues is not done. I am 
still deeply concerned with the Commission's position limits proposal 
and the impact the new bona fide hedging restrictions will have on 
agricultural producers, especially when they are struggling with low 
commodity prices. The proposed reg AT also needs significantly more 
work to narrow its definitions and eliminate its potential impact on 
the smaller market participants that should not be swept up in it.
    Finally, the CPA in me cannot close without touching on the 
importance of getting to the bottom of the accounting mess the CFTC 
finds itself in. First, I want to thank Chairman Massad for the CFTC's 
responsiveness to our inquiries on this matter. The Commission's 
continued openness will help this process. But, I am troubled by the 
accounting irregularities. Any mistake is cause for concern, but 
especially one that goes unnoticed for years. In this case, the failure 
of the Commission's internal accounting systems has led to at least one 
law being broken. That is clearly unacceptable and I look forward to 
hearing a plan from the Chairman on how to fix the problem.
    I want to welcome Chairman Massad back to the Committee. Thank you 
for putting in the time to prepare for this hearing today.
    With that, I'd like to yield to Ranking Member Peterson for any 
thoughts that he might have.

    The Chairman. And with that, I will turn to the Ranking 
Member for any thoughts that he might have.

OPENING STATEMENT OF HON. COLLIN C. PETERSON, A REPRESENTATIVE 
                   IN CONGRESS FROM MINNESOTA

    Mr. Peterson. Well, thank you, Mr. Chairman. And thank you, 
Chairman Massad, for being with us today.
    I am looking forward to hearing more about the Commission's 
efforts to harmonize its rules with foreign regulators, create 
margin rules as a protection in the uncleared swaps markets, 
address cybersecurity and automated trading, and improve data 
collection. I would also like to hear the Chairman's thoughts 
on the state of the derivatives markets today, given the 
fluctuation that we have seen in the market since the start of 
the year.
    The CFTC's mission is to protect the integrity of the 
derivatives markets, and in turn, the CFTC protects not just 
our constituents who use these markets, but the economy as a 
whole.
    So I look forward to your testimony, Chairman Massad. And I 
yield back the balance of my time.
    The Chairman. I thank the Ranking Member. I do want to 
welcome the Honorable Timothy Massad, Chairman of the Commodity 
Futures Trading Commission here in Washington, D.C.
    Chairman Massad, please begin when you are ready, sir.

         STATEMENT OF HON. TIMOTHY G. MASSAD, CHAIRMAN,
             COMMODITY FUTURES TRADING COMMISSION,
                        WASHINGTON, D.C.

    Mr. Massad. Thank you, Chairman Conaway, Ranking Member 
Peterson, and Members of the Committee. I am pleased to be back 
to discuss the CFTC's progress and priorities.
    I know that the markets we regulate are extremely important 
to your constituents, not just farmers and ranchers, but 
businesses of all types that use them to manage risk. We have 
been working hard to make sure these markets work well for 
them, and to ensure that the problems we saw in the financial 
crisis don't undermine their ability to use these markets 
effectively.
    Over the last year, the CFTC completed most of the rules 
required by the Dodd-Frank Act. These rules were enacted in 
response to the global financial crisis; a crisis that cost our 
country millions of jobs, and inflicted pain on millions of 
American families. We are now making sure those rules work as 
intended, which includes making adjustments and fine-tuning 
them where necessary. In particular, we are working to make 
sure they do not improperly burden the American farmers, 
ranchers, and businesses who did not cause the crisis. We also 
remain focused on our traditional responsibilities of 
surveillance, compliance, and enforcement.
    I want to thank our hardworking, talented CFTC staff, and 
the constructive engagement of my fellow Commissioners Bowen 
and Giancarlo. Our progress is due to working together 
collaboratively.
    Let me highlight a few recent achievements. First, I am 
pleased to note that earlier today Commissioner Jonathan Hill 
of the European Commission and I announced a common approach 
regarding requirements for clearinghouses located in the U.S. 
and Europe. This agreement will ensure that European and U.S. 
clearinghouses can continue to provide clearing services to 
firms in each other's jurisdictions. It will help ensure that 
our global derivatives markets remain robust, while keeping our 
financial system as stable and resilient as possible. It is 
also a significant milestone in our cross-border harmonization 
efforts. I would be happy to discuss it in further detail.
    Second, the Commission recently approved a strong rule 
setting margin requirements for uncleared swaps. Our rule 
exempts end-users, and focuses instead on where the greatest 
risks exist; that is, between large financial institutions 
where the interconnectedness means that one entity's default 
could trigger further defaults by others. We are also 
addressing cybersecurity, one of the greatest risks to the 
orderly operation of our financial system. The Commission 
unanimously voted to propose rules requiring companies that run 
the core infrastructure under our jurisdiction to adequately 
evaluate and protect against the risk of cyberattacks. Also 
recently, the Commission unanimously proposed new safeguards 
that address the rise in automated and high frequency trading. 
Currently, approximately 70 percent of the trading in the 
futures market is automated, and our proposal focuses on 
minimizing the potential for disruptions that can occur from 
automated trading, such as from fat fingers or untested 
algorithms. These proposals rely on a principles-based approach 
that codifies many industry best practices.
    We have also taken many actions to address the concerns of 
commercial end-users. For example, we recently eliminated 
certain reporting and record-keeping requirements for end-
users. We have made it easier for commercial firms to use 
certain traditional types of commodity contracts, and we have 
made it easier recently for our small banks and community 
development institutions to continue to use these markets 
without being subject to new regulations aimed at much larger 
institutions.
    The CFTC is also continuing to engage in robust enforcement 
in order to maintain the integrity of our markets and protect 
the public against fraud. We are focused on new, complex forms 
of manipulation and spoofing that use automated trading 
strategies, as well as conventional frauds, such as precious 
metal scams aimed at retirees.
    Surveillance is an equally critical function, particularly 
given the growth and range of products under our jurisdiction. 
To be successful in both surveillance and enforcement, we must 
be able to keep up with the technological transformations in 
these markets. We must be able to continually receive, load, 
and analyze large volumes of data. This requires a massive 
information technology investment, sophisticated analytical 
tools, and experienced professionals to identify problems.
    Our priorities in the months ahead include finalizing our 
proposed rules to address cybersecurity and automated trading 
concerns. We will continue to focus on the strength and 
resiliency of clearinghouses, and take steps to improve the new 
framework for trading of swaps. We are also working to finalize 
important rules related to position limits to address the risk 
of excessive speculation, while making sure participants can 
engage in bona fide hedging.
    Let me also note, Mr. Chairman, since you raised it, we are 
moving to address the lease accounting issues that you raised, 
and I am happy to talk about those.
    Mr. Chairman, I appreciate your support for many of the 
actions we have taken, particularly those to address end-user 
concerns, and I look forward to working with you, this 
Committee, and with Congress on reauthorization and other 
matters in the coming year.
    Thank you again for inviting me today.
    [The prepared statement of Mr. Massad follows:]

   Prepared Statement of Hon. Timothy G. Massad, Chairman, Commodity 
              Futures Trading Commission, Washington, D.C.
    Thank you, Chairman Conaway, Ranking Member Peterson, and Members 
of the Committee. I'm very pleased to be back testifying on behalf of 
the Commodity Futures Trading Commission (CFTC). I appreciate the 
opportunity to discuss the progress and priorities of the agency.
    As you know, the CFTC oversees the futures, options, and swaps 
markets. While they, and the agency, are not well-known to most 
Americans, the importance of these markets to American businesses, 
families and the American economy cannot be overstated.
    The derivatives markets allow farmers to lock in a price for their 
crops, utilities to manage the cost of fuel, and businesses of all 
types and sizes to hedge commercial risk. And as a result, they shape 
the prices we all pay for food, energy and a host of other goods and 
services.
    At the CFTC, our job is to ensure these markets are working 
properly, by helping to deter and prevent fraud and manipulation. We 
strive to create a regulatory framework that promotes transparency, 
competition and innovation. This benefits everyone--from the 
agriculture community to business owners and investors saving for 
retirement. And we try our best to do this in a way that does not 
impose undue burdens on those end-users who rely on these markets as an 
important component of their business.
    Since I last testified before this Committee, the CFTC has made 
considerable progress in a number of areas. The Commission has written, 
and is working to enforce, most of the rules required by the Dodd-Frank 
Act, which was enacted in the aftermath of the worst financial crisis 
since the Great Depression. We are also focused on fine-tuning our 
rules, so they do not improperly burden commercial end-users. This work 
adds to our traditional responsibilities of surveillance, compliance, 
and enforcement for the futures and options markets. And we have been 
addressing new developments and challenges in our markets, particularly 
those created by technological development.
    Today, I would like to highlight some of our accomplishments over 
the past year and also lay out a number of key priorities for the 
months ahead.
    Before I begin, I want to thank our staff for their tireless work 
on behalf of our mission. I know I speak for my fellow Commissioners 
Bowen and Giancarlo when I say that the effort, dedication and 
expertise of the CFTC staff are the reasons we've made such strides 
this year.
    I would also like to thank Commissioners Bowen and Giancarlo for 
their dedication. Each brings experience, judgment, and an important 
perspective to the work of the Commission. We have developed a 
productive working relationship that is grounded in good faith and 
mutual respect. I appreciate their willingness to collaborate and work 
together constructively.
Recent Accomplishments
    The CFTC has taken many actions during the past year to help make 
sure our financial markets continue to be the best in the world. There 
are several I'd like to talk about today.
    Margin for Uncleared Swaps. One of our more recent actions was the 
Commission's approval of a final rule setting margin requirements for 
uncleared swaps.
    Our margin rule is one of the most significant elements of swaps 
market regulation set forth in the Dodd-Frank Act. There will always be 
a large part of the market that is not cleared--many swaps are not 
suitable for central clearing and our clearinghouses will be stronger 
if we exercise care in what is required to be cleared. And in the 
absence of clearing, margin requirements protect against excessive risk 
buildup in the system.
    I think the rule we have adopted is strong and sensible. Consistent 
with Congressional intent, our rule does not require the collection of 
margin from end-users. It focuses instead on where some of the greatest 
risk exists--between large financial institutions, where the default of 
one entity would lead to further defaults by its counterparties, given 
the interconnectedness of our financial system. It requires swap 
dealers and major swap participants to post and collect margin with 
financial entities with whom they have significant exposures. It 
requires initial margin, which is designed to protect against potential 
future loss on a default, as well as variation margin, which serves as 
mark-to-market protection.
    We also worked very hard to harmonize our rule with those 
concurrently issued by the Prudential Regulators, as well as with 
international standards. Shortly after I took office, I committed to 
doing all we could to achieve such harmonization. There were many 
differences 18 months ago. Today, I believe we have succeeded.
    To determine how our rule should apply to inter-affiliate 
transactions, we worked to strike the proper balance between benefits 
and costs.
    It was important that we mandate appropriate protections to help 
ensure the safety and soundness of swap dealers. So, we require full 
variation margin be exchanged for all inter-affiliate swaps. We did not 
require initial margin for all such swaps, however, which is one point 
of difference with the Prudential Regulators. Instead, to prevent 
evasion of collection requirements in certain cases, we require initial 
margin, and we require posting of initial margin to insured depository 
institutions that are swap dealers. We also require that inter-
affiliate swaps be subject to a centralized risk management program 
appropriate to monitor and to manage these risks.
    We have also been working to address new and emerging threats to 
the financial system.
    Cybersecurity. Cyberattacks are perhaps the number one risk to 
financial stability that we face today. This past year, the Commission 
unanimously took action to enhance cybersecurity protection in our 
markets. We proposed rules designed to make sure that the private 
companies that run the core infrastructure under our jurisdiction--
exchanges, clearinghouses, swap execution facilities and swap data 
repositories--are doing adequate evaluation of cybersecurity risks and 
testing of their own cybersecurity and operational risk protections. 
They address concerns related to information security, physical 
security, business continuity and disaster recovery. The proposals set 
principles-based testing standards, which are deeply rooted in industry 
best practices.
    The proposals identify five types of testing as critical to a sound 
system safeguard program: vulnerability testing, penetration testing, 
controls testing, security incident response plan testing and 
enterprise-wide assessment of technology risk. Such efforts are vital 
to mitigate risk and preserve the ability to detect, contain, respond 
to, and recover from a cyberattack or other type of operational 
problem.
    Before adopting final rules, we will carefully consider any 
feedback we may receive. We hope to finalize these important rules 
before the end of this year.
    Internal Cybersecurity. I would note, that in addition to guarding 
against technological threats among the entities we regulate, we 
continue to be vigilant regarding our own cybersecurity. A draft report 
set to be released by the Office of Management and Budget in March 
underscores our commitment, and our success. The draft report grades 
Federal agencies in meeting cybersecurity performance goals, and I'm 
pleased to report that of all small agencies reporting, it ranks the 
CFTC among the top five, receiving a compliance score of over 90 
percent.
    We continue to do all we can to build and enhance our systems with 
our limited resources. For example, we are participating in the 
Department of Homeland Security's Continuous Diagnostic Mitigation 
Program, we have increased advanced malware defenses and we are 
implementing new data loss prevention technology this year.
    Proposed Rule on Automated Trading. Let me turn to another area 
where we are responding to technological change. Last November, the 
Commission unanimously proposed rules to address the increased use of 
automated trading. Today, almost all trading in our markets is 
electronic, and approximately 70 percent of trading in the futures 
market is automated.
    Automated trading has brought many benefits to market 
participants--such as more efficient execution, lower spreads and 
greater transparency. But its extensive use also raises important 
policy and supervisory questions and concerns.
    Our proposed rule focuses on minimizing the potential for 
disruptions or other operational problems that can be caused by 
automated trading. These could occur from fat fingers, untested 
algorithms or in other ways. Our proposal builds upon the steps we and 
the exchanges have already taken on this front. It relies on a 
principles-based approach that codifies many industry best practices.
    Our proposal requires pre-trade risk controls such as message 
throttles and maximum order size limits, and other measures such as 
``kill switches,'' which facilitate emergency intervention in the case 
of malfunctioning algorithms. But it does not prescribe the parameters 
or limits of such controls, because we believe market participants are 
the ones who should determine those specifics. Our proposal sets 
general requirements pertaining to the design, testing and supervision 
of automated trading systems, but again it leaves the details of those 
to market participants.
    We have proposed requirements at the exchange level as well as at 
the clearing member and trading firm levels. This, too, is a best 
practice suggested by many firms. We have proposed requiring 
proprietary traders who access the market directly and who are using 
automated trading to register with the CFTC. And we have included 
measures to limit the practice of self-trading.
    We hope to finalize this rule in 2016 as well.
Continuing to Support Commercial End-Users
    Let me turn now to some concerns of commercial end-users. Since I 
took office, I have made it my priority to do all we can to ensure 
commercial end-users can use these markets efficiently and effectively. 
I know Commissioners Bowen and Giancarlo share that view. Commercial 
end users did not cause the financial crisis, and were not the focus of 
Congressional reforms. So, as we take the necessary steps to create 
sensible regulation of these markets, we must make sure end users do 
not face undue burdens.
    Over the past year, the Commission has taken many actions to 
address the needs and concerns of commercial end-users.
    Simplifying record-keeping Requirements. In mid-December, we 
adopted significant changes to a rule that will reduce record-keeping 
obligations for commercial end-users. This final rule, unanimously 
approved by the Commission, amends record-keeping requirements set 
forth under Commission Regulation 1.35. This regulation, first 
implemented in 1948, requires various types of market participants to 
keep written and oral records of their commodity interest and related 
cash or forward transactions. It is very important to our efforts to 
ensure our markets are strong, transparent, and operate free of fraud 
and manipulation.
    We revised the rule so that members of exchanges and swap execution 
facilities not registered with the Commission, such as end-users, do 
not have to keep pre-trade communications or text messages. Further, we 
have simplified the requirements for keeping records of final 
transactions. The amended rule also states that commodity trading 
advisors do not have to record oral communications regarding their 
transactions.
    The rule strikes an appropriate balance between the costs of 
record-keeping and the benefits to market oversight. It reduces the 
burden on businesses, farmers and ranchers that depend on the 
derivatives markets, and will ensure that they are able to continue 
using these markets effectively and efficiently. Our final rule 
reflects the input we have received by many commercial businesses and 
other market participants.
    Volumetric Optionality. In addition to our recent action with 
respect to trade options, the Commission also clarified when certain 
agreements that include volumetric optionality provisions are forward 
contracts, rather than swaps. These types of contracts are widely used 
by a variety of end-users, including electric and natural gas 
utilities. By clarifying how these agreements will be treated, the 
interpretation is intended to make sure commercial companies can 
continue to conduct their daily operations efficiently.
    Relief for Small Banks and CDFIs. A few weeks ago, CFTC staff 
addressed the concerns of our community development financial 
institutions (``CDFI'') and small banks with under $10 billion in 
assets. Staff's action made clear that these entities may choose not to 
clear a swap subject to the CFTC's clearing requirement, provided that 
they elect the end-user exception and comply with certain other 
conditions.
    These actions complement a number of steps we took earlier to 
address end-user concerns.
    Public Utility Companies. For example, the Commission amended its 
swap dealer rules so that local, publicly-owned utility companies can 
continue to effectively hedge their risks in the energy swaps market. 
These companies, which keep the lights on in many homes across the 
country, must access these markets efficiently in order to provide 
reliable, cost-effective service to their customers.
    Customer Protection/Margin Collection. The Commission also 
unanimously adopted a change to the ``residual interest'' rule. This is 
an important aspect of our customer-protection related rules, designed 
to help prevent future insolvencies like the failure of MF Global--and 
to protect customers in the event it does happen. To address a concern 
of many in the agricultural community and many smaller customers 
regarding the posting of collateral for their trades, we removed a 
provision that would have automatically changed the deadline for 
futures commission merchants to post ``residual interest,'' which, in 
turn, can affect when customers must post collateral.
    We also expect to have a roundtable soon on the issue of how this 
rule is working in practice. We'll have more to say about that in the 
near future.
    Reporting Requirements for Contracts in Illiquid Markets. Finally, 
CFTC staff also granted relief from the real-time reporting 
requirements for certain less liquid, long-dated swap contracts. Staff 
agreed to permit slightly delayed reporting so that the reporting 
requirements do not make it more difficult to hedge.
    These are just some of the actions we have taken to make sure these 
markets work for commercial end-users. And during my tenure, I intend 
to continue to remain focused on their concerns.
Improving Data Reporting
    The CFTC is also taking important steps to ensure that the swap 
data we receive is accurate, consistent and useful.
    Reporting of swaps transaction data was a key goal of the reforms 
agreed to by the leaders of the G20 nations, and one of the most 
important components of the Dodd-Frank Act. We have come a long way 
since the fall of 2008, when a lack of reporting meant neither 
regulators nor market participants could assess the exposures or 
interconnectedness of major institutions. The reforms we have 
implemented have given better information to regulators and greater 
transparency to market participants.
    But building an efficient system to collect and analyze data from 
this market is an enormous undertaking, and there is more work to do. 
Currently, for example, there is considerable variation in how 
different participants report the same fields to SDRs, and in how the 
SDRs themselves transmit information to the CFTC. When the rules were 
first written, we purposely didn't prescribe exactly how each field 
should be reported--for a number of reasons. First, when the agency 
issued the reporting rules, we didn't yet have any data to inform our 
views. And second, we expected the industry to develop standardized 
terms. That, unfortunately, did not happen.
    So in December, CFTC staff requested public comment on technical 
specifications for the reporting of 120 priority data elements. We are 
seeking public input on this, which culminated months of work to 
identify priority areas where standardization or clarification is 
needed.
    In addition, last year we proposed clarifying reporting obligations 
with respect to cleared swaps. This will ensure that as swaps are 
cleared, there is a simple, consistent process for reporting them. The 
proposal will help ensure that there are not multiple records of a swap 
that can lead to erroneous double counting, and that accurate 
valuations of swaps are provided on an ongoing basis. It will eliminate 
unnecessary reporting requirements, reduce reporting costs and improve 
data quality. And it will enhance the Commission's ability to trace 
swaps from execution through clearing.
    We are also leading international efforts on data harmonization. 
And finally, we will continue to take enforcement actions to ensure 
that participants honor their reporting obligations.
    De Minimis Threshold. Despite the need for more progress on data 
reporting, it's important to acknowledge how far we've already come. An 
important example of this is the preliminary report CFTC staff recently 
released on what is known as the ``de minimis threshold'' for swap 
dealing and major swap participants.
    The de minimis limit was set by the CFTC and the Securities and 
Exchange Commission's joint rule defining swap dealers. If an entity 
engaged in swap dealing exceeds that threshold--which is currently $8 
billion in notional amount of swaps over the year--it must register as 
a swap dealer, in which case capital and margin requirements as well as 
disclosure, record-keeping and other requirements apply. The rule also 
provides that at the end of 2017, that level will fall to $3 billion, 
unless the Commission takes action.
    When our two agencies wrote the ``de minimis exception'' we did it 
with limited data.
    But we now have a wealth of information that we can use to inform a 
discussion about what is the appropriate level at which to set the de 
minimis threshold. In November 2015, our staff issued a preliminary 
report that aims to start that conversation, by taking a fresh look at 
the issue. The staff's preliminary report does not make a 
recommendation as to what the level should be. It instead explores the 
issues, and invites public comment on the data, the methodology and the 
issues discussed.
    The comment period on this study recently closed. We will now begin 
the process of carefully studying the feedback we've received, 
producing a final report, and making a decision on what, if any, action 
to take.
Priorities for the Months Ahead
    The year ahead will also be marked by continued progress at the 
CFTC. Moving forward, an important part of our agenda will be to 
finalize the various proposals I have noted--in particular, 
cybersecurity and automated trading.
    In addition, we will be taking action on a number of priorities 
that are important to this Committee.
    Trade Options. Continuing with our effort to address end-user 
concerns, I plan to soon ask the Commission to adopt proposed rule 
changes related to trade options, which are a type of commodity 
options. This proposal would eliminate the obligations of commercial 
participants to report trade options to swap data repositories. It 
would include eliminating the requirement to file ``form TO.''
    I strongly support finalizing this proposal. Trade options products 
are commonly used by commercial participants, and this relief will help 
them continue to do so efficiently. Many of the comments we received on 
the proposal were supportive, and several asked us to consider further 
eliminating some requirements on commercial participants. While I 
cannot speak for my fellow Commissioners, I am optimistic that we can 
be responsive to some of those requests, and hope this can be completed 
in the near future.
    Related to trade options, we have also heard comments regarding 
peaking supply and capacity contracts. There has been some concern over 
the appropriate treatment of these products, which many end-users rely 
on to ensure they have the appropriate supply of commodities needed to 
run a business, manufacture a product, or generate electricity. I have 
asked CFTC staff to look at this. And while again, I cannot speak for 
my fellow Commissioners, I would support the Commission providing 
guidance or otherwise addressing this issue.
    Continued Focus on Clearinghouse Resiliency. We will remain keenly 
focused on preventing excessive risk and promoting stability in the 
financial system. A primary focus here will be clearinghouse strength 
and resiliency generally. As you know, clearinghouses play a critical 
role in the global financial system--one which has only become more 
prominent since the enactment of Dodd-Frank. We have taken many actions 
already to address resiliency, but there is much more to do. There are 
considerable efforts going on domestically and internationally to look 
at a range of issues to make sure clearinghouses are strong and safe. 
This includes, in particular, stress-testing standards for CCPs, and 
recovery and resolution planning.
    We are also chairing the international working group that is 
looking at a variety of issues, including stress-testing, margin 
methodologies, and capital and recovery planning. It also includes an 
examination of interdependencies among global clearinghouses. It's very 
important to do this in a manner that supports the liquidity of these 
markets.
    On the subject of clearinghouses, let me note that last week, the 
Commission announced the approval of the registration of Eurex Clearing 
as a clearinghouse. Eurex Clearing is one of the largest clearinghouses 
in Europe, and we are pleased they have registered with the CFTC. This 
is an important step forward to enhance global clearing and 
harmonization of derivatives rules.
    In addition, we are continuing to work with the European Commission 
(EC) on the issue of ``equivalence,'' so that European firms can 
continue to do business with our clearinghouses. I have always believed 
there is an ample basis for the European Commission to declare us 
equivalent.
    It is important that a determination of equivalence happen soon, 
particularly because the European clearing mandate is scheduled to take 
effect in a few months, and it's vital that we avoid market disruption. 
I know my counterpart on the EC, Commissioner Jonathan Hill, shares 
that concern and wants to bring this to closure. So I'm hopeful they 
will act and a determination will be issued soon.
    Cross-Border Margin Rule. Soon, I will ask the Commission to adopt 
the staff recommendation on the cross-border application of our new 
rules on margin for uncleared swaps. In June of last year, the 
Commission unanimously approved a proposal on this issue, an important 
component of our margin rule. It addresses risk that could be created 
outside our borders, but still could jeopardize our financial stability 
and our economy.
    I believe our final rule will draw a reasonable line that makes 
clear when we should take offshore risk into account. As with our 
broader margin rule, our proposal also recognizes the importance of 
harmonizing rules with other jurisdictions.
    Revised Capital Rule. In addition, the staff is working on updating 
our proposed rules related to capital requirements for swap dealers and 
major swap participants. As with the margin rules, we're working with 
our fellow regulators--in this case the Prudential Regulators as well 
as the SEC--to harmonize these standards as much as possible.
    Improving SEF Trading. Further, we will continue to focus on 
improving swaps trading.
    Over the past 2 years, we have implemented a new framework for 
trading on regulated platforms. This is bringing greater transparency, 
better price information and greater integrity to the process. In fact, 
a recent paper put out by the Bank of England confirms that the 
improvements in transparency caused by trading on SEFs has led to lower 
costs and increased liquidity.
    I'm very pleased that just a couple of weeks ago, the Commission 
announced permanent registration status for 18 swap execution 
facilities (SEFs) Indeed, the volume of SEF trading is growing. But 
there is more to do to fine tune our rules to improve SEF trading. Our 
goal is not just to implement the trading mandate in the law and 
achieves the basic goals of transparency, fairness and integrity in 
trading--but strive to create conditions in which participants want to 
trade on SEFs.
    Over the past several months, we have taken action to ensure more 
flexibility regarding acceptable modes of execution. We have improved 
SEF confirmation practices and confirmation data reporting. We have 
clarified SEF capital requirements. We provided relief related to 
executing block trades and correcting erroneous trades. And we've 
issued no-action relief to provide market participants additional time 
to adapt to procedures for executing package transactions.
    This spring, I will ask the Commission to consider changes to our 
rules to enhance trading and participation. I expect this will include 
formalizing a number of the ``no action'' letters and guidance staff 
issued over the past 18 months through rulemaking proposals.
    We will also consider some additional changes, such as the ``made 
available to trade''--or MAT--determination process. This identifies 
products that must be traded on SEFs. Some market participants have 
suggested that the Commission play a larger role in this process, and 
we are considering it.
    Finally, we will be looking at ways to harmonize our rules further 
with those of other countries. In particular, we are working with the 
European Commission, European Securities and Markets Authority and the 
Financial Conduct Authority regarding differences between our rules and 
European rules.
    Europe's rules are still evolving, and have not yet been 
implemented. But I am hopeful that as their rules take shape, and as we 
look for ways to fine tune ours, we can work together to ensure greater 
harmonization.
    Position Limits. In addition, the Commission continues to work on 
finalizing important rules related to position limits.
    I know there is great interest in these rules--and some concern. 
None of us currently on the Commission were in office when these rules 
were proposed, and therefore we are taking time to listen to end users 
and other market participants and consider the proposals very 
carefully. This is particularly the case regarding concerns about bona 
fide hedging. We understand the significance of these rules to the 
ability of commercial end-users to continue to use the markets 
efficiently for risk management and price discovery.
    We recently proposed to modify the aggregation provisions of the 
rules. These changes are designed to streamline the process for waiving 
aggregation requirements when one entity does not control another's 
trading, even if they are under common ownership.
    We are also considering the possibility of further modifications, 
which would have the exchanges play a greater role in granting 
exemptions for non-enumerated hedges. We have discussed this at our 
advisory committee meetings and we are continuing to study it. We're 
also continuing to gather information on deliverable supply estimates 
so that limits are set appropriately.
    Working to Implement New Congressional Changes. In addition, we 
have begun working to implement recently-enacted Congressional changes 
related to indemnification and to ``centralized treasury units'' or 
CTUs. As you know, the law ensures that an end-user company that uses a 
CTU to streamline and manage all its derivatives activity would 
continue to be exempt from margin and clearing requirements that are 
designed for financial institutions. Congress also removed the 
requirement that other regulators seeking access to Swap Data 
Repositories (SDR) provide a written indemnification agreement to the 
SDR. And CFTC staff are working to incorporate these changes so as to 
facilitate data sharing. Moreover, we will continue to work with 
Congress on a CFTC reauthorization measure.
Enforcement
    Finally, robust enforcement is vital to maintaining the integrity 
of our markets. It has been, and will remain, a priority.
    Our enforcement division has continued to do an excellent job 
protecting customers, preventing fraud and manipulation--and holding 
entities accountable for misbehavior. In the past year, we have brought 
or resolved actions related to integrity of benchmarks. We're working 
to identify new and improper behavior--such as spoofing--and have 
brought cases against bad actors for their attempts to manipulate the 
markets. We've confronted scams that target retirees, Ponzi schemes 
that target investors, illegal precious metals transactions, and fought 
for consumers whose customer funds were misappropriated.
    Over the past fiscal year, the CFTC's total monetary sanctions 
topped more than $3.2 billion. That number is more than 12 times the 
CFTC's budget for Fiscal Year 2015. And over the past 5 years, the 
Commission collected fines and penalties of approximately four times 
its cumulative budgets. We will continue to focus on robust 
enforcement.
Resources
    Finally, let me just say that with the many things on our agenda, 
our desire to be responsive to the concerns of lawmakers, end-users and 
other market participants, is seriously impaired by our current level 
of resources at the CFTC.
    We are very grateful for the increases we have previously received. 
Our Fiscal Year 2015 budget provided us an increase of $35 million over 
the previous year. This was essential to improving our ability to carry 
out our mission. We have used these resources judiciously to support a 
number of activities, including modernizing our information technology 
capabilities and bolstering our staff in critical areas.
    But as you know, our responsibilities were greatly expanded after 
the crisis, and our markets have grown enormously in size, importance 
and technological complexity. Our budget is not commensurate with the 
scope of our responsibilities. As a result, it has become increasingly 
challenging to carry out our duties at our current funding level.
    For example, without sufficient funding, the CFTC cannot modernize 
its information technology and data collection systems sufficiently to 
keep up with the markets, nor hire the personnel necessary meet its 
responsibilities in a timely manner. As a result, the Commission will 
be less proactive, less flexible, and less responsive than we need to 
be. It hurts our ability to fine-tune rules appropriately, and it 
impacts our ability to perform our surveillance and enforcement duties 
in a thorough and efficient manner. This can have consequences for 
businesses, consumers and the broader economy.
Conclusion
    Thank you again for inviting me today. Let me close by saying that 
I believe the United States has the best financial markets in the 
world. They are the strongest, most dynamic, most innovative, and most 
competitive--in large part because they have the integrity and 
transparency that attracts participants.
    The CFTC is committed to working with you and doing all we can to 
further enhance those qualities. Thank you for your assistance in this 
work. I look forward to your questions.

    The Chairman. All right, thank you, Chairman Massad. I 
appreciate that statement.
    The chair would remind Members that they will be recognized 
for questioning in order of seniority for Members who were here 
at the start of the hearing. After that, Members will be 
recognized in order of arrival. And I appreciate the Members' 
understanding.
    With that, I recognize myself for 5 minutes.
    Again, Chairman, thank you for being here. This has been a 
bad year for agriculture. We have had a century-long drop in 
prices over the last 2 years, 55 percent reduction in farm 
income. Can you tell us what your staff at the CFTC is doing to 
help understand the full weight and the full cost of its 
regulations on the agriculture community? And this, I don't 
mean just the direct costs, but also reduced services, 
decreased liquidity, fewer FCMs, the full gamut, of our folks 
trying to access these tools for risk management in the face of 
the pretty daunting challenges that they are facing?
    Mr. Massad. Certainly, Mr. Chairman. Well, these have been 
challenging times. We have seen a lot of volatility as well as 
a decline in prices. And obviously, we don't have an effect on 
prices, but to answer your question, we are certainly very 
cautious of making sure that the businesses that need these 
markets, and in particular, smaller businesses, and farmers and 
ranchers, can continue to use these markets effectively to 
hedge their routine risk. And that is why we have addressed 
many of what I have called these end-user concerns. We have 
taken steps to reduce record-keeping requirements. For example, 
we recently amended our Regulation 1.35 to reduce record-
keeping requirements. We have focused on the residual interest 
rule and changed that, which went to when customers must post 
margin. So that is not too onerous. We have reduced reporting 
requirements, and we have a proposal on the table right now 
that concerns trade options, to make sure businesses can 
continue to use trade options.
    You raised the question on clearing members. I am very 
concerned about the robustness of the clearing member industry. 
We want to make sure we still have a very robust clearing 
member industry that market participants can still access these 
markets. So I have spoken out about this and am happy to 
discuss some of those issues.
    Let me also note that I noted that we have announced this 
agreement with Europe on transatlantic CCPs, and throughout 
this process I have been very focused on making sure that 
whatever agreement we reached did not raise costs unnecessarily 
in our markets. And that is where we landed. At the end of the 
day, for example, there won't be any change to customer 
margins, and, in fact, we excluded agricultural contracts from 
even the changes that apply to what we call house margin.
    The Chairman. I understand, Timothy, all of the things that 
you have done are great if I can get into the market, but if I 
no longer have access to the market because the overall 
regulatory burden on the FCMs, on all these other institutions, 
and the capital regimes, everything else that is happening, 
they have basically excluded me because they can't make money 
on my trades. How does that help me stay in, to access these 
markets, if this overall burden on the folks that I try to go 
to have pushed them to a point where they can't service my 
account?
    Mr. Massad. Well, there are a number of factors influencing 
the clearing member industry. For example, if you look at the--
people have talked about the decline in clearing members. That 
goes way back. That has been a 10 year trend. It predates Dodd-
Frank. And it has to do with just the challenges of this 
business, particularly in a low interest rate environment. I 
don't think a particular----
    The Chairman. But is there sensitivity to--I got that, but 
is there sensitivity to the impact that the regulatory schemes 
have on making that environment even more challenging?
    Mr. Massad. Absolutely. And I have talked about this 
publicly, you raised the capital requirements issue. A key 
thing there for clearing members is the effect of the 
supplementary leverage ratio on clearing. And I have spoken out 
about this. This is, of course, a regulation of the bank 
regulators, but I do think it is not properly measuring the 
exposure of clearing members, and, therefore, it is having a 
potentially very adverse effect on clearing. And that is the 
reason we are hearing that clearing members are dropping 
customers. I have had meetings with clearing members. They say 
your customer protection regulations, for example, that came 
out after Dodd-Frank, those were a very good thing, we are all 
for those, what they are really focused on is the SLR.
    The Chairman. Right. Can you real quickly, on the leasing 
issue, if you have any Antideficiency Act violations, will you 
report those on a timely basis?
    Mr. Massad. Absolutely. Yes, we can.
    The Chairman. And there may be some other Members who want 
to go into the overall impact that that has, but again, thank 
you for being here.
    With that, I will recognize the Ranking Member for 5 
minutes.
    Mr. Peterson. Thank you, Mr. Chairman.
    Could you expand a little bit on the agreements you have 
with the Europeans on clearinghouses?
    Mr. Massad. Certainly. Certainly. So this agreement will 
resolve the issues pertaining to whether Europe would recognize 
our CCPs, which is necessary for European firms to continue to 
do business on U.S. CCPs. And we went through a very detailed 
analysis comparing our regimes. I, of course, have spoken out a 
lot about this. I thought there was an ample basis for them to 
recognize us a long time ago. They wanted to use this as an 
opportunity to look at ways to harmonize our regimes a little 
bit. And so we have agreed on a few steps. And like any 
agreement, it is a good compromise. Each of us will take some 
actions. On the customer margin practices, in other words, the 
practices of our CCPs when it comes to what they charge 
customers, those essentially won't change. We showed Europe--
they were first concerned that their system might produce more 
margin. We showed that actually ours generally produces more 
customer margin to the CCP than theirs, and they are 
considering allowing their CCPs to move toward ours in that 
respect.
    On the house side, in other words, the clearing members' 
proprietary accounts and positions, they have a slightly higher 
standard with respect to one key element of setting those 
margins than we do, and our CCPs that want recognition will 
need to show that they are collecting sufficient margin that is 
comparable to what they would under the European standard.
    There are some other aspects to the deal. We have agreed to 
propose to the full Commission what we call a substituted 
compliance determination, which is simply recognizing that 
European firms can comply with our rules in many respects by 
showing that they comply with the comparable European 
requirements. This is a very good step forward. It is something 
we have done in other areas already. And as I said, we have 
exempted agricultural contracts from the conditions that our 
CCPs need to meet with respect to house margining practices, 
and that is because these contracts really don't involve 
international competition, they are very focused on the U.S. 
market, and that was important to us, again, because I wanted 
to make sure this deal did not result in higher costs, 
particularly for our smaller customers in these markets.
    Mr. Peterson. So the stuff I have been reading about, these 
clearinghouses not being able to clear in one country, all that 
stuff is going to go away?
    Mr. Massad. Yes. We should be able to implement this on a 
timely basis. I think market participants can continue to clear 
with confidence. I have gotten assurances from the European 
Commission and from ESMA that they are prepared to implement 
this in a timely basis. And I know our CCPs have to do certain 
things to do that, but I know they are ready to do that also.
    Mr. Peterson. So this Office of Financial Research of the 
Treasury report, about the increased systemic risk caused by 
moving the swaps into central clearing, we understood that we 
were potentially moving this risk to the clearinghouse that if 
they screw something up, they could put the clearinghouse at 
risk, is that what they are talking about here?
    Mr. Massad. Well, that is essentially what----
    Mr. Peterson. I mean there is not much----
    Mr. Massad.--what they are talking about, but even the OFR 
would say--I know Richard Berner, the Director, would agree 
that the steps we took to move certain types of contracts on to 
central clearing were good steps, that made sense, because we 
can much better monitor and mitigate that risk. Having done 
that though, we simply have to engage in increased vigilance 
over these CCPs, make sure they are always strong and 
resilient, and that is what we have been doing. We have 
overhauled our regulations in this respect, we have 
strengthened transparency, we have strengthened customer 
protection, and we are working with other regulators around the 
world, not just domestically but around the world, on these 
issues of CCP resiliency.
    Mr. Peterson. So do they think that you haven't done enough 
there to----
    Mr. Massad. No, they are just raising it because they agree 
it is an important issue, and they want to help and they have 
offered their help, and we appreciate that.
    Mr. Peterson. Okay. Thank you.
    Thank you, Mr. Chairman.
    The Chairman. The gentleman yields back.
    Mr. Lucas, for 5 minutes.
    Mr. Lucas. Thank you, Mr. Chairman.
    Chairman Massad, I am very pleased with both your statement 
this morning and your pronouncement about the equivalency, and 
the assurance you have given us now. That is a big step in the 
right direction. My understanding was if we had not been able 
to achieve this, potentially the 21st of February might have 
been a key date when we were cut off, in effect.
    You expanded on the things that we have come to an 
agreement with. Are there still areas where perhaps there is a 
different perspective between us and our European colleagues?
    Mr. Massad. No, I don't believe so, Congressman. Not on the 
question of this whole equivalence and recognition process. 
Truthfully, it took a lot longer than I thought it would or 
should. Frankly, I thought we would be able to announce this a 
lot sooner, but sometimes it just drags on, as you well know, 
but I am glad we got here. And again, market participants can 
continue to clear with confidence.
    Mr. Lucas. Changing topics briefly, Mr. Chairman. One of 
the advantages of the dynamic leadership of the Committee and 
the 114th Session of Congress is, in addition to two good 
Aggies leading the place, we both are CPAs, so we probably have 
a better focus on the financial details than maybe any 
Committee in recent times on the Agriculture Committee. Could 
you discuss with us for a moment this topic about leasing 
issues and your facilities in New York City, and the IG's 
comments and the cost and all that kind of thing? Could you 
expand for just a moment on that situation? And I realize that 
the leases were done prior to your tenure as Chairman, as I 
understand it.
    Mr. Massad. Yes. Absolutely, Congressman. So the issue on 
accounting for leases is this--when the agency first entered 
into multiyear office leases, which goes way back to 1994, it 
accounted and obligated the current year payments, the first 
year payments, in its financials, and it obligated that amount, 
and it disclosed all the future payments, every single year, in 
a footnote to its financials. It continued to follow that 
practice for years. That practice was signed off on by various 
accounting firms, including KPMG, the most prominent accounting 
firm. The GAO started looking at some things last fall and said 
we have some questions. We promptly looked into their 
questions, we worked with them, and they concludes that, no, 
what you should have done when you enter a multiyear lease is 
you should obligate the entire amount, all those future year 
payments. If it is a 10 year lease, you take the sum of those 
10 year payments, and you have to obligate that amount in the 
first year, and you have to account for that amount, not just 
in a footnote but on the financial statements itself. And once 
they said that, we said okay, well, we will work to fix it. We 
notified our auditors as well as the Inspector General, who 
also had signed off on this practice, hadn't noticed any 
problem, and we came to Congress when GAO first raised this.
    So that is where we are. As I say, we will work with GAO 
and OMB to address this. I want to fix it. It is important that 
we be fully in compliance.
    But let me say, this was not an issue of the facts not 
being known. The facts about our leases and our lease payments 
were fully disclosed in the footnote. It is not an issue about 
having an internal system that didn't keep track. We knew what 
the lease costs were, we knew what the lease terms were, and 
all that was provided, again, to our outside auditors. It was, 
however, an incorrect practice with respect to both accounting 
and Federal appropriations law obligation practice.
    Mr. Lucas. Is it fair to say that there was some point in 
the report where it noted perhaps even the circumstance where 
there are a couple of rooms in the lease that management wasn't 
aware that were a part of the lease, those kind of things have 
been addressed?
    Mr. Massad. Okay. That is a separate issue where the IG has 
looked at whether we have excess space. And let me say on that, 
when I first took office, within about 2 weeks I went to Kansas 
City and looked at our office space, and it was clear to me we 
did have excess space, and we immediately contacted the 
landlord and offered it back. We have a limitation. We cannot 
just sublease on our own to anybody. We can't do that. So we 
have to go to the landlord. So we did that in Kansas City, and 
we have done that in New York as well. Our overall lease 
occupancy is about 85 percent, but we are working to try to get 
the landlord to take back the office space. We do have some 
disagreements with the IG on the calculation. I think the IG 
felt there were certain rooms we could use that we didn't feel 
we could really use, but we are certainly working to the extent 
that if we can give back any space, we are happy to do it.
    Mr. Lucas. Just remember, Chairman Massad, my CPA friends 
are watching. Thank you, sir.
    I yield back, Mr. Chairman.
    The Chairman. The gentleman yields back.
    Mr. Scott, for 5 minutes.
    Mr. David Scott of Georgia. Thank you. Chairman Massad, 
good to have you with us.
    First of all, I want to share with you some concerns I have 
with the possibility of lowering the de minimis level. First of 
all, it could have some damaging consequences if we lower that. 
One, it would limit our banks' ability to provide good risk 
management solutions for bank customers. And the other thing 
that it would do is it would raise the cost of providing the 
hedges that are so important for risk management as well.
    So my question to you is, in view of my concerns, you will 
not lower that level from $8 billion?
    Mr. Massad. So thank you for the question, Congressman.
    Here is what we have done on that. I asked our staff to do 
a study of the effect of lowering that level. As you know, the 
way the rule was written back when the SEC and the CFTC drafted 
this rule several years ago, was they set it at $8 billion 
initially, and provided that it would automatically fall to $3 
billion at the end of 2017. I asked our staff to do a study of 
that now that we have some data, the agencies didn't really 
have any data when they first wrote the rule. We hadn't--no one 
had data on the swap market. Now we have some data. So we put 
out a preliminary study that looked at what the effects would 
be as best we could. We have gotten some comment on that study. 
A lot of good public comment. We are evaluating those comments. 
We are going to finalize the report, and then that will put the 
Commission in a place, it will have the facts and the analysis, 
where we can decide whether to take action and what action to 
take. So we are trying to do this all on a timetable that 
works, in light of the timetable of the regulation as it is 
written today.
    Mr. David Scott of Georgia. Well, I want to register my 
deep concern and urge you not to lower it----
    Mr. Massad. Okay.
    Mr. David Scott of Georgia.--because, from my own 
calculations, it would have a devastating effect on our banks' 
ability to be able to help their customers hedge, and on their 
ability to be able to effect good risk management. That is the 
whole purpose of it.
    Mr. Massad. Yes.
    Mr. David Scott of Georgia. And if the banks are having 
that, then we need to listen to their concerns. So I would be 
very pleased if you would keep me apprised. And I have some 
information as well that I could share with you where it would 
be a devastating impact.
    Mr. Massad. Fine, Congressman.
    Mr. David Scott of Georgia. Thank you.
    Mr. Massad. I would be happy to keep you apprised, and look 
forward to whatever information you want to give us.
    Mr. David Scott of Georgia. As you know, over in Financial 
Services, when we last talked--I serve on Financial Services 
too, I spoke to you about the deep concerns we had about the 
failure of the European Union to give us fair harmonization and 
equivalency. First, this didn't just start, it started last 
year in the spring, in the summer. It has been kicked down the 
road. We still didn't have equivalency. We set the date for 
December. Still didn't have it. And now you are coming to us 
and saying that you have it and you are satisfied. And I don't 
question that, but I am wondering why did they put the United 
States' clearinghouses and exchanges through this doubt that, 
in effect, really--when you raise doubt and you have a period 
of time where that doubt is registered in a very competitive 
rural market, my point is, was there any damage done because of 
their failure, in taking so long? So I am wondering as to why 
they did it in the first place when they knew we had the 
equivalency, they went ahead and they gave the equivalency and 
harmonization to Singapore and other areas that had our same 
rigid regimes. And then I want to know did it cause any damage 
to our competitiveness for our United States businesses in 
dealing with cross border.
    Mr. Massad. I don't think it caused any damage to our 
competitiveness or the strength of our CCPs. It probably took a 
few years off of some of my staff who had to negotiate this 
over a long time as I have said, it should have happened a lot 
sooner. I think there was always an ample basis for them 
finding us equivalent. But the difference was this versus how 
they looked at Singapore or Korea or India or the many other 
places where they have granted equivalence, they looked at this 
as an opportunity to say we really need to try to harmonize 
regulation of CCPs between the U.S. and Europe so that we don't 
have a situation where there is a possibility for arbitrage by 
businesses, movement and so forth. And that is an admirable 
objective.
    Mr. David Scott of Georgia. Right.
    Mr. Massad. I think we all want to try to harmonize 
regulations. So they really wanted to use the process to do 
that.
    Mr. David Scott of Georgia. Okay.
    Mr. Massad. And we have succeeded at that. We have reached 
an agreement, and we will go forward and get it done on time.
    Mr. David Scott of Georgia. All right. Very quickly, we 
just passed an omnibus bill, and I have been very, very 
hardworking to try to make sure you all had the proper funding 
that you needed. But in this omnibus bill you were flat funded. 
Tell us where you are with that. Do you have enough funds, 
moving forward, and how damaging was the flat funding?
    Mr. Massad. Well, it is very challenging, it is very 
difficult. Our costs increase over time, so we must manage 
hiring, but this agency, to my mind, just does not have the 
budget commensurate with its responsibilities, given that those 
responsibilities were dramatically expanded, really 
dramatically expanded by the Dodd-Frank Act. We were given 
responsibility for this entire new market, the over-the-counter 
swaps market, and plus, as many of you know, the traditional 
markets we have overseen, the futures and options markets, have 
grown tremendously, not just in size, but in complexity, in the 
number of products. So that is our challenge. I would be happy 
to discuss it in more detail.
    Mr. David Scott of Georgia. All right, thank you. I----
    The Chairman. The gentleman's time has expired.
    Mr. David Scott of Georgia. I apologize for going over 
time, and I appreciate your courtesy, sir.
    The Chairman. The reason I allowed it is I thought you were 
just following up with the first question, not going into an 
entirely new line. So, David, I had to cut you off a little bit 
there.
    Mr. David Scott of Georgia. My apologies, sir.
    The Chairman. Mr. King, for 5 minutes.
    Mr. King. Thank you, Mr. Chairman. Chairman Massad, I am 
just picking up where Mr. Lucas left off. I believe you said 
that it was an incorrect practice, the accounting on some of 
the leases that are the subject of the news and our dialogue 
here this morning. And since I am not one of the CPAs here, was 
it an incorrect accounting practicing that you were referring 
to?
    Mr. Massad. Yes. It was both an incorrect practice in terms 
of the amount that should have been obligated under Federal 
law, as well as, therefore, an incorrect accounting.
    Mr. King. Okay.
    Mr. Massad. That is how I understand. I am not an 
accountant either, but that is how I understand it both--
incorrect as to Federal appropriations law and accounting.
    Mr. King. The Federal appropriations law, can you state--
stipulate what law that might be?
    Mr. Massad. The specific law, I am sorry----
    Mr. King. Antideficiency Act?
    Mr. Massad. Well, certainly, the Antideficiency Act is 
involved, but there may be a separate law as to what amounts 
you obligate. But the issue was, as I say, the fact that when 
we entered a multiyear lease, the view was, just given the 
nature of our authority, we had the authority to enter into 
multiyear leases, and obviously, by entering into a multiyear 
lease you can get a better deal for the taxpayer. It is pretty 
hard if you have to enter into a 1 year lease for 600 people, 
you are not going to get a very good deal. But when we entered 
into a multiyear lease, we should have obligated the full 
amount, those full 10 years of payments.
    Mr. King. And regardless of the accounting practice 
involved there, I will just go back to the Antideficiency Act, 
which prohibits the obligation of funds that have not yet been 
appropriated.
    Mr. Massad. Right.
    Mr. King. And that is what we are really talking about, 
isn't it?
    Mr. Massad. Well, had we tried to obligate the full amount, 
yes, we would not have had the budget if we were going to both 
have an office and employees, as I understand it. We couldn't 
have had both.
    Mr. King. Right. And so I just wanted to get to that. And I 
don't know that I want to put you in this position, but I am 
trying to determine this, and that is that, how pervasive is 
this practice in the broader Federal Government? And I know 
that is not a question you can legitimately answer here this 
morning, but I am asking you this question this way so that I 
can continue on with that, and that is, I will just say, as I 
interpret what I have heard here today, however inadvertent it 
might have been, it is, at least temporarily, a violation of 
the Antideficiency Act, which you will correct working with the 
GAO and the OMB.
    Is that a fair statement?
    Mr. Massad. Yes. And I couldn't comment on how pervasive it 
is, Congressman.
    Mr. King. Right.
    Mr. Massad. I don't know the answer to that.
    Mr. King. But you would concede that it appears that this 
is a violation of the Antideficiency Act?
    Mr. Massad. Well, I will leave it to the lawyers on that, 
but my understanding is that it likely is.
    Mr. King. And that is mine. And I take it to this point for 
that purpose that we have a broader responsibility in 
government to go back to the Antideficiency Act and apply it in 
places beyond just in your operation, but in the entire 
government. And so I take the opportunity to make that point 
here in this hearing, and I am glad this hearing is taking 
place for that reason.
    And so moving on from that topic, and I thank you for that 
response, I go back to Dodd-Frank, the--making sure that all 
the rules work and your customer protection requirements that 
came out after Dodd-Frank. You are relatively satisfied with 
what you have been able to put together in fine-tuning the 
rules?
    Mr. Massad. Well, we are still working on it. There is 
still some fine-tuning we need to do. One of the things we are 
going to be taking up this spring is our rules on trading of 
swaps. There are a number of things that we would like to look 
at there that need to be changed. There are other issues too. 
With this whole structure, it is very challenging to implement 
a whole new regulatory framework for an industry that is 
already a global industry that hasn't been regulated.
    Mr. King. Let me pose this question another way. If Dodd-
Frank had never been passed and signed into law, or if it were 
repealed in its entirety, what would you speculate would be the 
implications in your area of influence?
    Mr. Massad. Well, Congressman, the steps we have taken 
through Dodd-Frank are excellent steps, and they reflect, 
obviously, the commitments of all the leaders of all the G20 
nations to take the very same steps. We saw in the crisis how 
excessive risk could develop in this market, and it contributed 
to the intensity of the crisis.
    Now, there are a lot of derivatives that we all know are 
used by commercial businesses to hedge routine risk that are 
very important, and we want to make sure they can continue to 
do that. But we needed to take steps to put in a framework for 
this market where we are clearing standardized swaps, because 
that helps monitor and mitigate the risk, where we are having 
oversight of the major players in this market, and requiring 
them to do things like have capital and margin and so forth. So 
all those steps are good. It is just, it will take time to get 
it exactly right.
    Mr. King. I thank you. And that summarizes just the 
international conformity as one of the things that you 
mentioned.
    And, Mr. Chairman, I appreciate the hearing, and I yield 
back the balance of my time.
    The Chairman. The gentleman's time----
    Mr. King. Thank you.
    Mr. Massad. Thank you.
    The Chairman.--has expired.
    Ms. Plaskett, for 5 minutes.
    Ms. Plaskett. Yes, thank you, Mr. Chairman. Thank you so 
much for being here this morning.
    Mr. Massad. Thank you.
    Ms. Plaskett. I wanted to just quickly ask you, and then 
move on to something else, a question about the leasing. When 
there was some discussion earlier about that, do you think 
that--I know that the SEC had the same problem several years 
ago, is this something that maybe if you had--GSA had taken 
over, or using GSA, would be more helpful to you so that you 
could move to them the administrative and the day-to-day 
operations?
    Mr. Massad. Well, thank you for the question, 
Congresswoman. It is a very good question. And, obviously, 
there is a difference if an agency goes through GSA. In our 
case, when I took office--all I can speak of is really my 
experience since taking office, and when I took office we 
already had leases in place in all the offices. None of them 
actually are due to expire for another, I don't know, 5 years. 
So when I took office it was even longer than that. However, I 
did sit down--shortly after I took office, I sat down with the 
head of the GSA because I recognized that we did have some 
excess space, and I wondered if they could help us with that. 
And we actually talked about whether it would even make sense 
for GSA to take over our leasing. And he pointed out, well, 
since you don't have anything coming up, you don't have any 
renewals----
    Ms. Plaskett. Yes.
    Mr. Massad.--you would have to pay us--I would have to pay 
GSA seven percent really for not much benefit.
    Ms. Plaskett. Exactly.
    It is only if they would be negotiating the contract to 
leases that you could see any benefit to that?
    Mr. Massad. I think so, but we didn't explore it fully, but 
he was very helpful anyway in----
    Ms. Plaskett. Okay.
    Mr. Massad. Yes.
    Ms. Plaskett. Thank you. And then my other question, moving 
to a completely different topic, would be in terms of market 
reform, and particularly in Asia. Where do you see them going 
in terms of market reform and the competitiveness that we have 
with the Asian market and commodities? And between Europe, our 
own market, and Asia, where do you find us and the others in 
that spectrum?
    Mr. Massad. Yes. Excellent question, Congresswoman. And I 
have been very focused on what is going on in Asia. Last year I 
made a trip out there. I have tried to develop good 
relationships with the regulators throughout that part of the 
world, China, Japan, Hong Kong, Singapore in particular, Korea, 
and we are continuing to do that. They agreed to the G20 reform 
principles. They are implementing those. Clearing the--clearing 
requirements have taken effect in many jurisdictions. Japan is 
probably furthest along in terms of implementing some of the 
other reforms. The U.S. really was able to implement these 
reforms much faster than anywhere else in the world, so other 
jurisdictions are still coming along.
    The markets in Asia are not quite as developed as ours. 
Certainly, maybe leaving out Japan, but when you look at China, 
it is a huge market for derivatives, particularly commodities, 
but it is not as developed in terms of being a market where 
businesses hedge risk. It is much--it is a much more retail-
speculative market. But we have been trying to build relations 
there and work with them on harmonizing reforms.
    So I guess the short answer is there is a lot of work to do 
here, but there is a willingness over there to work together, 
and I hope that we can do that so that they do implement 
similar reforms and we can harmonize.
    Ms. Plaskett. So the lack of harmonization, does that 
create a competitive edge for them or for us, or is it 
something that you don't see affecting----
    Mr. Massad. I don't think it is today because, again, I 
don't think there is a serious issue there, and there are other 
differences in the markets. But, over time we do want to make 
sure that we achieve some basic regulatory harmonization on a 
lot of these key points. And there is a lot of good work going 
on to do that. The margin rule on uncleared swaps is a great 
example where there are international standards that a lot of 
countries participated in drafting. And I worked very hard to 
make sure our rule was consistent with those so that we do 
further this process of international harmonization.
    Ms. Plaskett. I have run out of time, but at some point it 
would be great if the Chairman could have you explain why this 
margin you feel is so important in the uncleared swaps area.
    Thank you.
    The Chairman. The gentlelady yields back. Thank you.
    Mr. Scott, for 5 minutes.
    Mr. Austin Scott of Georgia. Thank you. Thank you, Mr. 
Chairman.
    Mr. Massad, good to see you again.
    Mr. Massad. Good to see you.
    Mr. Austin Scott of Georgia. I want you to know I share the 
Chairman's opinion that until there is a reauthorization, that 
there should be no increase in funding for the agency. That 
would be for any agency, quite honestly, if it hasn't been 
reauthorized, I don't think we should increase funding, but 
certainly, holds for yours as well.
    I can't help but wonder, as a small business owner who is 
licensed with a series 7, who somebody on someone's staff that 
worked for someone like you thought that I should document 
every lunch that I had with a client, I should document where 
we ate, what the address of that lunch was, and what I spent 
with that client at lunch. And I can't help but wonder what 
would happen if a government regulator came through the doors 
of my business and asked for the records of where I had lunch, 
how much my fine would be if I wasn't able to produce each and 
every document for them.
    I heard what you said, but the fact of the matter is a 
legal liability was not properly documented, and your records 
are incomplete. And as a private business owner, I know what 
would happen to me if I hadn't done those same things. I trust 
you when you say it wasn't intentional, but what would happen 
to an entity regulated by your agency if that entity was not 
recording data in a timely fashion, or retaining complete 
document sets? What would the fine be? What would the penalty 
be?
    Mr. Massad. Congressman, I guess I would say it this way. 
Our compliance efforts are directed, and I say this to the 
staff all the time, are directed toward bringing people into 
compliance. They are not directed at playing gotcha games. And 
the same is true for our--with respect to our enforcement. We 
are not focused on small businesses who don't document a lunch. 
I am not even aware that our requirements require that. We are 
focused on Ponzi schemes and precious metal scams and spoofing 
and people who are deliberately manipulating the markets.
    Mr. Austin Scott of Georgia. And I absolutely support you 
being in those things. In order for our markets to work, you 
have to have access and you have to have integrity. The problem 
is when you draft the rules and regulations in such a manner 
that it encompasses everybody out there, then it becomes a 
problem and it puts the smaller people out of business----
    Mr. Massad. And I----
    Mr. Austin Scott of Georgia. Let me make one final 
statement on that if I could. With regard to Dodd-Frank, the 
idea that you would put my local community bank, where there is 
absolutely no systemic risk to the U.S. economy if that bank 
failed, under the same rules and regulations that you would put 
a multibillion dollar institution, is a perfect example of the 
flaw of the original legislation. And my fear is that if the 
agent--that the agencies are going to push forward and continue 
to put the little person under the same rules and regulations 
as the big person, and, therefore, putting the little guy out 
of business.
    Mr. Massad. Well, Congressman, I share your concern. It is 
certainly not my desire, and we have taken a lot of steps to 
make sure we are not doing that. As I noted, recently we took 
an action to make sure that small banks and community 
development financial institutions who weren't specifically 
addressed in the statute could continue to engage in their very 
limited derivatives business the way they had been, and not be 
subject to a----
    Mr. Austin Scott of Georgia. And I recognize that most of 
them are not engaged actively, but as a whole, the rules and 
regulations that were drafted for the multibillion dollar 
institutions have come down on our local community bank, and it 
has caused problems, especially for our farmers and others like 
myself who go to the community bank because that is who we 
choose to go to and want to go to.
    I have 30 seconds left. I would suggest to you that, with 
regard to the rules of automated trading, which is not 
something that--I will admit, I don't understand it completely, 
but I do believe that that is intellectual property that 
belongs to people, and I do believe that they have a right to 
privacy. If you have probable cause of wrongdoing, then I 
absolutely think that you should go get a warrant to get access 
to that intellectual property. But I can't see the government 
being trusted to safeguard and house peoples' intellectual 
property.
    Mr. Massad. And, Congressman, we are not asking you to do 
that. We are not seeking that power. We are not asking them to 
give us what they call their source code. All we are asking is 
that they preserve it, that is all we are trying to do, so that 
if there is a problem and we do need to go get it, using the 
proper procedures, we can. There has been some misunderstanding 
about what our intention was, and we are certainly open to 
making sure that the final rule works that way.
    If I can just take a minute more on the record-keeping. We 
did just revise a very important record-keeping rule in 
response to the concerns of a lot of commercial businesses that 
said they felt it was subject to an interpretation such that 
they did have to keep records that they didn't feel were 
necessary, and we changed it. That was called rule 1.35. And 
the same on the small banks, we have taken steps, such as the 
swap dealer rule doesn't require registration by them. They are 
exempted from a lot of other requirements. So I will----
    Mr. Austin Scott of Georgia. I appreciate it.
    Mr. Massad.--continue to work with you on this.
    Mr. Austin Scott of Georgia. My time has expired. But there 
is a difference in the standard for private business owners----
    Mr. Massad. Okay.
    Mr. Austin Scott of Georgia.--and the government. And the 
people who make the rules should abide by the rules.
    The Chairman. The gentleman's time has expired.
    Ms. Adams, for 5 minutes.
    Ms. Adams. Thank you, Mr. Chairman. And thank you, Chairman 
Massad, for your testimony and for the work that you and the 
other Commissioners have done in developing and finalizing and 
implementing many important rulemaking guidance in the wake of 
Dodd-Frank, particularly as it relates to harmonizing 
rulemaking on central clearing.
    Let me ask, with today's announcement, and it is sort of a 
follow up of an agreement on equivalence for clearinghouses 
with the European Union, can you give a breakdown of how this 
agreement may impact the Asian markets and their ability to 
follow suit in working with us on harmonizing rulemaking. 
Specifically, what impact today's rulemaking will have on the 
Asian markets to catch up.
    Mr. Massad. That is an excellent question, Congresswoman. A 
lot of the people in Asia have been waiting for Europe and the 
U.S. to reach an agreement so that then they could see what 
that agreement is, and maybe then think about their own rules. 
And we have a separate process going on to look at just that. 
We have a separate process that involves not just the U.S. and 
Europe, but regulators from around the world looking at 
clearinghouse regulation issues, and whether we should try to 
make the standards more granular, whether we can meet to 
harmonize in certain areas, and the Asians are involved in 
that.
    So the main effect of this is everybody will say finally, 
it is finally done. Now we know, and now let's move forward 
through the international work stream to look at some of these 
issues further, and to try to achieve further harmonization 
globally.
    Ms. Adams. Thank you. There have been heightened levels of 
discussions around the issue of stress tests for 
clearinghouses. Do you think that stress tests for 
clearinghouses are necessary to mitigate the concern for the 
concentration of risk on a clearinghouse?
    Mr. Massad. That is an excellent question. Yes, I think it 
is very important. And again, this international group that I 
referred to, that is one of the things they are looking at: can 
we develop some standards for stress tests of clearinghouses. 
Clearinghouses are different. They clear different products, 
they have different structures, so there is not a one-size-
fits-all, but it is important to try to develop some standards. 
We are co-chairing this international effort to look at things 
like stress tests and margin methodologies, and recovery plans 
and capital or skin in the game. So there will be a report 
coming out by about the middle of the year on this.
    Ms. Adams. Okay. One last question. One major area of 
concern identified in the 2015 OFR report is the risk of a 
contagion from a failing swap dealer or major swap participant. 
So how is the CFTC monitoring or working to relieve that risk 
or the concern for that contagion risk?
    Mr. Massad. Well, that is where this rule on margin for 
uncleared swaps is so important. What we have done is we have 
said you have to clear on these central clearinghouses, or 
CCPs, the standardized products, but then you have still have a 
lot of products that aren't going to be cleared, and shouldn't 
be cleared. We shouldn't be trying to move everything into the 
clearinghouses because that will just potentially put too much 
stress on the clearinghouses. So you are still going to have 
large institutions engaging in swaps bilaterally. And the 
margin rule says you have to hold some margin for that, 
collateral, in case the other guy defaults. We have a rule in 
place now. We made it consistent with what the bank regulators 
are doing in this area, because they have responsibility too 
for this issue. We made it consistent with what international 
regulators are doing. So that is why I refer to this as a very 
important sort of piece of the overall architecture here.
    Ms. Adams. Thank you very much.
    Mr. Chairman, I yield back.
    The Chairman. The gentlelady yields back.
    Mr. Crawford, 5 minutes.
    Mr. Crawford. Thank you, Mr. Chairman.
    In your testimony you said one of the reasons swap data is 
disorganized is because the Commission ``expected the industry 
to develop standardized terms. Unfortunately, that didn't 
happen.'' However, in the 2012 swap data reporting rule it 
states unequivocally the Commission has determined that the 
final rule will delegate the Chief Information Officer the 
authority to determine the format, data standards, and 
electronic transmission standards and procedures acceptable to 
the Commission. Other than the December technical standards 
release, what specific steps has the CIO undertaken to provide 
appropriate data standards to market participants?
    Mr. Massad. Excellent question, Congressman. We have 
recently come out with some proposals suggesting some 
standardized ways of reporting. It covers about 120 fields. And 
prior to that time, we had a lot of meetings with industry to 
sort of develop these ideas. Let me just say that there was an 
article about what I said--quoted or had a headline that said I 
was blaming the industry. I am not blaming the industry. This 
is a challenging problem, and it is just something that is just 
going to take time and we have to work together. I want to work 
with industry to figure out what the best way is of doing this.
    I wasn't around when the agency first drafted the rules. 
They didn't really have the data then, and they put out rules 
thinking that the industry might come up with standardized 
measures. The industry has done that in a lot of areas. I used 
to be a lawyer in private practice. I worked with a whole 
industry group that came up with a whole set of definitions 
originally in the swap area. But the issues today, they are 
things like if you have a swap that pertains to a physical 
commodity even, like corn or whatever, there are maybe ten 
different ways basic fields are getting reported. It is a 
simple problem on the one hand, but when you are talking about 
millions of swaps it becomes a very complicated problem.
    Mr. Crawford. Well----
    Mr. Massad. That is what we are trying to standardize.
    Mr. Crawford. Got you. Let's talk about the data problem 
that you highlighted in your testimony. It has been known for 
years and it has been highlighted repeatedly before this 
Committee by multiple witnesses, including then-Commissioner 
Scott O'Malia. So providing regulators with a complete picture 
of the market was one of the most important goals of the G20, 
and it has been loudly trumpeted as one of Dodd-Frank's biggest 
safeguards against another financial catastrophe. Given the 
importance of data reporting, why hasn't this issue been a 
bigger priority at the Commission?
    Mr. Massad. Congressman, excellent question. It has been a 
big priority. It is just all a question of resources and how 
quickly can you do all these things. All these things are big 
priorities. Fine-tuning the rules so that they don't burden 
commercial end-users is a big priority, making sure we are 
addressing cybersecurity is a big priority, all these things 
are, but, let me just say that while there are issues in 
getting the data to a better state, we are benefiting very, 
very significantly from this data already. The study on the de 
minimis rule is a great example of that.
    Mr. Crawford. Let me----
    Mr. Massad. Yes.
    Mr. Crawford. Let me ask you this: probably more important 
than who is to blame for the swap data problem is what is the 
magnitude of the problem. So my question to you is if we had a 
financial crisis today, what could the CFTC tell us tomorrow 
morning about total counterparty exposure for major U.S. 
financial institutions?
    Mr. Massad. We can tell you a lot. I receive reports on who 
are the largest participants in the swap market, what that 
exposure consists of in terms of whether it is cleared or 
uncleared, what asset class it is in. We are increasingly able 
to look at interconnectedness, so we are able to do a lot, but 
there is a lot more we should do. We are trying, for example, 
to build out our surveillance system which is very 
sophisticated when it comes to the futures market, because we 
built that out over time. We look at concentration risk, 
liquidity risk, credit risk, market risk, for all these 
participants. We are trying now to incorporate their swap 
activity into that, even if it is uncleared. So there is a lot 
we can tell you today, but there is still a lot of work we need 
to do.
    Mr. Crawford. You don't have any concerns that the global 
regulators don't have a full picture of the markets as the G20 
intended?
    Mr. Massad. Well, the words full picture, we are getting 
there. There are always ways you can improve the picture. It is 
a very, very--and the way I liken this to, it is like a big 
infrastructure project. It wasn't just write a rule, flip a 
switch, and suddenly you will know exactly what this market 
looks like. You have to build this out. And I remind our staff, 
we have to build it out over time so let's think about the 
milestones we are trying to achieve. We can't build the Rolls 
Royce tomorrow.
    Mr. Crawford. What is the timeline for building that out?
    Mr. Massad. It is a gradual process. I am very focused on 
what can we accomplish this year. And, as I say, we have put 
out a specification on harmonizing 120 fields, we have put out 
rule changes on reporting of cleared swaps, we are working on 
right now, this very minute, we are chairing a data 
harmonization effort that brings together international 
regulators as well as industry participants. We have about--I 
spoke to them yesterday, it is a 3 day meeting where we are 
talking about a lot of these issues, and we are bringing--
again, bringing together regulators and businesses from around 
the world to do this.
    Mr. Crawford. Thank you, Mr. Chairman.
    The Chairman. The gentleman's time has expired.
    Ms. Graham, for 5 minutes.
    Ms. Graham. Thank you, Mr. Chairman.
    I represent north Florida, very rural, lot of agriculture, 
so I am so proud to sit on this Committee. I just finished a 
tour, the first annual north Florida farm tour of all 14 
counties in my district, and talked with farmers and folks 
about the challenges they are facing, which are, unfortunately, 
quite a lot. And low commodity prices came up regularly. So 
within the markets that you regulate, can you give some counsel 
advice as to what steps farmers in my district and across the 
country can be taking to address and to deal with low commodity 
prices?
    Thank you.
    Mr. Massad. Well the derivatives markets, in my mind, 
really exists to help farmers, ranchers, commercial businesses 
to hedge price risk. Prices are going to be volatile. We don't 
control them. They are going to go up and they are going to go 
down. And we are experiencing that in a lot of commodity areas, 
obviously, not just agriculture. We are seeing, obviously, that 
in the whole energy complex with what has happened with oil. 
And so our job is to make sure these markets are accessible. 
The questions that were asked by the Chairman and others on 
clearing members and whether people have access to clearing 
members is critical. Our job is to make sure they can execute 
efficiently. Our job is to make sure that clearinghouses 
function well and don't pose risks. So those are the things we 
are trying to do to facilitate their ability to use these 
markets. But obviously, the price volatility and the declines, 
we are talking about global forces here that affect these 
things.
    Ms. Graham. Well, thank you. Is there nothing in addition 
that you could point to that I could help some of the farmers 
in my district with some guidance in the future as they deal 
with these low commodity prices?
    Mr. Massad. Well, again, I can't influence prices. I don't 
influence prices. But I guess what I would say to them is, to 
the extent that they are trying to hedge their risk through the 
commodity derivatives markets, I am always happy to hear about 
their experience and whether they are facing challenges there, 
and whether there are things we can do to make it easier for 
them to hedge risk, if that is what they want to do. Some 
businesses don't want to do that. And I am not counseling 
people to do it or not do it, I am just saying if that is what 
they are choosing to do, and they are running into issues, we 
are always happy to hear about that.
    Ms. Graham. Okay, I really appreciate it. Thank you.
    And I yield back my time, Mr. Chairman.
    The Chairman. The gentlelady yields back.
    Mr. Newhouse, 5 minutes.
    Mr. Newhouse. Thank you, Mr. Chairman. And thank you for 
being with us this morning, Chairman Massad.
    My very first CODEL was to Chicago, and included the CFTC 
visit, and I appreciate the hospitality there.
    I just wanted to ask a couple of questions. In December of 
last year, the CFTC finalized rules on margins for non-cleared 
cross-border swaps. And we appreciate that this rule provides a 
greater flexibility for swap participants than what the 
potential alternative rules could have, but it seems to 
conflict heavily with guidance that was issued back in 2013. In 
the areas where there is conflict between the rule and the 
guidance, how would you encourage market participants to 
respond, and what have you done, what steps have you taken to 
help clarify any confusion that this creates?
    Mr. Massad. Sure. Thank you, Congressman, for the question. 
I believe you are referring to the cross-border application of 
the margin rule, of the rule on margin for uncleared swaps. We 
have not yet finalized that part of the rule. What we finalized 
in December was what we call the base rule. We are doing a 
separate rulemaking on the cross-border application of it, and 
we do hope to take that part up for finalization very soon.
    The issue there was that the guidance that you are 
referring to was general guidance put out with respect to 
cross-border issues across the board, not just margin but a lot 
of issues. When it came to the margin rule, we looked at being 
consistent with the guidance, but that would have made us 
inconsistent with what the bank regulators were doing. And so 
we have been thinking a lot about, well, how do we proceed 
here. The guidance stated very clearly that it was just general 
guidance, and the Commission, when it did particular rules, 
might do something different. And so we put out a proposal that 
said to everybody, please comment. We said, well, we could 
comply with the guidance. It would look like this if we did. We 
could be consistent with what the bank regulators are doing in 
this very same issue, because they have responsibilities too, 
and it would look like this. Or we could do something in 
between the two.
    So we invited comment on that. Invited industry comments. 
We received a lot of comments. We are going through that now, 
and we will make a determination as to what to do. To me, that 
is the best way forward, to try to be as transparent as 
possible, to say, look, we could make it consistent with the 
guidance, we could make it consistent with these other rules 
that are coming down the pike, we could do something in 
between, or maybe there is another alternative. So that is what 
we are looking at.
    Mr. Newhouse. Yes. I appreciate that. As you know, the 
report accompanying the Consolidated Appropriations Act of 2016 
directs the CFTC to issue a rule setting the swap dealer de 
minimis level at $8 billion or higher, no later than 60 days 
after passage. Mr. Chairman, does the CFTC intend to comply 
with Congress' instructions?
    Mr. Massad. Well, we certainly take those instructions 
seriously, and we are keeping them in mind. What we are doing 
is, I felt we needed to have a study of this rule to understand 
what the implications were because there wasn't really data 
available before. So that is why we have been doing the study 
and getting input. We have gotten input from people in Congress 
on this. And we are looking at all that input, and we will come 
out with a final report and that will enable the Commission to 
then decide what to do.
    Mr. Newhouse. Do you anticipate an interim final rule?
    Mr. Massad. We haven't made a decision on that. I want to 
talk to my fellow Commissioners and see what their thoughts are 
on what action, if any, we should take.
    Mr. Newhouse. Yes. I appreciate that. Again, welcome. Thank 
you for being here.
    Mr. Massad. Thank you.
    Mr. Newhouse. I yield back, Mr. Chairman.
    The Chairman. The gentleman yields back.
    Mr. Kelly, 5 minutes.
    Mr. Kelly. Thank you, Mr. Chairman. And thank you, 
Chairman, for being here.
    Going back and following up with Representative Scott's 
question, despite receiving $35 million increase in your Fiscal 
Year 2015 appropriation, relative to 2014, you repeatedly asked 
for increased funding for the agency. Your Fiscal Year 2016 
appropriation was kept at the same level as 2015. While we all 
would like to have more resources or more funds at our 
disposal, that is often not possible, especially in the world 
that we live in, and we must tighten our belts instead, 
shifting resources to meet the most pressing need, 
prioritizing, determining what needs the most funds. Could you 
please tell me what steps the CFTC has undertaken to tighten 
its belt, looking to see where funds may not be put to their 
best use and reallocating those funds to the priorities that 
you choose as the Chairman?
    Mr. Massad. Absolutely, Congressman. And I agree with you 
that we do have to prioritize. One of the key things we have 
done is we have worked with the National Futures Association, 
the NFA, which is our main self-regulatory organization, to see 
what further activities they could engage in that aren't 
necessarily the core things that we need to focus our resources 
on. And so, for example, we have asked them to take on greater 
responsibility with respect to examinations of swap dealers, 
and the permanent registration process for swap dealers. And 
there are other areas where we are asking them to step up and 
do more.
    We are trying to prioritize our own issues and it is very 
hard because so many of these things I would like to be acting 
on concurrently, whether it is the data issues or the end-user 
concerns. But we are having to do that. We have had to delay 
doing certain improvements to our IT systems, which I would 
rather not delay, but we have had to postpone some of those.
    We are always focused on trying to prioritize and make the 
best use of the resources we have, but I do believe that given 
the scope of this agency's responsibilities, that it is 
critical to increase that budget.
    Mr. Kelly. And on another line, as you are aware in the 
current form, regulation automated training, reg AT, will 
permit the CFTC and the DOJ access without a subpoena to highly 
proprietary source codes by market participants. Many market 
participants have expressed concern with the CFTC's ability to 
safeguard this highly valuable and sensitive information. How 
does or how will the CFTC guarantee that any outside 
contractors would safeguard these irreplaceable trade secrets, 
and how would the agency know if any proprietary source code 
was, in fact, stolen?
    Mr. Massad. Excellent question, Congressman. So what we are 
talking about is what we call the source code for how an 
algorithmic trading strategy would work. And if you have a 
situation in the market where an algorithm runs amok, and we 
have seen those, whether it was Knight Trading or some other 
things, you need to be able to go back in and reconstruct what 
happened, and the only way you can reconstruct what happened is 
if that source code has been preserved, meaning even if they 
change the algorithm, they kept what it used to say. That is 
what we are after. We are just asking them to keep it, to 
preserve it. We are not asking them to give it to us. And we 
very much recognize the confidentiality concerns. We get all 
sorts of confidential information from market participants, and 
keeping it confidential is one of our utmost obligations.
    And with respect to source code, we are happy to work with 
industry participants on this to make sure there are procedures 
in place that are sufficient to safeguard that confidentiality. 
That is the last thing I want to see happen. The strength of 
our markets rests on their integrity and their transparency, 
and part of that is making sure that we preserve the 
confidentiality of any kind of information that we need to get 
access to in our compliance and enforcement capacities.
    Mr. Kelly. Thank you, Chairman, for being here today. And, 
Mr. Chairman, I yield back the balance of my time.
    The Chairman. The gentleman yields back.
    Mr. Allen, 5 minutes.
    Mr. Allen. Yes, sir. And thank you, Chairman Conaway--
excuse me. Thank you, Mr. Chairman. And again, I firmly believe 
that all agencies and programs in the Federal Government need 
to be authorized and then appropriated, not the other way 
around.
    As you know, House Republicans have made many efforts to 
reauthorize the CFTC with some significant and much-needed 
reforms. I want to encourage, as you probably already heard 
here today, our Senate colleagues to act on this legislation. 
And I agree with Chairman Conaway, we need to finish our work 
authorizing agencies and programs before we spend more taxpayer 
dollars.
    Obviously, as in all of our districts, the commodity price 
situation is of great concern. We have decreasing acreage being 
used, for example, for cotton, which is under the WTO rule, and 
now in the farm bill there is no protection. And so is there 
any link to that as far as the world market price for cotton? I 
mean the reduction--I mean it looks like that--well, obviously, 
we have some issues with China on cotton, but if there is this 
glut in the supply chain, and because we now have a situation 
where our folks are just taking a big hit. As the Chairman 
said, the farm economy is down 55 percent, and it is going to 
hit us particularly hard in Georgia, agriculture is our number 
one industry. So is there any connection with that as far as 
some of our counterparts taking advantage of us because we are 
considered a developed nation, and they are considered 
undeveloped nations, according to the lawsuit. So what is your 
thinking on that?
    Mr. Massad. Well, I would hope not, Congressman. I guess in 
terms of what our jurisdiction is, it is to make sure that, 
say, a futures contract pertaining to cotton isn't susceptible 
to manipulation. It is not up to us to police trade agreements, 
as you know. But the concerns you have raised bear on the 
contract design, and how is that contract designed in terms of 
what are the production points or the delivery points that are 
taken into account in calculating a futures price, and is that 
working well. And that is something that the clearing agencies 
review from time to time as market participants raise concerns 
about contract design, and we get involved as well. I know also 
one of the clearinghouses is trying to introduce a new world 
cotton contract.
    So I am happy to work with your staff if there are 
particular concerns on that contract design, we are happy to 
look into those.
    Mr. Allen. Okay, great. Well, certainly, we are just going 
to continue to reduce the numbers of acres that we plant 
cotton. And folks can just eat so many peanuts. And, of course, 
the farmers were fairly smart to go to peanuts and corn, and 
some other things, but we still want to be a player in cotton, 
so we are going to have to figure that out.
    Also, and I am not sure if you have been asked to do this, 
but as far as a list of your current service contracts, could 
your Commission provide that to----
    Mr. Massad. I am sorry, our current what contracts?
    Mr. Allen. The current service contracts that your agency 
enters into as far as third party vendors. Could you get us a 
list of those service contracts?
    Mr. Massad. Sure, I would be happy to check on that, 
Congressman.
    [The information referred to is located on p. 39.]
    Mr. Allen. And then also as far as those service contracts, 
has your staff examined to ensure that all obligations are 
appropriately accounted for under the recording statutes?
    Mr. Massad. Certainly. Yes, we do.
    Mr. Allen. Okay.
    Mr. Massad. We take that very seriously. We take our 
obligations to comply very seriously.
    Mr. Allen. Okay. All right, good. Well, Mr. Chairman, I 
yield back my time. And thank you very much for your testimony.
    The Chairman. The gentleman yields back.
    Mr. Davis, 5 minutes.
    Mr. Davis. Thank you, Mr. Chairman. And, Mr. Chairman, 
thanks for being here.
    Sometimes I need a translator too to understand my 
colleagues from Georgia also. So, Rick, great questions.
    Mr. Allen. Thank you.
    Mr. Davis. I wanted to bring up an issue that was brought 
to my attention. Representatives of the futures trading 
industry recently took the extreme step of filing an amicus 
brief in Federal court. The brief asserts that they do not 
understand the CFTC's position on attempted manipulation, and 
they believe the position on attempted manipulation, if 
accepted by the court, will cause major problems in the 
markets. They claim that the CFTC is attempting to recast 3 
decades of subtle law, and that the CFTC, if successful, it 
would upset settled trading expectations and practices. Are you 
aware of this brief?
    Mr. Massad. I am aware of it, sir.
    Mr. Davis. Are you concerned about the potential negative 
impact on legitimate trading when you change settled law 
through enforcement actions?
    Mr. Massad. Well, Congressman, I would prefer not to get 
into the specifics of a particular case.
    Mr. Davis. Well, this is more about changing settled law.
    Mr. Massad. Yes.
    Mr. Davis. That is what I am asking----
    Mr. Massad. Yes.
    Mr. Davis.--about, not----
    Mr. Massad. Yes. I----
    Mr. Davis.--a specific case.
    Mr. Massad. Yes. I don't think--we are not trying to change 
settled law. I think our view of the law is--I can state it 
pretty basically. You can't toy with prices. Prices should be 
set by supply and demand.
    Mr. Davis. But would you----
    Mr. Massad. You----
    Mr. Davis. Would you--go ahead.
    Mr. Massad. Sorry. Please.
    Mr. Davis. Would you agree on the importance that market 
participants have a clear understanding of what constitutes 
that attempted manipulation in the futures markets?
    Mr. Massad. Yes, I would, and I would agree that the way we 
do that in this country is Congress passes a law and the courts 
interpret it, and that is what is going on here. But, I don't 
think we are trying to rewrite a lot of history here, a lot of 
court cases. I think it is before the court--or these things go 
before the courts and they will get resolved that way. But I 
can tell you that as far as the agency's own position, it has 
not changed.
    Mr. Davis. Okay. Well, I just want to make sure we have 
learned some hard lessons about the importance of markets and 
their impact on our economy, and shouldn't Congress or at 
least, collaborative, thoughtful agency rulemaking, with proper 
notice to the marketplace, have a role in something like this 
that could cause, as they stated in their letter, widespread 
problems for our markets.
    So thank you for your responses. Before I run out of time, 
I want to say I am glad to see you have an agreement with 
Europe on the equivalence, because it is very vital for our 
U.S. markets. The process for getting to this point seems a 
little flawed. From my perspective, it seems like Europe tried 
everything they could to make this a competitive instead of a 
regulatory issue. And, in fact, this seems like it almost 
became a trade issue with Europe trying to keep the U.S. out of 
its markets.
    What can be done to prevent European regulators from acting 
this way in future negotiations?
    Mr. Massad. Well, I guess I would say it this way, 
Congressman----
    Mr. Davis. And I know you dealt with this issue earlier, 
but I wasn't here. I apologize.
    Mr. Massad. Both Commissioner Hill and I inherited a 
situation. We were both committed to trying to resolve it in 
good faith and as quickly as we could. The fact that we now 
have resolved it provides a good basis for future cooperation. 
We should be focused on, as you put it, the regulatory 
objective. We have a lot of other work streams going on that 
are seeking to do that, that Europe and the U.S. and other 
regulators are involved in. And so our challenge is now let's 
take this forward, let's focus on those work streams, and let's 
try not to let these things get derailed.
    Mr. Davis. Well, Mr. Chairman, thank you for your time. And 
in the days of multiple hearings, I will see you later.
    Mr. Massad. Okay, thank you.
    Mr. Davis. I yield back.
    The Chairman. The gentleman yields back.
    Mr. DesJarlais, for 5 minutes.
    Mr. DesJarlais. Thank you, Mr. Chairman.
    Mr. Chairman, a recent article in Bloomberg noted that oil 
markets had reached a new record for the highest number of open 
positions in WT oil contracts, with speculations opening almost 
\1/2\ million contracts through February 2.
    Given this unprecedented level of speculative activity in 
the oil markets, how many dollars per barrel do you think it is 
adding to the current price of oil?
    Mr. Massad. Congressman, I don't speculate on prices, or I 
don't comment on prices. I guess what I would say is that we 
have seen a lot of volatility obviously in the oil market and 
the energy complex overall. It is obviously the product of a 
lot of very, very big forces of supply and demand. But our job 
is to engage in surveillance to make sure there aren't people 
violating the law, engaging in improper behavior, trying to 
manipulate prices, and we will do that to the best that we can 
with the resources that we have.
    Mr. DesJarlais. Thank you. Would you consider, or would you 
classify this as excessive speculation?
    Mr. Massad. No, not at this time. To my knowledge, we are 
again witnessing an oil market which has been affected by some 
very large forces of supply and demand. The shale revolution 
has caused tremendous change in production, and particularly 
production in this country. We have seen changes from abroad in 
both what OPEC is doing and in Iran. So there are lot of very 
big factors affecting the oil market and affecting prices here.
    Mr. DesJarlais. Okay, Mr. Chairman, if a record number of 
open contracts doesn't constitute excessive speculation, then 
what exactly is excessive speculation?
    Mr. Massad. Well, Congress didn't define it in the law. It 
is up to us to do our best, and our task in that regard is to 
come up with a positions limits rule, as Congress has directed 
us to, that is supposed to be designed to prevent excessive 
speculation. And that is what we are trying to do. In our 
surveillance efforts, we are focused on whether people are 
manipulating or attempting to manipulate price. So that is what 
we will continue to do there.
    Mr. DesJarlais. Okay, you may have answered this somewhat, 
but let me try again. How do we know exactly what activity the 
Commission is trying to prevent with this proposed position 
limits rule, which has no definition or test for excessive 
speculation?
    Mr. Massad. Congressman, we are trying to carry out the 
directive that Congress gave us, which was to implement 
position limits, to limit excessive speculation, while at the 
same time allowing for bona fide hedging. We have had position 
limits in agricultural commodities for many, many years, and 
most people would say they have worked well. And Congress made 
the decision to expand that, and that is what we are trying to 
do. We are going about that by looking at a number of things 
and listening to market participants of all types as to how we 
should design this rule. We are working with the exchanges on 
how we should design this rule. They, of course, have had 
position limits in place for a number of other commodities, 
even when it wasn't a Federal limit, for years and years also. 
And when I talk to most participants, they agree that we should 
have position limits. The questions go to exactly where they 
should be set, and making sure that they allow for bona fide 
hedging. And those are the things we are focused on.
    Mr. DesJarlais. All right, thank you for your answers.
    I yield back.
    The Chairman. Before the gentleman yields back, if he would 
yield to----
    Mr. DesJarlais. I will yield the balance of my time, Mr. 
Chairman.
    The Chairman. Mr. Chairman, that law you cite, Dodd-Frank, 
uses the phrase as appropriate with respect to position limits. 
We did not, in fact, demand that you do that. Wouldn't it be 
better to let the markets themselves set those limits as 
opposed to the Commission trying to make that happen, because 
we didn't tell you that you had to do it?
    Mr. Massad. Well, Congressman, I guess it has been our 
interpretation that we are supposed to do a rule here. As to 
exactly what the limits are, is the question we are working on 
and working to try to get right. And we will continue to do 
that. I have said many times over it is more important to get 
this right and we should take the time we need to get it right.
    The Chairman. Okay. I appreciate that.
    Mr. Thompson, 5 minutes.
    Mr. Thompson. Thank you, Mr. Chairman. Chairman, welcome. 
Thanks for being here.
    Chairman, I have a couple of questions. I have read that in 
response to increases in capital requirements under the Basel 
III supplementary leverage ratio, large derivative dealers in 
the United States and Europe are exploring spinning off their 
cleared swaps desks. Do you have concerns with that 
possibility, and what would be the effect on the swaps market 
and the cost of hedging risk?
    Mr. Massad. That is an excellent question, Congressman, and 
we are watching that. There have been some articles on that 
recently. We don't have enough information yet to fully 
evaluate it, but it is something we are certainly going to keep 
our eyes on and talk to market participants about.
    The issue though, you have noted properly the underlying 
issue here, or at least one of them, which we are also looking 
at and I have spoken about publicly, which is the effect of 
capital requirements on, for example, the clearing member 
community. And we talked about that a little bit earlier, but I 
am concerned about whether we are properly balancing the 
objectives of strong capital requirements, which I support, but 
also promoting central clearing. And I have been concerned that 
the way some of these regulations were written could create a 
disincentive to clear, which would not be consistent with the 
objective of promoting central clearing.
    Mr. Thompson. Yes. Thank you. Just to follow up on that. I 
know that, in response to a question by former Chairman Lucas 
regarding the SOR, you said that I am very concerned, as you 
said now, that the SOR would have a significant negative impact 
on the clearing, and you went on to say that you spoke recently 
with Comptroller Curry and Chairman Gruenberg at the FDIC, and 
as well as the Fed, about this issue, and that you all agree 
that our staffs would get together and discuss it further. Did 
Comptroller Curry and Chairman Gruenberg, Chair Yellen, or any 
of their staff ever take the time to sit down with you or your 
staff to discuss the issue further, and if so, how did that go?
    Mr. Massad. Yes. We have discussed it. They have a 
different view right now. They are--well, I don't want to speak 
for them individually. I will just say that there are different 
views here. There is still discussion going on. They have the 
objective of making sure there are strong capital requirements, 
and they believe the leverage ratio should not be, as they put 
it, risk-based, and, therefore, shouldn't take into account, 
for example, the margin posted at the clearinghouse. I am 
concerned that we really should be thinking about that margin. 
I mean there is $250 billion of margin held at our primary 
clearinghouses for all these cleared trades. That is a lot of 
margin to ignore. I know there is an international work going 
on looking at this.
    So we will continue to engage, but there are differences of 
opinion.
    Mr. Thompson. Now, I have seen recently where the Basel 
Committee is considering reviewing its position on the issue. 
What does that mean for the U.S. SOR rules, and if the Basel 
Committee fixes this issue, will the issue be settled there, or 
will our U.S. regulators have to act?
    Mr. Massad. That is a good question. My understanding, and 
I am not a member of the Basel Committee and I don't know 
exactly what they are going to do, I have heard rumors, is they 
could do something but our regulators would still have to act. 
Obviously, they have the jurisdiction here. It is helpful to 
have this kind of discussion about it. I will continue to be 
available and to raise it. We are continuing to talk to 
clearing members about it. It is helpful if the clearing member 
industry comes up with more data to show what effects they 
think it is having. Thank you.
    Mr. Thompson. Well, thank you, Chairman.
    And, Mr. Chairman, I yield back.
    The Chairman. The gentleman yields back.
    Mr. Chairman, thank you for being here today. I have a 
couple of other questions. Your job, and a lot of other 
regulators, all these things that have been done under the 
guise of Dodd-Frank and a lot of money spent in that regard. 
Stepping back from it and trying to see does it actually work 
and are we going to be able to give a heads-up in terms of some 
sort of monster systemic risk that would replicate the damage 
done in 2008. A lot of press reporting about the stresses on 
European banks, and you talked earlier about interconnectedness 
and being able to do the things that you are supposed to do. I 
mean I got the enforcement part on a one-on-one basis, that is 
really important to maintain the integrity that is going on, 
but overall FSOC efforts and everything that is in place. Could 
you walk us through your role at FSOC? Do you prepare written 
reports and other data to put into that scheme, whatever it is, 
not that those would be public, obviously, because of the 
sensitivity of it, but I am just trying to see, we have a lot 
invested in this whole effort collectively, the folks on the 
compliance side as well as your team and the taxpayers. Are we 
in a position to give the world a heads-up if a coming wreck is 
imminent, based on everything we have done?
    Mr. Massad. Well, excellent question, Mr. Chairman. I think 
we are in a much better position today. That is not to say we 
will predict everything. Right? It is always challenging 
because if there is another problem, it may come from a 
direction that we haven't anticipated. But, bringing all the 
regulators together through FSOC is an enormously important 
action that we have taken, because it does allow all of us to 
share ideas and information and perspectives, and at least 
minimize the risk that, because of the various functional 
groupings of regulators of even silos, that we kind of miss 
something that falls between jurisdictions. So think it helps 
enormously in that respect.
    The Chairman. So your contribution to that, would it be 
written, do you just go there and talk, or does your team 
actually put together reports that feed into the system, and if 
so, how often does that happen?
    Mr. Massad. It varies, Mr. Chairman. We do some of both. 
Yesterday we were making a presentation with others on 
clearinghouse issues to some of the other staff. My staff made 
a presentation, when we had the October 15 volatility in the 
treasury markets, because we had data on the futures market, 
which doesn't really exist on the cash treasuries market, we 
were able to put together a presentation for the full FSOC for 
the principles when we made that presentation. We are going to 
make a presentation on our Regulation AT. So sometimes we do 
formal presentations, sometimes we comment on other 
presentations that are made, sometimes it is just a discussion. 
We comment on drafts of reports. So it is all of those things.
    The Chairman. All right. Well, given the nature of that and 
the sensitivity of the data, would you agree to a confidential 
briefing for the Ranking Member and I, our Members, to get a 
better sense of what that looks like?
    Mr. Massad. Certainly.
    The Chairman. Okay. A couple of this and thats. Office of 
the Chief Economist is relatively small now versus what it 
might have been in the past. And the role that you see the 
Chief Economist playing in the overall surveillance and trying 
to look and get these kind of forward-looking heads-ups that it 
is a part of that job, how do you see that office going?
    Mr. Massad. It is extremely important. In fact, in our 
budget, percentage-wise in terms of staff, that is the highest 
increase. I am trying to increase that office by 50 percent.
    The Chairman. All right.
    Mr. Massad. And that is not the only economist we have 
though. We also have economists in other divisions. But it is 
extremely important to expand our economists.
    The Chairman. The lease issue that we have talked about, 
the excess space, I know that you wouldn't necessarily get 
benefit to your budget if you were able to sublease that or to 
try to minimize the impact. What are the restrictions for being 
able to do that, and can you see a public relations plus on 
your side in that those resources would come back to the 
taxpayer, in effect, if you did that by being able to minimize 
the impact that excess office space is having? What are the 
technical restrictions for allowing you to take a businesslike 
approach? I mean if you were in business for yourself, you 
would have done something, rather than paying----
    Mr. Massad. Absolutely.
    The Chairman.--out millions of dollars.
    Mr. Massad. Mr. Chairman, I would be happy to sublease it 
and turn the money over to the U.S. Treasury if I could do 
that. The restriction as I understand it is this, we can only 
sublease under the law if it is to someone who is, and I am not 
going to get the phrase right, I will ask our lawyers so I get 
the exact phrase, but they have to be furthering our regulatory 
mission----
    The Chairman. Okay. So this----
    Mr. Massad.--and objectives.
    The Chairman. This is something that you would be willing 
to work with us on if we can figure out how to address that----
    Mr. Massad. Certainly.
    The Chairman.--because this can't be the only agency that 
has excess space, if those are----
    Mr. Massad. Mr. Chairman, to give you an example, we 
collected $2.8 billion in enforcement fines. All that goes back 
to the Treasury. So, we are not----
    The Chairman. Well, that--there is a--I got that, but I--
you know what I am saying? You are asking for more resources 
and yet you have this albatross hanging around your neck of 
excess office space. It is easy for others to say, well, you 
are not using it. Anyway, let's work together to try to figure 
out how we can loosen that up so that you can, in fact, get a 
better arrangement for the taxpayers.
    Ms. Kuster, did you have questions?
    Ms. Kuster. Just a very quick one----
    The Chairman. All right, you are recognized----
    Ms. Kuster.--if I could have 1 minute?
    The Chairman.--for 5 minutes.
    Ms. Kuster. Thank you very much. And I apologize for the 
delay. I have been in another committee. But welcome----
    Mr. Massad. Thank you.
    Ms. Kuster.--to the Agriculture Committee.
    I understand that there was an announcement this morning 
about the EU and the CFTC reaching an agreement on equivalence, 
which is great news. My question is, how can we ensure that 
these efforts will not inhibit our ability to safeguard the 
markets? So in other words, it is great news that we have 
reached an agreement, is that going to be sufficient and do you 
have any concerns, going forward, about safeguarding markets?
    Mr. Massad. Yes, Congresswoman. Thank you for the question. 
It is very, very consistent with those efforts. In fact, it 
helps, it furthers those efforts. One of the things that was 
very important to me in this agreement was making sure we 
recognize that these very large clearinghouses that operate 
cross-border, that we need to work together with regulators in 
other parts of the world on the oversight, on the supervision. 
We shouldn't just be saying, well, if it is on your soil, you 
take care of it and we don't have to worry. And so that is why 
we want to continue to get information about what is going on 
at a European clearinghouse. Now, we have a very excellent 
relationship with the Bank of England and with ESMA and with 
the German regulators, and we will continue to work with them. 
But in this day and age, having regulators cooperate in the 
oversight of these very, very large clearinghouses is a very 
high priority.
    Ms. Kuster. Great, thank you. And hopefully you will report 
back, and I am----
    Mr. Massad. Yes.
    Ms. Kuster.--sure Mr. Conaway will be all over it. Thank 
you very much. Thank you.
    The Chairman. Mr. Chairman, again, thank you for being here 
today. I want to get it on the record one more time how 
responsive your team was with respect to the leases issue and 
our inquiries, and thank you for that. From time to time, there 
are agencies out there that aren't quite as forthcoming, and 
particularly on the issue of where you are trying to clean up 
somebody else's mess. But I appreciate that.
    With the economies in the world going bad, our own economy 
only grew \7/10\ of a percent last year. We have ag income down 
55 percent in over 2 years. The worst drop since 1919, 1920, 
1921 timeframe. There are stresses in the mix, and I am hoping 
that this overall effort we have had, some of it agreed with, 
some of it we didn't agree with, will pay some dividends in 
terms of trying to let FSOC do its job and trying to see what 
might be in front of us, and try to rein some of those things 
that are actually causing it, as opposed to just the overall 
impact that economies have on growing and shrinking. So again, 
thank you, Chairman, for being here.
    Under the rules of the Committee, the record of today's 
hearing will remain open for 10 calendar days to receive 
additional material and supplementary written responses from 
the witness to any question posed by a Member.
    This hearing of the Committee on Agriculture is adjourned.
    [Whereupon, at 11:37 a.m., the Committee was adjourned.]
    [Material submitted for inclusion in the record follows:]

                                           Supplementary Material Submitted by Hon. Timothy G. Massad, Chairman, Commodity Futures Trading Commission
 
 
 
    Mr. Allen. . . .
    Also, and I am not sure if you have been asked to do this, but as far as a list of your current service contracts, could your Commission provide that to----
    Mr. Massad. I am sorry, our current what contracts?
    Mr. Allen. The current service contracts that your agency enters into as far as third party vendors. Could you get us a list of those service contracts?
    Mr. Massad. Sure, I would be happy to check on that, Congressman.
 


                                                       CFTC Service Contracts as of March 2, 2016
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                                                  Expiration Date
         Contractor                             Purpose                          Amount       Obligated to Date   (if all  options      Contract Type
                                                                                                Effective Date       exercised)
--------------------------------------------------------------------------------------------------------------------------------------------------------
Lockheed Martin Management   eLaw Support                                      $4,264,702.13           3/4/2013          3/31/2016  Labor
 Systems
Verizon                      Combined Services--telecomm services              $4,745,868.87          9/30/2009          9/30/2017  Telephone Service
PhaseOne Consulting Group    IT Security Support--20 Critical Controls         $2,425,358.18          6/29/2015          6/28/2020  Labor
PhaseOne Consulting Group    Enterprise Architecture Support                     $275,129.00          6/29/2015          6/28/2018  Labor
Coastal International        Security guard services                             $397,794.00           8/1/2015          1/31/2017  Labor
 Security Inc.
Kearney & Company            Fiscal Manual and Financial Controls              $2,396,689.15          9/29/2014          3/28/2017  Labor
Washington Metropolitan      SmartBenefits Program                             $1,564,176.80           9/6/2011           9/5/2016  Services
 Area Transit (WMATA)
Verizon                      Managed Trusted Internet Protocol Services        $2,413,889.65          9/30/2011          9/30/2017  Telephone Service
                              (MTIPS)
Employee Services, Inc.      Employee Assistance Program                         $105,643.50          11/6/2012          11/5/2016  Labor
FPMI Solutions Inc.          Personnel security program support                  $504,692.87         11/29/2011         11/28/2016  Labor
Merlin International         Hosting and License for Monster (HR Hiring          $992,353.92          6/15/2012          6/14/2017  Software/Hosting
                              Solution)
Northrop Grumman             Enterprise service Bus/BizTalk/Service            $2,378,927.51          9/24/2012          9/23/2017  Labor
                              Oriented Architecture support
Northrop Grumman             Data analytics support                            $3,295,282.44         11/23/2012         11/22/2017  Labor
Northrop Grumman             SAS platform support                              $1,867,396.31           3/4/2013           3/3/2018  Labor
Northrop Grumman             Portal development and maintenance support        $3,743,656.89          3/11/2013          3/10/2018  Labor
Northrop Grumman             Data Standards Support                            $3,216,220.76          3/25/2013          3/24/2018  Labor
Northrop Grumman             Ongoing Development, Maintenance and Support      $2,608,508.98           6/1/2015          5/31/2019  Labor
                              for Data Engineering and Processing (DEAP)
Northrop Grumman             Market data operations support                      $420,396.30          9/15/2015          9/14/2020  Labor
Northrop Grumman             Swaps data harmonization support                    $962,552.69          9/14/2015          9/13/2020  Labor
IBM                          IT systems operations and maintenance             $8,769,981.68          9/26/2012          9/26/2017  Labor
MAR Inc.                     Sharepoint maintenance and support                $3,661,675.46          9/24/2012          9/23/2017  Labor
MAR Inc.                     Surveillance systems support                      $4,103,810.80          9/25/2012          9/24/2017  Labor
Deloitte Consulting          Enterprise solutions development support          $1,132,010.00          6/12/2013          6/11/2018  Labor
The DesignPond               Full service design support for CFTC's AFR,         $361,088.28          9/25/2012          3/31/2017  Labor
                              Summary and President's Budget
The DesignPond               Full service design support for CFTC's              $216,700.38          9/25/2012          6/30/2017  Labor
                              Annual Performance Report
FM Talent                    Business management support                         $945,569.13           7/9/2012           7/8/2017  Labor
Techlaw Solutions            Relativity software maintenance                     $120,000.00         10/19/2015         10/18/2016  Software Maintenance
Unisys                       EMC onsite support                                  $952,743.23          9/13/2012          9/12/2017  Labor
Deloitte Consulting          Maintenance of Business Information Systems       $1,103,097.06          9/27/2012          9/26/2017  Labor
Genscape                     Access to Genscape databases                        $200,000.00          9/24/2012          9/23/2016  Subscription Service
SEC                          Market watch room/back-up site                       $25,898.00           9/1/2015          9/30/2016  Services
Iron Mountain                Offsite paper records storage                       $161,707.97           6/1/2013          5/31/2018  Services
Markit Group Ltd.            Data subscription service                           $198,000.00           9/5/2013          10/9/2017  Subscription Service
FPMI Solutions Inc.          Human Resources operations and                      $728,158.88          1/22/2013          1/21/2018  Labor
                              administrative support
FPMI Solutions Inc.          Training coordination                               $135,744.00           9/1/2014          8/31/2019  Labor
FPMI Solutions Inc.          Competency Study                                    $389,952.00          9/17/2014          9/16/2016  Labor
FPMI Solutions Inc.          Payroll and benefit support                         $170,649.60          9/28/2014          9/27/2019  Labor
FPMI Solutions Inc.          eLearning Specialist                                $123,705.60          9/12/2014          9/11/2018  Labor
Northrop Grumman             Enterprise systems architecture support           $1,417,985.13          3/25/2013          3/24/2018  Labor
SoftChoice                   Annual software maintenance for K2 product          $233,813.40          3/25/2013          3/24/2018  Software Maintenance
PJ Mechanical                HVAC maintenance (NY)                                $11,286.00          6/27/2013          6/26/2016  Services
Aquilent                     Recurring support and maintenance of              $1,928,000.00           6/1/2013          5/31/2018  Labor
                              CFTC.gov
Aquilent                     CFTC.gov site content analysis and design           $316,214.18          6/22/2015           4/1/2016  Labor
Metrostar                    CFTCNet maintenance and support                     $907,096.41          5/29/2013          5/31/2018  Labor
Metrostar                    CFTC Whistleblower Program and OCE Websites         $283,275.90          4/20/2015         10/19/2016  Labor
LexisNexis                   Computer assisted legal research and                $818,553.00          11/1/2013         10/31/2018  Subscription Service
                              retrieval services
T-Mobile                     CFTC-Wide wireless services and related             $409,550.78         11/19/2013         11/18/2018  Wireless Telecom
                              equipment--initial task order                                                                          Service
AT&T                         CFTC-Wide wireless services and related             $612,371.36         11/27/2013         11/26/2018  Wireless Telecom
                              equipment--initial task order                                                                          Service
AT&T                         WiFi installation and service at CFTC HQ             $72,490.40           9/9/2014           9/8/2018  WiFi Service
Verizon                      CFTC-Wide wireless services and related           $1,062,974.77         11/26/2013         11/25/2018  Wireless Telecom
                              equipment--initial task order                                                                          Service
Nexidia                      Software                                             $94,729.02          3/26/2014          3/25/2019  Software Maintenance
CCH                          Access to CCH publications and data                 $203,725.53           9/1/2014          8/31/2019  Subscription Service
GMG Management Consulting    Travel information center services                  $392,768.04           5/1/2014          4/30/2019  Labor
Spartan Business and         Document management, project management and       $1,273,389.68           9/1/2014          8/31/2019  Labor
 Technology                   analytical support for CFTC Financial
                              documents
Practicing Law Institute     Legal education services relevant to                 $86,900.00          1/16/2014          1/15/2019  Services
                              financial markets
Corporate Executive Board    CEB Corporate Leadership Council                     $91,960.00          6/26/2014          6/25/2017  Membership
BarnAllen Technologies       Electronic imaging services                          $70,000.00          9/29/2014          9/28/2017  Services
Aquilent                     Web-hosting of external portal                      $356,724.70          9/26/2014          9/25/2019  Services
Aquilent                     CFTC.gov cloud hosting                               $80,000.00          3/11/2015          3/10/2020  Services
Anser                        COOP support services                               $544,748.80          9/26/2014          3/25/2018  Labor
DecisionQuest                Jury trial consultation services                  $1,400,000.00          9/24/2014          9/23/2019  Labor
Porter Novelli               Integrated marketing support                      $4,799,450.29          9/18/2014          3/17/2016  Labor
MAIC                         Acquisition Support Services                        $248,198.40          9/26/2014          9/25/2019  Labor
Northrop Grumman             Analysis of Swap Dealer Risk                      $1,069,198.80          9/30/2014          9/29/2019  Labor
Northrop Grumman             Analytical support                                $1,110,685.68          9/29/2014          9/28/2019  Labor
Zebra Economics              Expert Witness                                       $90,000.00          9/22/2014          9/21/2017  Labor
CMRA                         Expert witness                                      $573,000.00          9/29/2014          9/28/2016  Labor
IBM                          Analytical support                                  $438,182.40          9/29/2014          9/28/2019  Labor
Advanced AV                  Audio visual maintenance                            $389,880.00          10/1/2014           9/1/2019  Equip. Maintenance
Entrust Inc.                 Entrust identity guard                               $13,277.08          10/1/2014           9/1/2017  Software Maintenance
Entrust Inc.                 Entrust certificate management services               $8,264.07         11/18/2014         11/17/2017  Software Maintenance
First Federal                Records storage                                       $9,512.48          12/1/2014         11/30/2019  Services
West Publishing Corporation  Investigative Research Tool                          $57,935.28          4/27/2015          4/26/2020  Software
Berkeley Research Group      Expert witness                                      $740,000.00         12/31/2014          9/30/2016  Labor
Shaw, Bransford & Roth       Outside legal counsel for labor issues               $50,000.00           2/6/2015           2/5/2020  Labor
Recovery Point Systems       Data center                                       $1,264,614.00           9/1/2015          8/31/2025  Services
Imtech Corporation           Activu license renewal                               $66,544.49          6/21/2015          6/20/2017  Software Maintenance
ThunderCat                   VCE Maintenance                                      $12,992.97           3/1/2015          2/29/2017  Equip. Maintenance
ThunderCat                   EMC Maintenance                                   $1,233,018.38          3/26/2015          3/25/2017  Equip. Maintenance
Southwest Distribution       Newspaper delivery                                   $22,191.05           4/1/2015          3/31/2016  Services
Ensys                        Expert Witness                                      $140,000.00          4/22/2015         10/21/2017  Labor
Advanced Computer Concepts   Maintenance on Symantec NetBackup                    $59,135.14           9/1/2015          8/31/2016  Software Maintenance
The Network Inc.             Hotline program                                       $2,660.00          3/30/2015          3/29/2016  Services
Trivantis                    Hosting of CourseMill                                $24,900.00           6/5/2015           6/4/2016  Subscription Service
Smiths Detection Inc.        Maintenance of x-ray unit                             $4,125.80          4/20/2015          4/19/2016  Equip. Maintenance
Smiths Detection Inc.        Maintenance of SABRE handheld devices                 $9,075.00           4/2/2015           4/1/2016  Equip. Maintenance
Bates White                  Expert witness                                      $595,400.00          8/20/2015          7/31/2017  Labor
Corporate Executive Board    CEB Government Finance Leadership Council            $75,118.00          4/30/2015          4/26/2016  Membership
PATCech Oxygen               Forensic license renewal                              $3,447.00           8/4/2015          4/21/2018  Software Maintenance
August Schell Enterprise     Symantec Protection Enterprise Edition 4.0           $35,255.00          5/13/2015          5/12/2016  Software Maintenance
                              Licenses
Murray, Martin M.            Expert economist                                     $92,050.40          5/28/2015          5/27/2016  Labor
Boardwalk                    BoardwalkTech BCP Enterprise Edition license          $9,000.00          5/11/2015          5/10/2016  Software Maintenance
                              renewal
Portfolio Media              Subscription to Law360                               $16,320.00          5/11/2015          5/10/2016  Subscription Service
Advance Trading Inc.         Subscription Services                                $12,000.00           5/1/2015          4/30/2016  Subscription Service
Lockheed Martin              Management Systems Financial intake review          $270,000.00           8/7/2015           8/6/2020  Labor
                              and analysis
U.S. Coast Guard             Administrative Law Judge services                    $10,000.00          9/30/2015          6/21/2016  Labor
Dynamic Systems              Oracle Financial maintenance renewal                 $35,861.79          9/23/2015          9/22/2016  Software Maintenance
Sirsidynix                   Software maintenance for library cataloging           $7,175.18           7/1/2015          6/30/2016  Software Maintenance
Analysis Group, Inc.         Expert witness                                      $497,373.00          7/10/2015          9/11/2017  Labor
ADI Strategies               Business Information System support                 $543,201.60          8/30/2015          8/29/2020  Labor
Litsavant LTD                LitSavant Conformity Engine license                   $8,100.00          6/25/2015          6/24/2018  Equip. Maintenance
Financial Times              Financial Times                                      $18,277.00           8/1/2015          7/31/2016  Subscription Service
Dave Redden New Life         Retirement training and counseling services          $24,700.74          9/28/2015          9/27/2016  Services
 Retirement Benefit
 Counseling Service
Inovitech LLC                IS-A Task license                                   $170,000.00          7/27/2015          7/26/2016  Software Maintenance
Institutional Investor       Subscription to Global Capital                       $16,740.00           9/1/2015          8/31/2016  Subscription Service
MRF Consulting               Human Resources support services                    $325,000.00          9/25/2015          9/24/2020  Labor
                              (classification, audits)
CQ-Roll Call Inc.            Subscription Services                                $20,580.00           6/1/2015          5/31/2016  Subscription Service
Gartner Inc.                 Gartner CIO Essential and Research and               $72,690.00           7/1/2015          6/30/2016  Services
                              Advisory Services
Platts                       Renew subscription to access Platts/McGraw          $139,653.00          7/24/2015          7/23/2016  Subscription Service
                              Hill data and publications
Teel Technologies            Annual license for Cellebrite UFED Ultimate           $3,098.99          7/19/2015          7/18/2016  Software Maintenance
Hendrik Bessembinder         Expert witness                                      $109,500.00          7/15/2015          1/14/2018  Labor
ABM Janitorial Services--    D.C. carpet cleaning                                  $9,600.00          7/15/2015          7/14/2016  Services
 Mid-Atlantic, Inc.
Northrop Grumman             Swap Risk Analysis for Chief Economist              $323,184.36          9/29/2015          9/28/2020  Labor
U.S. Postal Service, Office  Investigative, technical and forensics               $27,000.00          7/20/2015          7/19/2016  Labor
 of Inspector General         services
Blue Tech Inc.               StealthWatch Maintenance                             $56,642.41           9/1/2015          8/31/2016  Software Maintenance
Carahsoft                    Vmware maintenance                                  $165,839.79          9/20/2015          9/19/2018  Software Maintenance
Emergent                     Google appliance                                     $47,937.00           8/5/2015           8/4/2017  Equip. Maintenance
Wolters Kluwer Financial     TeamMate license renewal                             $69,495.00           8/1/2015          7/31/2016  Software Maintenance
 Services
Lyme Computer                Resource Scheduler license renewal                   $16,927.67           9/1/2015          8/31/2016  Software Maintenance
LexisNexis                   Renew subscription to LexisNexis Knowledge            $9,900.00          7/28/2015          7/27/2020  Subscription Service
                              Mosaic Database
LexisNexis                   Renew subscription to LexisNexis Federal              $1,932.00          7/28/2015          7/27/2020  Subscription Service
                              Agency Content Database
Dow Jones & Company          eFinancial News subscription                         $37,500.00          8/18/2015          8/17/2016  Subscription Service
Incisive Media               Renew subscription to Risk.net                       $55,481.00          9/17/2015          9/16/2016  Subscription Service
Claurus Financial            Clarus SEFView and ClarusSDRView                     $21,600.00           8/1/2015          7/31/2016  Software License
 Technology
SWN Communications           Emergency notification services                      $27,533.83          8/15/2015          8/14/2016  Software
PAE Labat-Anderson Inc.      Capstone E-mail Records Management Planning         $212,971.00          9/29/2015          9/28/2016  Labor
                              Support
Department of                Security operational services                        $88,333.00           8/5/2015           8/4/2016  Services
 Transportation--ESC
Deloitte Consulting          Pay and performance management reform               $222,561.00          9/30/2015          9/29/2016  Labor
PCMG                         Devcraft software license renewal                    $30,939.29           3/6/2015           3/5/2016  Software Maintenance
Analysis Group, Inc.         Expert Witness                                      $298,410.00           8/7/2015          7/31/2017  Labor
Love and Long LLP            Attorney support services                           $300,000.00          9/23/2015          9/22/2020  Labor
Aon Consulting               Retirement subject matter expert                     $92,277.22          9/30/2015          9/29/2016  Labor
Workforce Resources          Facilities, logistics and administrative          $2,407,161.28           9/4/2015           9/3/2017  Labor
                              support services
Neopost USA Inc.             Maintenance for mail inserter machine                 $1,561.51          8/24/2015          8/23/2016  Services
Ebsco                        Subscription Services                               $165,000.00          8/12/2015          8/11/2016  Subscription Service
A&T Systems                  MaaS360 License Renewal                              $45,475.00          8/31/2015          8/30/2017  Software--Maintenanc
                                                                                                                                     e
Actionable Intelligence      Comprehensive Financial Investigation                $61,053.32          8/20/2015          8/19/2020  Software--Maintenanc
 Technologies, Inc.           Software (CFIS)                                                                                        e
OPM                          Leadership for a Democratic Society Program          $39,750.00          8/20/2015          8/19/2016  Training
OPM                          Administration of Leadership360 and Profiler         $19,000.00           9/3/2015           9/2/2016  Services
                              Assessment
American Systems             PBX Upgrade and annual maintenance                $1,531,317.07          9/30/2015          9/29/2019  Equip./Soft.
                                                                                                                                     Maintenance
Catapult Technology          Core infrastructure operations and                $2,704,696.20           9/1/2015          8/31/2025  Labor
                              maintenance and support services
STG Inc.                     Configuration Management and IT Security            $315,000.00           9/1/2015          8/31/2025  Labor
                              Support
Teel Technologies            PC-3000 Annual Maintenance                           $17,678.00          9/29/2015          9/28/2016  Software--Maintenanc
                                                                                                                                     e
Knowledge Information        DLP Software Solution                               $205,173.52          9/29/2015          9/28/2020  Software--Maintenanc
 Solutions                                                                                                                           e
Grant Thornton               Expert Witness                                       $50,000.00          9/23/2015          9/22/2016  Labor
The Brattle Group            Expert Witness                                      $325,000.00          9/14/2015          9/30/2016  Labor
Berkeley Research Group      Expert Witness                                      $100,000.00          9/24/2015          9/23/2016  Labor
Blue Tech Inc.               Altova MissionKit Annual Maintenance                  $7,074.28          8/26/2015          8/25/2016  Software--Maintenanc
                                                                                                                                     e
Ricoh USA                    Comprehensive maintenance for CFTC's                $119,380.00           9/1/2015          8/31/2016  Equip. Maintenance
                              multifunction printers
Design Mechanical            HVAC maintenance for KC office                        $2,264.00           9/1/2015          8/31/2016  Equip. Maintenance
Sanametrix                   Audit strategic planning model                       $74,925.00          9/29/2015          9/28/2020  Labor
X1 Discovery                 Social discovery software and maintenance             $7,497.00          9/23/2015          9/22/2020  Software Maintenance
Vound Colorado               Intella Pro License                                   $7,000.00          9/21/2015          9/20/2016  Software
AMTIS                        Executive Coaching Services                         $273,896.35          9/28/2015          9/27/2020  Services
Capitol News                 Politico Pro News Access                             $24,975.00          9/30/2015          9/29/2016  Subscription Service
CNN Interactive Group        SmartCheck Advertising Support/Placement            $100,000.00          9/17/2015          5/16/2016  Advertising
Interceptive                 Interactive SmartCheck Advertising Support/         $149,000.00          9/17/2015          5/16/2016  Advertising
                              Placement
Forbes                       SmartCheck Advertising Support/Placement            $125,000.00          9/17/2015          5/31/2016  Advertising
Investing Media              SmartCheck Advertising Support/Placement            $100,000.00          9/25/2015          5/31/2016  Advertising
Specific Media               SmartCheck Advertising Support/Placement            $149,000.00          9/29/2015          5/31/2016  Advertising
AOL Advertising              SmartCheck Advertising Support/Placement            $149,000.00          9/30/2015          5/31/2016  Advertising
USDA-NFC                     Implement and annual maintenance of EmpowHR         $352,789.00          9/21/2015          9/20/2016  Software
                              System
Interactive Data             Data Service                                         $52,800.00          9/26/2015          9/25/2016  Subscription Service
Kiplinger Washington         SmartCheck Advertising Support/Placement             $80,000.00          9/25/2015          5/31/2016  Advertising
 Editors
Gumgum                       SmartCheck Advertising Support/Placement            $149,000.00          9/24/2015          5/31/2016  Advertising
Atlantic Monthly Group       SmartCheck Advertising Support/Placement            $149,000.00          9/30/2015          5/16/2016  Advertising
Investopedia                 SmartCheck Advertising Support/Placement            $149,000.00          9/29/2015          5/31/2016  Advertising
Dow Jones & Company          SmartCheck Advertising Support/Placement             $75,000.00          9/28/2015          3/14/2016  Advertising
Regulatory Compliance        Online training services                             $24,900.00          9/30/2015          9/29/2016  Subscription Service
 Association
BMC                          Upgrade Footprints Software                          $68,512.00          9/30/2015           4/8/2016  Software
Empresa Noronha              Expert Witness                                       $97,928.00          9/29/2015          5/31/2016  Labor
Government [Publishing]      [Publishing] in the Federal Register                $186,250.00          10/1/2015          9/30/2016  [Publishing]
 Office
Government [Publishing]      CFTC Participation in the GPO spa 960                $23,254.34          10/1/2015          9/30/2016  [Publishing]
 Office                       program
Alvarez & Associates         Quantum Scalar tape library annual                   $73,474.82         10/14/2015         10/13/2016  Software Maintenance
                              maintenance
COMED                        Electricity services for Chicago Regional            $15,474.00          10/1/2015          9/30/2016  Utilities
                              Office
BCSP V D.C. Portfolio Reit   Misc. services for the D.C. office                   $30,000.00          10/1/2015          9/30/2016  Services
 LLC
National Business Center     Interagency Agreement for Drug and Alcohol              $700.00          10/1/2015          9/30/2016  Services
                              testing
OPM                          Background investigations for FTE staff and          $84,603.00          10/1/2015          9/30/2016  Services
                              contractors
Dynamex                      Courier services for Chicago Regional Office          $3,000.00          10/1/2015          9/30/2016  Services
Tishman Speyer Properties    Misc. services for the Chicago Regional              $12,334.80          10/1/2015          9/30/2016  Services
                              Office
United Parcel Service        Priority mail delivery services for all              $45,000.00          10/1/2015          9/30/2016  Services
                              office locations
Tishman Speyer Properties    Janitorial services for Chicago Regional             $23,000.00          10/1/2015          9/30/2016  Services
                              Office
ABM Janitorial Services--    Janitorial services for D.C. Regional Office         $17,683.00          11/1/2015         10/31/2016  Services
 Mid-Atlantic, Inc.
Remco Business Systems       Maintenance of electronic filing system               $1,690.00         10/25/2015         10/24/2016  Equip. Maintenance
Linden Resources             Business cards for the CFTC Employees                 $8,133.00         10/29/2015         10/28/2016  Services
General Services             MOU for removal of agency excess furniture            $9,500.00          10/1/2015          9/30/2016  Services
 Administration               and equip.
Laz Parking                  Parking pucks for authorized staff                   $25,704.00          11/1/2015         10/31/2015  Services
Neopost USA Inc.             Postage meter rental and maintenance fees             $5,799.00          10/1/2015          9/30/2016  Services
                              for all office locations
4900 Main LLC                Misc. services for the Kansas City Regional           $5,000.00          11/1/2015         10/31/2016  Services
                              Office
Iron Mountain                Shredding services for all office locations           $4,676.00          11/1/2015         10/31/2016  Services
American Building            Janitorial services for New York Office              $22,858.44          11/1/2015         10/31/2016  Services
 Maintenance
Brown Brothers Harriman &    Misc. building services for New York                  $5,000.00          11/1/2015         10/31/2016  Services
 Co.                          Regional Office
W.E. Bowers                  HVAC Maintenance for the D.C. office                  $4,193.00           2/1/2016         11/30/2016  Equip. Maintenance
Air Comfort                  HVAC Maintenance for the CH office LAN Room           $3,262.00          12/1/2015         11/30/2016  Equip. Maintenance
FAA                          PIV Maintenance                                      $86,014.33          10/1/2015          9/30/2016  Services
Unicom Government            Warranty extensions for Dell equipment               $11,568.91         10/19/2015          9/28/2016  Equip. Maintenance
SHI International            Maintenance renewal for the NightWatchman             $4,296.00         10/19/2015          9/30/2016  Software Maintenance
                              Enterprise
Department of                Accounting services for FY16                        $343,569.00          10/1/2015          9/30/2016  Services
 Transportation--ESC
Department of                Hosting services for the Business                   $228,861.61          10/1/2015          9/30/2016  Services
 Transportation--ESC          Information System
Department of Treasury       Treasury Executive Institute--executive              $55,199.14          10/1/2015          9/30/2016  Training
                              development training
GMC TEK                      Annual MatLab license renewal                        $31,993.28          10/1/2015          9/30/2016  Software Maintenance
Alliance Micro Inc.          UPS Maintenance for D.C. office                      $10,044.00         10/20/2015         10/19/2016  Equip. Maintenance
Comcast                      Cable television service for HQ                      $23,990.40          10/1/2015          9/30/2016  Services
FCN, Inc.                    Annual Cisco Maintenance                            $123,036.54          10/1/2015          9/30/2016  Equip. Maintenance
HHS--Federal Occupational    Basic Occupational Health Services                   $18,990.00          10/1/2015          9/30/2016  Services
 Health
Lockheed Martin              Management Systems Automated Litigation           $1,550,000.00          11/1/2015          4/30/2016  Labor
                              Support Services
FCN, Inc.                    LexisNexis LAW                                      $202,000.00          10/1/2015          9/30/2018  Software Maintenance
Interactive Data             FutureSource workstations subscription              $207,756.00          10/1/2015          9/30/2016  Software Maintenance
Intelligence Community       Staff IT Services and maintenance for                $35,612.00          10/1/2015          9/30/2016  Equip./Soft.
                              IntelDirect computer equipment and printers                                                            Maintenance
FCN, Inc.                    LexisNexis Concordance                               $42,350.00          10/1/2015          9/30/2018  License
LRP Publications             CyberFeds subscription renewal                       $24,768.00          11/1/2015         10/30/2016  Subscription Service
West Publishing Corporation  Computer assisted legal research and                $178,067.58          11/1/2015         10/31/2016  Subscription Service
                              retrieval services (Westlaw)
OPM                          USAjobs.gov portal usage and support                  $4,214.00          10/1/2015          9/30/2017  Software Maintenance
General Services             HSDN/OneNet Maintenance                              $15,527.00          10/1/2015          9/30/2016  Equip./Soft.
 Administration                                                                                                                      Maintenance
NARA                         Records storage for CFTC                              $6,000.00          10/1/2015          9/30/2016  Services
Library Of Congress          Fedlink IA                                            $3,550.60         11/10/2015          9/30/2016  Services
Carahsoft                    Data Domain Tech Refresh                          $1,499,731.14         12/29/2015         12/28/2018  Equip./Soft.
                                                                                                                                     Maintenance
West Publishing Corporation  Renewal of West subscriptions for FY16               $30,199.28          10/1/2015          9/30/2016  Subscription Service
Blue Tech Inc.               BES License Upgrade                                  $16,347.00          12/3/2015          12/2/2016  Software Maintenance
Fincad America               Software license renewal for Fincad                   $7,060.00         12/30/2015           1/5/2017  Software Maintenance
General Services             SmartCheck publication and documentation              $7,000.00         12/15/2015          9/30/2016  Publication support
 Administration               support
IOSCO                        2016 annual IOSCO contribution                       $50,923.35           1/1/2016         12/31/2016  Membership
RedHawk IT                   Cisco Iron Port Web Security Appliance               $21,530.00         12/30/2015         12/29/2018  Software Maintenance
                              Software renewal
Department of Justice        Paralegal Support                                   $296,125.00           1/1/2016          5/31/2016  Labor
CORT Business Services       Rental furniture for New York                         $3,823.44         10/23/2015         10/22/2016  Services
Reed Elsevier (DBA           Library--Legislative History Database                $39,276.00           1/1/2016         12/31/2021  Subscription Service
 LexisNexis)                  Maintenance
Duff & Phelps (Feltman)      Expert Witness                                       $30,000.00          1/28/2016          1/27/2017  Labor
Berkeley Research Group      Expert Witness                                       $10,000.00          2/16/2016          2/15/2017  Labor
PACER Service Center         Public Access Service to Obtain Case and             $18,000.00           1/1/2016         12/31/2016  Subscription Service
                              Docket Information
NYSE                         Access to NY Stock Exchange and American              $2,400.00           9/1/2015          8/31/2016  Subscription Service
                              Stock Exchange data
Blue Tech Inc.               ClearSwift MimeSweeper Licenses                       $7,967.00         12/19/2015         12/18/2016  Software Maintenance
Hendrik Bessembinder         Expert Witness                                      $150,000.00           1/8/2016           1/7/2017  Labor
DataFacts                    Tri-merge credit bureau reports for                   $6,000.00          1/22/2016          1/21/2017  Services
                              suitability checks
USDA-NFC                     Payroll and personnel processing                     $94,782.00          10/1/2015          9/30/2016  Services
Verizon                      Wireless Expense Management Solution                 $27,732.60           2/1/2016          1/31/2020  Services
BBNA                         Online information services                          $67,583.15           2/1/2016          1/31/2019  Subscription Service
OPM                          eOPF                                                 $13,511.89          10/1/2015          9/30/2016  Services
BBNA                         Subscription Services                                $67,583.15           2/1/2016          1/31/2019  Subscription Service
Thomson Reuters              Subscription Services                               $114,792.40           2/1/2016          1/31/2019  Subscription Service
--------------------------------------------------------------------------------------------------------------------------------------------------------

                                 ______
                                 
                          Submitted Questions
Response from Hon. Timothy G. Massad, Chairman, Commodity Futures 
        Trading Commission
Questions Submitted by Hon. K. Michael Conaway, a Representative in 
        Congress from Texas
Contracting
    Question 1. Are any contracts awarded through any process other 
than a full and open competition?
    In the event that the Committee does award contracts in a manner 
other than a full and open competition, could you please provide the 
Committee with a list of those contracts; the financial details of each 
contract, including price, duration, service provided, and other 
relevant information; the number of contractors employed under the 
contracts, if any; and any written justifications associated with them.
    Answer. The Commodity Futures Trading Commission (``CFTC'' or ``the 
Commission'') awards contracts using full and open competition. In the 
limited instances where less than full and open competition is sought 
(i.e., sole source or limited competition), the Commission acts 
according to the requirements of the Federal Acquisition Regulation 
(``FAR'') (48 CFR 1). The FAR allows certain contracts to be awarded 
without full and open competition, such as micro-purchases, which are 
procurements valued at $3,500 or less, as defined in FAR 2.101, as well 
as contracts with values not exceeding $4 million awarded under the 
8(a) program, which falls under the auspices of the Small Business 
Administration's Business Development Program, authorized by FAR 19.8.
    Although the CFTC uses competitive procedures to award the majority 
of its contracts with values exceeding the micro-purchase threshold, 
there are circumstances where that is not in the Commission's best 
interests. For instance, there have been occasions where a procurement 
has not yet been completed, but the incumbent contract was expiring. 
Because of this, the Commission awarded a short-term sole source 
contract or extension to the incumbent contract to bridge the gap to 
avoid any lapse in service that could have adverse effects on CFTC's 
ability to execute its mission.
    Per the Committee's request, attached to this response is a 
spreadsheet that contains a list of CFTC's current contracts awarded 
using less than full and open competition. The ultimate completion 
dates and total values provided assume that CFTC exercises all 
available option years in each contract. Additionally, the spreadsheet 
includes a ledger explaining the authorities allowing for CFTC to use 
less than full and open competition in awarding its contracts.

                                                                       Attachment
   Current Contracts of the Commodity Futures Trading Commission that were Awarded on a Sole Source or Limited Competition Basis--As of March 10, 2016
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                                                     Authority for
                                                                                                                    Less Than Full
                                                                   Ultimate  Completion                                and Open        Total Potential
  PIID (Contract  Number)      Contractor       Effective Date      Date (if all option      Product or Service       Competition       Value (if all
                                                                   years are exercised)         Description          (see  Legend     option years are
                                                                                                                          for            exercised)
                                                                                                                     descriptions)
--------------------------------------------------------------------------------------------------------------------------------------------------------
            CFODT15CO0138   Alliance                   07/14/2015            09/30/2016  Maintenance of Mutare      FAR 13.106-                $9,375.00
                             Technology                                                   Business Continuity        1(b)(1)
                             Group, LLC                                                   System
            CFHRB15CO0239   Amtis, Inc.                09/28/2015            09/27/2020  Executive Coaching         FAR 6.302-5--          $1,425,367.62
                                                                                          Services                   8(a) Program
            CFENF14CO0209   Analysis Group,            04/09/2015            05/14/2016  Expert Witness             FAR 6.302-3              $456,432.00
                             Inc.
            CFENF15CO0157   Analysis Group,            07/10/2015            09/11/2017  Expert Witness             FAR 6.302-3              $497,373.00
                             Inc.
            CFENF15CO0199   Analysis Group,            08/07/2015            07/31/2017  Support- Professional:     FAR 6.302-3              $398,410.00
                             Inc.                                                         Expert Witness
            CFHRB15DO0096   Aon Consulting,            04/13/2015            04/12/2016  SME in support of the      FAR 8.405-                $36,748.00
                             Inc.                                                         procurement of a dental    6(a)(1)(i)(B)
                                                                                          plan
            CFODT16DO0041   Aspen Systems              10/22/2015            04/21/2016  Automated litigation       FAR 8.405-               $500,000.00
                             Corporation-                                                 support services           6(a)(1)(i)(B)
                             Lockheed
            CFENF15CO0134   Bates White,               08/20/2015            07/31/2017  Expert Witness             FAR 6.302-3              $720,400.00
                             LLC
                       CFLIBBBNA0081                   02/01/2016            01/31/2019  BBNA online services       FAR                      $210,638.54
                                                                                                                     16.505(b)(2)(
                                                                                                                     i)(B)
            CFENF15CO0104   Berkeley                   02/10/2015            09/29/2016  Expert Witness             FAR 6.302-3              $459,400.00
                             Research Group
                             LLC
            CFENF15CO0081   Berkeley                   12/31/2014            09/30/2016  Expert Witness             FAR 6.302-3              $740,000.00
                             Research Group
                             LLC
            CFENF15CO0225   Berkeley                   09/24/2015            09/23/2017  Expert Witness             FAR 6.302-3              $565,030.00
                             Research Group
                             LLC
            CFENF16CO0069   Berkeley                   02/16/2016            02/15/2017  Expert Witness             FAR 13.106-               $96,998.00
                             Research Group                                                                          1(b)(1)
                             LLC
            CFENF15CO0176   Bessembinder,              07/15/2015            01/14/2018  Expert Witness             FAR 6.302-3              $278,125.00
                             Hendrik
            CFENF16CO0073   Bessembinder,              01/08/2016            01/07/2017  Expert Witness             FAR 13.106-              $150,000.00
                             Hendrik                                                                                 1(b)(1)
             CFIT12CO0058   Bloomberg                  07/01/2015            06/30/2020  Access to Bloomberg        FAR 6.302-1            $1,660,982.90
                             Finance L.P.                                                 Terminals
            CFODT15CO0143   Boardwalk Tech             05/11/2015            05/10/2016  Software Maintenance       FAR 13.106-                $9,000.00
                                                                                                                     1(b)(1)
            CFCON15CO0241   Cable News                 09/17/2015            05/16/2016  Online Advertising         FAR 13.106-              $100,000.00
                             Network, Inc.                                                                           1(b)(1)
            CFENF14CO0222   Capital Market             09/29/2014            09/28/2016  Expert Witness             FAR 6.302-3              $734,760.00
                             Risk
                             Associates,
                             Inc.
            CFODT15CO0240   Capitol News               09/30/2015            09/29/2016  Politico Pro News Access   FAR 13.106-               $24,975.00
                             Company, LLC                                                                            1(b)(1)
                       CFLIBCCHO0211                   09/01/2014            08/31/2019  Subscription service to    FAR 8.405-               $465,595.59
                             Incorporated                                                 Commodity Futures Laws     6(a)(1)(i)(B)
                                                                                          Reports and Federal
                                                                                          Litigation Library
            CFODT16CO0038   Comcast of the             10/01/2015            09/30/2016  Cable television services  FAR 13.106-               $23,990.40
                             District, LLC                                                                           1(b)(1)
            CFBMP16DO0066   Cort Business              10/23/2015            10/22/2016  Furniture rental--NY       FAR 8.405-                 $3,823.44
                             Services                                                     Regional Office            6(a)(1)(i)(B)
                             Corporation
                       CFLIBCQ-Roll Call,              06/01/2015            05/31/2016  Subscription Service       FAR 13.106-               $20,580.00
                             Inc.                                                                                    1(b)(1)
                       CFLIBDow Jones &                08/18/2015            08/17/2016  eFinancial New             FAR 13.106-               $37,500.00
                             Company, Inc.                                                subscription               1(b)(1)
                       CFLIBDow Jones &                09/24/2015            09/23/2016  Subscription to Wall       FAR 13.106-               $11,865.00
                             Company, Inc.                                                Street Journal Digital     1(b)(1)
                                                                                          Group Access
            CFENF14CO0174   Decisionquest               9/24/2014             9/23/2019  Jury trial consultation    FAR 6.302-3            $7,000,000.00
                                                                                          services
            CFENF16CO0068   Duff & Phelps,             01/28/2016            01/27/2017  Expert Witness             FAR 13.106-               $60,000.00
                             LLC                                                                                     1(b)(1)
            CFENF15CO0262   Empresa Noronha            01/15/2016            05/31/2016  Expert Witness             FAR 13.106-               $97,928.00
                             LLC                                                                                     1(b)(1)
            CFENF15CO0117   ENSYS Energy &             04/22/2015            10/21/2017  Expert Witness             FAR 6.302-3              $215,601.00
                             Systems Inc.
            CFODT15CO0142   Entrust, Inc.              06/24/2015            06/23/2019  Entrust Identity Guard     FAR 13.106-               $22,002.80
                                                                                          Federation Module WIN      1(b)(1)
                                                                                          10.2 license and
                                                                                          maintenance
            CFODT15DO0043   Entrust, Inc.              10/15/2015            10/14/2018  Identity Guard CAL for     FAR 8.405-                $19,915.62
                                                                                          soft tokens                6(a)(1)(i)(B)
            CFODT15CO0064   Entrust, Inc.              11/18/2014            11/17/2017  Entrust certificate        FAR 13.106-               $12,710.09
                                                                                          management services        1(b)(1)
            CFOED12CO0156   FM Talent                  07/09/2012            07/08/2017  Business management        FAR 6.302-5--          $1,432,097.13
                             Source LLC                                                   support for CFTC's         8(a) Program
                                                                                          Office of the Executive
                                                                                          Director
            CFCON15CO0245   Forbes Media,              09/17/2015            05/31/2016  Online Advertising         FAR 13.106-              $125,000.00
                             LLC                                                                                     1(b)(1)
                       CFLIBGenscape, Inc.             09/24/2015            09/23/2017  Access to Genscape         FAR 6.302-1              $200,000.00
                                                                                          databases
            CFFMB14CO0121   GMG Management             05/01/2014            04/30/2019  Travel information center  FAR 6.302-5--            $960,771.20
                             Consulting                                                   services                   8(a) Program
                             Inc.
            CFENF14CO0100   Grant Thornton             04/01/2015            05/31/2017  Expert Witness             FAR 6.302-3            $1,829,321.00
                             LLP
            CFENF16CO0089   Hendershott,               02/29/2016            02/28/2017  Expert Witness             FAR 13.106-               $55,600.00
                             Terrence                                                                                1(b)(1)
            CFODT15CO0106   Imtech                     06/21/2015            06/20/2018  Activu annual license      FAR 6.302-1              $207,124.56
                             Corporation                                                  renewal
            CFODT15CO0166   Inovitech LLC              07/27/2015            07/26/2020  IS-A Task license          FAR 6.302-1              $250,000.00
                       CFLIBInstitutional              09/02/2015            09/01/2016  Subscription to Global     FAR 13.106-               $16,740.00
                             Investor, Inc.                                               Capital                    1(b)(1)
            CFCON15CO0246   Investing Media            09/17/2015            05/31/2016  Online Advertising         FAR 13.106-              $100,000.00
                             Solutions LLC                                                                           1(b)(1)
            CFENF16CO0079   Iontach                    03/03/2016            03/02/2017  Expert Witness             FAR 13.106-               $25,000.00
                                                                                                                     1(b)(1)
            CFBMP16CO0021   Laz Parking                11/01/2015            10/31/2016  Parking Space              FAR 13.106-               $25,704.00
                             Ltd., LLC                                                                               1(b)(1)
            CFBMP16CO0019   Linden                     10/29/2015            10/28/2016  Business cards for the     FAR 13.106-                $8,133.00
                             Resources,                                                   CFTC Employees             1(b)(1)
                             Inc.
            CFODT15CO0162   Litsavant Ltd.             06/25/2015            06/24/2018  LitSavant Conformity       FAR 13.106-               $24,300.00
                                                                                          Engine license             1(b)(1)
            CFCON15CO0249   Microsoft                  09/17/2015            05/31/2016  Online Advertising         FAR 13.106-              $149,000.00
                             Online, Inc.                                                                            1(b)(1)
                       CFLIBMLEX U.S. Inc.             09/04/2015            09/04/2016  Newspapers and             FAR 13.106-               $13,000.00
                                                                                          Periodicals                1(b)(1)
            CFDMO15CO0141   Murray, Martin             05/28/2015            05/27/2016  Expert Witness             FAR 13.106-               $92,050.40
                             G.                                                                                      1(b)(1)
            CFBMP16CO0022   Neopost USA                10/01/2015            09/30/2016  Postage meter rental and   FAR 13.106-                $5,799.00
                             Inc.                                                         maintenance fees for all   1(b)(1)
                                                                                          office locations
                       CFLIBPacer Service              01/01/2016            12/31/2016  Public Access Service to   FAR 13.106-               $18,000.00
                             Center                                                       Obtain Case and Docket     1(b)(1)
                                                                                          Information
                       CFLIBPlatts, McGraw             07/24/2015            07/23/2016  Renew subscription to      FAR 13.106-              $139,653.00
                             Hill Financial                                               access Platts/McGraw       1(b)(1)
                                                                                          Hill data and
                                                                                          publications
         CFCON-14-DO-0186   Porter Novelli             09/18/2014            03/17/2016  OCO integrated marketing   FAR 8.405-             $4,799,450.29
                             Public                                                       support                    6(a)(1)(i)(B)
                             Services
                       CFLIBPortfolio                  05/11/2015            05/10/2016  Subscription to Law360     FAR 13.106-               $16,320.00
                             Media, Inc.                                                                             1(b)(1)
            CFODT15CO0137   Public Agency              04/22/2015            04/21/2018  Oxygen Forensic Dongle     FAR 13.106-               $10,341.00
                             Training                                                                                1(b)(1)
                             Council, Inc.
                       CFLIBReed Elsevier,             11/01/2013            10/31/2018  Computer assisted legal    FAR 8.405-             $1,855,788.00
                             Inc.                                                         research and retrieval     6(a)(1)(i)(B)
                                                                                          services--LexisNexis
                       CFLIBReed Elsevier,             07/28/2015            07/27/2016  License to access          FAR 8.405-                 $9,900.00
                             Inc.                                                         Knowledge Mosaic           6(a)(1)(i)(B)
                                                                                          LexisNexis Securities
                                                                                          Dashboard
            CFODT15DO0171   Reed Elsevier,             08/01/2015            07/31/2020  Annual maintenance of      FAR 8.405-               $272,954.00
                             Inc.                                                         CaseMap Suite              6(a)(1)(i)(B)
                       CFLIBReed Elsevier,             01/01/2016            12/31/2020  Library--Legislative       FAR 6.302-1              $212,736.00
                             Inc.                                                         History Database
                                                                                          Maintenance
            CFODT15CO0156   Sirsi                      07/01/2015            06/30/2016  Software maintenance for   FAR 13.106-                $7,175.18
                             Corporation                                                  library cataloguing        1(b)(1)
            CFBMP15CO0127   Smiths                     04/02/2015            04/01/2016  Maintenance of SABRE       FAR 13.106-                $9,075.00
                             Detection,                                                   handheld devices           1(b)(1)
                             Inc.
            CFBMP15DO0126   Smiths                     04/20/2015            04/19/2016  Maintenance of x-ray unit  FAR 8.405-                 $4,125.80
                             Detection,                                                                              6(a)(1)(i)(B)
                             Inc.
            CFFMB14CO0141   Spartan                    09/01/2014            08/31/2019  Document management,       FAR 6.302-5--          $4,000,000.00
                             Business &                                                   project management and     8(a) Program
                             Technology                                                   analytical support for
                             Services, Inc.                                               CFTC Financial documents
            CFODT15CO0151   Sterling                   07/01/2015            06/30/2017  Online computer-based      FAR 13.106-               $14,025.00
                             Computers                                                    security awareness         1(b)(1)
                             Corporation                                                  training
            CFODT15DO0195   SWN                        08/15/2015            08/14/2016  SWN Communications         FAR 8.405-                $27,533.83
                             Communications                                               Service Agreement          6(a)(1)(i)(B)
                             Incorporated
                       CFLIBThomson-Reuters            02/10/2016            01/31/2019  Subscription Service       FAR 6.302-1              $368,443.00
            CFODT14CO0122   Trivantis                  06/05/2015            06/04/2016  Hosting of CourseMill      FAR 13.106-               $24,900.00
                             Corporation                                                                             1(b)(1)
            CFCON15CO0248   TubeMogul, Inc.            09/17/2015            05/16/2016  Online Advertising         FAR 13.106-              $149,000.00
                                                                                                                     1(b)(1)
            CFBMP16DO0011   United Parcel              10/01/2015            09/30/2016  Express and ground         FAR 8.405-                $45,000.00
                             Service                                                      domestic delivery          6(a)(1)(i)(C)
                             Incorporated                                                 service
                             (OH) (2075)
             CFIT11DO0248   Verizon                    09/30/2011            09/29/2017  MTIPS Services             FAR 8.405-             $3,061,675.33
                                                                                                                     6(a)(1)(i)(C)
            CFCON15CO0247   Viant                      09/25/2015            05/16/2016  Online Advertising         FAR 13.106-              $149,000.00
                             Technology                                                                              1(b)(1)
                             Inc.
             CFOM11CO0199   Washington                 09/06/2011            09/05/2016  SmartBenefits Program      FAR 6.302-1            $5,000,000.00
                             Metropolitan
                             Area Transit
                             Authority
                       CFLIBWest Publishing            10/01/2015            09/30/2016  West subscription service  FAR 8.405-                $30,199.28
                             Corporation                                                                             6(a)(1)(i)(B)
                       CFLIBWest Publishing            11/01/2015            10/31/2016  Computer assisted legal    FAR                    $3,781,558.68
                             Corporation                                                  research and retrieval     16.505(b)(2)(
                                                                                          services--WestLaw          i)(B)
            CFODT15CO0185   Wolters Kluwer             08/01/2015            07/31/2016  TeamMate license renewal   FAR 13.106-               $69,495.00
                             Financial                                                                               1(b)(1)
                             Services, Inc.
            CFBMP15CO0202   Workforce                  09/04/2015            09/03/2017  Facilities, logistics and  FAR 6.302-5--          $4,000,000.00
                             Resources,                                                   administrative support     8(a) Program
                             Inc.                                                         services
            CFENF14CO0219   Zebra                      09/21/2016            09/21/2016  Expert Witness             FAR 13.106-              $105,000.00
                             Economics,                                                                              1(b)(1)
                             Inc.
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                  Legend of Authorities
--------------------------------------------------------------------------------------------------------------------------------------------------------
       FAR Citation                                 Brief Description of the Authority to Use Less Than Full and Open Competition
--------------------------------------------------------------------------------------------------------------------------------------------------------
              FAR 6.302-1      FAR 6.302-1, ``Only one responsible source and no other supplies or services will satisfy agency requirements'', allows
                              agencies to award a contract on a sole source basis when the contractor is considered to be uniquely qualified to perform
                                the work. (Note, the competition requirements of FAR Part 6 apply to open market procurements exceeding the simplified
                              acquisition threshold of $150,000. Per FAR 13.000, open market acquisitions that do not exceed the simplified acquisition
                                                        threshold are conducted pursuant to the requirements of FAR Part 13.)
              FAR 6.302-3     FAR 6.302-3, ``Industrial mobilization; engineering, developmental, or research capability; or expert services'', allows
                             agencies to award contracts using less than full and open procedures when the agency is acquiring services of ``[a]n expert
                              to use, in any litigation or dispute (including any reasonably foreseeable litigation or dispute) involving the government
                               in any trial, hearing, or proceeding before any court, administrative tribunal, or agency, whether or not the expert is
                              expected to testify.'' This is due to the unique nature of such services and the fact that their disclosure may compromise
                              pending litigation or other legal action. These contracts are frequently used by the CFTC for expert witness services and
                                                                              other litigation support.
              FAR 6.302-5       FAR 6.302-5, ``Authorized or required by statute'', permits agencies to award contracts on a sole source basis when a
                                statute allows or requires it. CFTC awards some contracts under the Small Business Development umbrella of SBA's 8(a)
                              Program. Competition is not required by the FAR for 8(a) Program contracts with values that do not exceed $4 million [see
                               FAR 19.805-1(a)(2)]. FAR 6.302-5(b)(4) expressly states that sole source contracts under the 8(a) Program may be awarded
                                                                   without providing for full and open competition.
       FAR 13.106-1(b)(1)    FAR 13.106-1(b)(1)(i) allows Contracting Officers to solicit from one source if the Contracting Officer determines that the
                                  circumstances of the contract action deem only one source reasonably available (e.g., urgency, exclusive licensing
                                agreements, brand-name or industrial mobilization). This authority applies to contract actions with values that do not
                              exceed the simplified acquisition threshold (i.e., $150,000). CFTC uses this authority in situations where only one source
                               is the only viable option to fulfill CFTC's requirements (e.g., providing cable television service or renewing software
                                                                                      licenses).
  FAR 8.405-6(a)(1)(i)(B)      CFTC uses the GSA Federal Supply Schedule (``FSS'') contracts often to fulfill its needs. FAR Subpart 8.4 specifies the
                    & (C)    requirements for obtaining competition for orders placed under the GSA FSS program. However, FAR 8.4 does allow agencies to
                              limit competition under certain circumstances. The two authorities most commonly used by CFTC are FAR 8.405-6(a)(1)(i)(B)
                               (only one source is capable of providing the supplies or services required at the level of quality required because the
                              supplies or services are unique or highly specialized) and FAR 8.405-6(a)(1)(i)(C) (the new work is a logical follow-on to
                                                                           an original competed FSS order).
   FAR 16.505(b)(2)(i)(B)   In addition to the GSA FSS contracts, CFTC also places orders against other Government-wide Acquisition Contracts (``GWAC'')
                                 such as the Library of Congress's FEDLINK GWAC. FAR 16.505(b)(2)(i)(B) permits agencies to place orders under a GWAC
                                 without providing fair opportunity for all contract holders to compete, in certain circumstances. Specifically, FAR
                                16.505(b)(2)(i)(B) allows agencies to award on a sole source basis when it has determined that ``[o]nly one awardee is
                               capable of providing the supplies or services required at the level of quality required because the supplies or services
                                                                     ordered are unique or highly specialized.''
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    Question 2. Mr. Chairman, what percentage of the agency's staff are 
contractors (i.e., not full time employees (FTE))?
    Do any of these contractors perform tasks associated with market 
oversight and surveillance, compliance, risk assessment, or 
enforcement?
    Does the Commission have specific rules governing what tasks are 
permissible or not permissible to be contracted out? If so, what are 
they?
    Answer. Based on the Congressional Spend Plan submitted in January 
2016, the Commission estimates it will have 714 civilian full time 
equivalents (FTE) and 292 contractor resources during FY 2016. It is 
estimated that contractors will be 30% of total agency labor resources 
during the fiscal year.
    The Commission complies with the Office of Procurement Policy 
definitions established in Policy Letter 11-01 titled Performance of 
Inherently Governmental and Critical Functions, as well as Federal 
Acquisition Regulation (FAR) Subpart 7.5, when hiring contractors to 
perform functions at the Commission. All functions that require 
performance by a Federal civilian are fulfilled by full-time Federal 
civilian employees employed by the Commission. The definition of an 
inherently governmental function is provided below for reference:

          `` `Inherently governmental function,' as defined in section 
        5 of the Federal Activities Inventory Reform Act, Public Law 
        105-270, means a function that is so intimately related to the 
        public interest as to require performance by Federal Government 
        employees.

                  (a) The term includes functions that require either 
                the exercise of discretion in applying Federal 
                Government authority or the making of value judgments 
                in making decisions for the Federal Government, 
                including judgments relating to monetary transactions 
                and entitlements. An inherently governmental function 
                involves, among other things, the interpretation and 
                execution of the laws of the United States so as--

                          (1) to bind the United States to take or not 
                        to take some action by contract, policy, 
                        regulation, authorization, order, or otherwise;
                          (2) to determine, protect, and advance United 
                        States economic, political, territorial, 
                        property, or other interests by military or 
                        diplomatic action, civil or criminal judicial 
                        proceedings, contract management, or otherwise;
                          (3) to significantly affect the life, 
                        liberty, or property of private persons;
                          (4) to commission, appoint, direct, or 
                        control officers or employees of the United 
                        States; or
                          (5) to exert ultimate control over the 
                        acquisition, use, or disposition of the 
                        property, real or personal, tangible or 
                        intangible, of the United States, including the 
                        collection, control, or disbursement of 
                        appropriations and other Federal funds.

          (b) The term does not normally include--

                  (1) gathering information for or providing advice, 
                opinions, recommendations, or ideas to Federal 
                Government officials; or
                  (2) any function that is primarily ministerial and 
                internal in nature (such as building security, mail 
                operations, operation of cafeterias, housekeeping, 
                facilities operations and maintenance, warehouse 
                operations, motor vehicle fleet management operations, 
                or other routine electrical or mechanical services).''
Personnel Issues
    Question 3. A recent ViewPoint survey of CFTC employees revealed 
that its employee satisfaction index (46%) is well below the average 
for small agencies (62%). In the ``Best Places to Work'' rankings, the 
CFTC ranked 25th out of 28 in the small agencies category. It also 
bottomed out in rankings for Effective Leadership and Strategic 
Management, where it had the lowest rating among the financial service 
agencies.
    Could you please explain what steps you're implementing to improve 
the leadership and management skills of the Commission's employees with 
managerial roles?
    Some of the most negatively rated issues involved the ability of 
senior leadership to generate ``high levels of motivation and 
commitment in the workforce.'' What steps is the Commission taking to 
address that problem?
    Answer. Immediately following the issuance of the 2014 Employee 
ViewPoint Survey results, I began working with division directors to 
address concerns raised by the survey.
    As part of this effort, each division director developed an action 
plan to address issues that were brought to light by the survey. For 
example, efforts were made to:

   Promote communication across all CFTC divisions and offices;

   Continue to assess and improve workflow and project 
        management processes to encourage greater interaction and 
        teamwork;

   Increase dialogue between CFTC headquarters and regional 
        offices; and

   Create opportunities for staff to participate in detail 
        assignments.

    In addition, we worked to increase agency wide communication and 
transparency to ensure that all employees felt connected to the mission 
of the agency. This effort included increased use of CFTCNet (agency 
intranet) to communicate agency-wide issues and goals, conducting 
agency-wide town halls, as well as site visits by the Chairman to the 
regional offices, and meetings with the Chairman and individual 
divisions or other groupings of employees. It also included formalizing 
procedures for employees to make suggestions on agency practices and 
management, and increasing recognition of employees for good 
performance.
    Moving forward, we are building off of these initiatives to provide 
additional opportunities for in-house training, more interaction across 
Divisions, and between headquarters and regional offices.
    The survey results for 2015 showed improvement in many categories. 
We saw increases in 61 of the 71 categories. We saw a decline in six 
categories and status quo in four of the categories. I feel strongly 
that we can improve our EVS scores, and am committed to prioritizing 
work on these and other initiatives to accomplish that.
    For example, in FY 2016, we are continuing to implement the 
following programs to improve leadership and management skills:
Executive Coaching and 360 Assessment Program
    In FY 2015, 27% of supervisors participated in a 360 degree 
leadership assessment, created and executed against an executive 
development plan, and received up to 8 hours of executive coaching. In 
FY 2016, 34% of supervisors have participated in a 360 degree 
leadership assessment, are in the process of designing an executive 
development plan, and will have the opportunity to receive up to 8 
hours of executive coaching.
Treasury Executive Institute
    The Commission has partnered with the Treasury Executive Institute 
(TEI) to provide leadership development training opportunities to all 
CT-14s and above. TEI provides training opportunities covering a range 
of leadership development topics such as: leading teams, providing 
feedback, setting vision, and other executive competencies.
Occupational Assessment Survey
    The CFTC is also currently conducting an occupational assessment of 
the executive and senior leadership occupations to capture knowledge, 
skills, and abilities that are required for successful occupational 
performance. When completed, the occupational profiles will support a 
broad range of human capital programs and activities including: 
recruitment and staffing, training and development, individual 
development planning, and succession planning.

    Question 4. How have negotiations with the National Treasury 
Employees Union progressed and what has the Commission promised 
regarding the pay and benefits of CFTC employees?
    Answer. Collective bargaining with the National Treasury Employees 
Union (Union) is in progress. The Union has submitted a preliminary 
proposal to address bargaining ground rules, and the Commission is 
preparing a response. The parties have yet to exchange proposals or 
reach any agreements concerning pay and benefits at this time.
De Minimis
    Question 5. The negative consequences to market participants and 
liquidity resulting from a de minimis threshold that is set too low are 
not theoretical. We observed these negative consequences when the CFTC 
set a de minimis threshold of $25 million for swap dealing activity 
with public power companies. How has the CFTC learned from this 
experience?
    Answer. The Commission's actions in connection with the de minimis 
threshold demonstrate a deliberative approach that carefully considers 
liquidity and other market conditions, as well as the policy benefits 
of regulating swap dealers. For example, the CFTC received comments 
from market participants after the de minimis exception rule was first 
proposed regarding the impacts of a $25 million threshold on public 
power companies. In response to those comments, CFTC staff studied the 
issue and held a round table to gather further information. The 
Commission ultimately amended the swap dealer de minimis rule on 
September 23, 2014 to raise the threshold for entities dealing swaps to 
public power companies to the $8 billion level applicable to swap 
dealers generally. Furthermore, the CFTC is currently studying the de 
minimis exception rule and issued the Swap Dealer De Minimis Exception 
Preliminary Report on November 18, 2015. The report discusses the 
policy goals that are achieved from a de minimis exception to 
registration. CFTC staff has reviewed the public comments on that 
report and are preparing a final report for consideration by the 
Commission.
Position Limits
    Question 6. Mr. Chairman, I appreciate that the Commission is 
committed to hearing from the market participants it regulates through 
the use of its various advisory committees. In one of the recent 
meetings of the Energy and Environmental Markets Advisory Committee, 
market participants discussed how the proposed rule on position limits 
will reduce market liquidity.
    How is the Commission working to ensure that its next position 
limits proposal won't negatively impact market liquidity, in the way 
your EEMAC panelists have outlined that it would?
    Answer. EEMAC panelists noted that there was a substantial drop in 
trading liquidity (and market depth), prior to the implementation of 
the position limits proposal. They also expressed concern that the 
position limits proposal would harm liquidity further, including ``out 
the curve.'' Panelists have suggested, among other things, broadening 
the enumerated hedges specified in the proposed rule, empowering the 
exchanges to recognize non-enumerated bona fide hedging positions for 
purposes of Federal position limits, and updating deliverable supply 
estimates.
    The Commission staff is examining all of these suggestions. As the 
Commission works to finalize its rules on position limits, I am 
committed to listening to market participants and working to arrive at 
a rule that sensibly fulfills the statutory mandate to address the risk 
of excessive speculation while insuring that commercial participants 
can continue to use these markets efficiently to hedge risk.
Regulatory Coordination
    Question 7. One example of a failure of regulatory coordination is 
found in the differing definitions of U.S. Person used by financial 
regulators. The CFTC will soon have two definitions, neither of which 
is identical to definitions used by the SEC or the Prudential 
Regulators. Why haven't regulators coordinated their efforts to develop 
a single understanding of who is subject to their jurisdiction through 
FSOC?
    What is the value to the CFTC as a regulator to have different 
rules for who must comply with U.S. swaps rules and U.S. security-based 
swap rules?
    Can you explain how a financial entity might engage in trading 
activities that make it both a U.S. Person under the CFTC's definition, 
but a non-U.S. Person under the SEC's definition of a U.S. Person?
    Do you think that having two different definitions of a U.S. Person 
increases compliance burdens for such a market participant?
    Answer. Under the Dodd-Frank Act, responsibility for regulating the 
OTC swaps market was bifurcated between the CFTC and the SEC, with the 
CFTC given responsibility for all of the market other than a small 
piece represented by security-based swaps. In addition, in certain 
areas such as margin, rule-making authority was further divided between 
these two agencies, as well as the Federal banking regulators. Given 
the global nature of the swaps market, I agree that coordination among 
national, as well as international regulators is critical. As Chairman, 
I have made it a top priority.
    Prior to my joining the Commission, guidance was issued in the 
summer of 2013 on the cross-border application of its rules, which 
included a U.S. person definition. The guidance stated that the 
Commission will periodically review its cross-border policy in light of 
future developments.
    Recently, the Commission issued a final rule on margin for 
uncleared swaps, which was developed after close consultation with U.S. 
banking regulators, as we are required to do by law. The SEC was not 
ready to develop a margin rule during this time; however, we engaged in 
dialogue with them in order to try to harmonize our rules as much as 
possible. The final rule is practically identical to the margin rules 
adopted by the banking regulators.
    In addition, the Commission has issued a proposed rule concerning 
the cross-border application of the margin rule. With respect to the 
cross-border issues, we faced a choice as to whether to take a 
transactional-level approach consistent with the guidance, an entity-
level approach, or a hybrid of the two approaches that was consistent 
with what was then being proposed by the Federal banking regulators. We 
invited and received comments on the advanced notice of proposed rule-
making and received comments that were quite varied. We then proposed 
the hybrid approach with a few modifications and worked with the 
Federal banking regulators to finalize the rule, with the result that 
they revised their cross-border approach to make it largely consistent 
with ours.
    The specific definition of U.S. person in the proposal is very 
similar to that in the 2013 guidance. We did, however, make a few minor 
changes in response to suggestions of market participants, all of which 
have generally been welcomed by the market. The current rule-making 
pertains only to margin, but I intend to look at the cross-border 
implications of other rules through the notice and comment rule-making 
processes.
    The Commission will continue to collaborate with other regulators, 
including the SEC, as we at the CFTC develop our swaps regulations to 
ensure that our broader cross-border approach promotes greater global 
harmonization, consistent with Dodd-Frank's goals of achieving greater 
transparency and better risk mitigation in the swaps market. In so 
doing, however, it is important to keep in mind the unique 
circumstances in which the swaps market evolved. The Commission was 
tasked with regulating a market that grew to a global scale without any 
meaningful regulation. Developing a regulatory framework to fit that 
market requires us to adapt and respond to rapid and continual changes 
in the market. Moreover, while the Dodd-Frank Act established key 
reform goals applicable to several Federal regulatory agencies, there 
will inevitably be differences in the specific rules we adopt given 
each agency's unique statutory mandate, regulatory history, and 
underlying regulatory framework--and the differences in the markets and 
market participants each oversees. The CFTC has made great progress in 
harmonization to date, and we will continue to work towards narrowing 
differences in our regulatory approaches.

    Question 8. This past summer, the Commission proposed a rule 
covering the cross-border application of margin requirements for 
uncleared swaps (Proposed Rule). You've stated recently that you hope 
to finalize that rule this spring. The Proposed Rule provides a 
strikingly different definition of ``U.S. Person'' than the one 
appearing in the Commission's Final Guidance regarding cross-border 
swaps.
    When the Commission finalizes the rule, will its definition of U.S. 
Person supersede the Final Guidance's definition of a U.S. Person for 
all cross-border activity?
    If not, will the Commission be updating its Final Guidance to 
reflect the new definition or does the Commission intend to maintain 
two separate and distinct definitions of U.S. Person indefinitely?
    Answer. The CFTC has proposed a modified U.S. person definition 
that applies solely to the cross-border application of its margin 
requirements. The proposed definition is substantially similar to the 
definition used by the SEC in the context of cross-border regulation of 
security-based swaps and is generally consistent with the U.S. person 
interpretation set forth in the cross-border guidance, with a few 
refinements that more closely align it with the SEC definition. Moving 
forward, I have asked the staff to review the U.S. person definition in 
the guidance and advise on whether we should seek to develop a U.S. 
person definition that would apply to all of the Commission's swap 
regulations adopted under the Dodd-Frank Act.

    Question 9. The Governor of the Reserve Bank of India recently sent 
a letter to the U.S. Ambassador to India, protesting the heavy-
handedness of the CFTC's international regulatory reach in requiring an 
Indian clearinghouse to be subject to the CFTC's regulatory 
jurisdiction because it was clearing trades for U.S. firms. Are you 
aware of this letter? Have you engaged in discussions with Indian 
officials to prevent U.S. firms from having to exit the Indian market?
    Answer. Yes, I am aware of the letter from Governor Raghuram Rajan 
of the Reserve Bank of India (``RBI'') to the U.S. Ambassador to India. 
I have received a substantially identical letter. I responded to 
Governor Rajan by letter, dated February 4, 2016, acknowledging receipt 
of Governor Rajan's letter and expressing my desire to work with him 
and his staff in addressing the concerns raised in his letter.
    The Commodity Exchange Act requires any derivatives clearing 
organization (``DCO'') that clears trades for U.S. firms to be 
registered with the CFTC, but also grants the Commission exemptive 
authority if the Commission determines that the DCO ``is subject to 
comparable, comprehensive supervision and regulation.'' To date, the 
CFTC has granted registration exemptions to clearinghouses in five 
different jurisdictions (such clearinghouses are known as ``Exempt 
DCOs''). In order to receive a registration exemption, each Exempt DCO 
must demonstrate compliance with a basic set of conditions. In 
addition, its regulator has to enter into a cooperative arrangement 
with the CFTC.
    The Clearing Corporation of India Ltd. (``CCIL''), which is 
regulated by RBI, is applying to become an Exempt DCO. CCIL has 
indicated it can meet most of the conditions, but has been advised by 
RBI that it cannot meet certain conditions. I respect the concerns 
expressed by Governor Rajan and want to make every effort to work with 
the parties involved to address those concerns. To this end, the 
Commission's Director of International Affairs traveled to Mumbai to 
meet with RBI and CCIL staff on February 9, 2016 for the express 
purpose of discussing the CCIL matter. Since that meeting, CFTC staff 
has been discussing the matter with RBI staff by email and telephone. 
Furthermore, given the potential impact of the matter on certain U.S. 
firms, the Commission's Director of International Affairs also met with 
representatives of such U.S. firms while in Mumbai.
Cybersecurity
    Question 10. How is the CFTC coordinating with other U.S. financial 
regulators on cybersecurity? What efforts are being taken by regulators 
to develop common approaches to cybersecurity oversight? How is the 
CFTC building on the NIST Cybersecurity Framework approach as it 
develops its cyber rules?
    Answer.
A. Coordination of Oversight
    The Commission recognizes cybersecurity as one of the greatest 
challenges facing the financial sector today, and places a high 
priority on its cybersecurity oversight of derivatives markets, 
clearing organizations, swap data repositories, and firms.
    The Commission coordinates on cybersecurity with other U.S. 
financial regulators on a regular and ongoing basis through its 
membership on the Financial and Banking Information Infrastructure 
Committee (FBIIC). FBIIC is the standing interagency committee through 
which financial sector regulators cooperate and coordinate concerning 
cybersecurity and critical infrastructure protection. Led by the 
Department of the Treasury as the Sector Specific Agency for the 
financial sector, FBIIC includes the CFTC, the Securities Exchange 
Commission, the Federal Reserve, the Office of the Comptroller of the 
Currency (OCC), the Federal Deposit Insurance Corporation (FDIC), and 
12 other Federal financial regulators and national associations of 
state financial regulators. Originally created under the President's 
Working Group (PWG), FBIIC also assists the Financial Stability 
Oversight Council concerning critical infrastructure protection issues.
    The Commission participates in and benefits from FBIIC's effective 
partnerships on cybersecurity issues with Federal law enforcement 
agencies and the intelligence community, and with the private sector 
through its private sector counterpart, the Financial Services Sector 
Coordinating Council, which includes major markets, clearing 
organizations, and firms across the U.S. financial sector.
    The Commission has also helped to plan and participates actively in 
the FBIIC's Hamilton Program series of public and private-sector 
tabletop cybersecurity exercises which has been underway since late 
2014 and will continue through 2016 and 2017. These exercises bring 
together Federal financial regulators, law enforcement and intelligence 
agencies, and systemically important financial sector firms, in order 
to improve the sector's cybersecurity resilience and the communication 
and coordination needed to respond to today's cybersecurity threat.
B. Development of Common Approaches to Oversight
    The Commodity Exchange Act (CEA) requires derivatives markets, 
clearing organizations, and swap data repositories to have system 
safeguards-related programs of risk analysis and oversight with respect 
to cybersecurity, and requires them to maintain automated systems that 
are reliable and secure. These rules require such cybersecurity risk 
analysis and oversight programs to incorporate and follow generally 
accepted standards and best practices regarding cybersecurity.
    The Commission's regular System Safeguards Examinations of 
registrant cybersecurity draw on and apply best practice sources 
provided and used by other financial regulators. This includes the 
National Institute for Standards and Technology (NIST) Cybersecurity 
Framework, the IT examination standards used by the Federal Financial 
Institutions Examination Council--which includes the Federal Reserve, 
FDIC, OCC, the National Credit Union Administration, the Consumer 
Finance Protection Board, and state-level banking supervisors--and the 
Financial Industry Regulatory Authority's 2015 Report on Cybersecurity 
Practices, as well as others.
    The Commission is also participating actively in ongoing 
discussions among Federal financial regulators and major financial 
sector trade associations including the Securities Industry and 
Financial Markets Association, the Futures Industry Association, the 
Financial Services Roundtable/BITS, and the American Bankers 
Association, about ways to foster increased coordination and possible 
use of common terminology and approaches with respect to cybersecurity 
oversight.
C. Building on the NIST Cybersecurity Framework in developing rules
    The Commission issued new proposed rules regarding cybersecurity 
testing last December, and is currently reviewing comments and working 
to prepare final rules we hope to issue this summer. The proposed rules 
rely significantly on the NIST Cybersecurity Framework as an important 
guide to best practices for cybersecurity.
Questions Submitted by Hon. Austin Scott, a Representative in Congress 
        from Georgia
    Question 1. Chairman Massad, you testified that you would not seek 
access to an AT Person's algorithmic source code without a warrant and 
that you are simply seeking to ensure that they preserve it so that the 
Commission can ``go get it using the proper procedures.'' Please 
clarify for the Committee, what procedures were you contemplating? What 
specific safeguards are you considering with respect to Commission's 
access to algorithmic source codes?
    Answer. The U.S. Commodity Futures Trading Commission (Commission) 
recently approved proposed rules that mark a comprehensive regulatory 
response to the evolution of automated trading on U.S. designated 
contract markets (DCMs). The proposed rules, known collectively as 
Regulation Automated Trading or Regulation AT, represent a series of 
risk controls, transparency measures, and other safeguards to enhance 
the U.S. regulatory regime for automated trading. The notice of 
proposal is open for a 90 day public comment period. The Commission is 
paying close attention to participants' comments regarding Regulation 
AT's proposed requirements related to algorithmic source code, 
including its incorporation of Regulation 1.31's inspection provisions.
    In response to questions about the Regulation AT proposed rule, I 
have tried to clarify questions that have come forward regarding the 
source code in testimony and public speeches. Specifically, the rule 
asks companies simply to preserve their source code so that if there is 
a problem and the Commission does need to get it, we can do that using 
the proper procedures. I am committed to a final rule that respects and 
protects confidentiality while at the same time ensuring that source 
code is preserved and is available to us when we need to reconstruct 
market events.
    As the comment period for Regulation AT draws to a close, the 
Commission will actively consider all comments received regarding 
access to algorithmic source code. The Commission looks forward to 
addressing comments raised by market participants, while also ensuring 
that it has access to all information necessary for effective 
regulatory oversight and the protection of markets and market 
participants.

    Question 2. In contrast with your statement, Reg AT requires that 
``Each AT Person shall keep such source code repository, and make it 
available for inspection, in accordance with Section 1.31.'' As you 
know, Section 1.31 requires that ``books and records shall be open to 
inspection by any representative of the Commission, or the United 
States Department of Justice'' and that, ``[s]uch production shall be
made . . . to a Commission representative upon the representative's 
request.''
    Does Section 1.31 require a Commission's representative to obtain a 
warrant before requesting documents from a market participant? If not, 
is Section 1.31 the appropriate record-keeping standard for this data 
and the standard that you contemplated in your response to me?
    Answer. Commission Regulation 1.31 is a general record-keeping rule 
applicable to a wide range of Commission registrants. As the comment 
period for Regulation AT draws to a close, the Commission and its staff 
will actively consider all comments received regarding access to 
algorithmic source code. The Commission looks forward to addressing 
comments raised by market participants, while also ensuring that it has 
access to all information necessary for effective regulatory oversight 
and the protection of markets and market participants. In particular, I 
am committed to a final rule that respects and protects confidentiality 
while at the same time ensuring that source code is preserved and is 
available to us when we need to reconstruct market events.
Question Submitted by Hon. Vicky Hartzler, a Representative in Congress 
        from Missouri
    Question. On January 15th, Chairman Austin Scott and I sent a 
letter to the Commission raising concerns about the CFTC's final rule 
on Ownership Control and Reporting (OCR). Thank you for your timely 
response on February 9th. In our letter we referenced the June 26, 2015 
FIA petition on the OCR Rule. Could you please provide us with an 
update on the progress of your response to that petition?
    Additionally, as we mentioned in our letter, the OCR rule is 
placing heavy burdens on smaller, more agriculturally focused FCMs and 
their clients, which is causing many firms to consider eliminating this 
portion of their business. It appears that certain rulemakings, 
including the OCR rule, are pushing the industry toward greater 
consolidation. Is it your intention that FCMs continue to consolidate 
so that they can better bear the increased regulatory burdens from the 
OCR rule?
    Answer. The Commission's OCR rules represent an important effort to 
automate data reporting and enhance the Commission's market 
surveillance capabilities. These rules seek to automate and strengthen 
important market surveillance functions to better protect markets and 
market participants from fraud and abuse. DMO staff has held extensive 
discussions with market participants regarding the OCR rules and their 
implementation. In addition, DMO staff is currently considering the 
issuance of no-action relief to further address industry concerns and 
applicable compliance deadlines.
    The decline in the number of FCMs has been going on for over a 
decade and is due to many factors, which I would be happy to discuss 
with you. Our staff has examined this issue and the Commissioners have 
discussed this issue at some of our advisory committee meetings. On 
many occasions I have expressed my view that having a robust clearing 
member industry is critical to making sure that all participants have 
access to the derivatives markets and to the health and resiliency of 
clearinghouses.
Question Submitted by Hon. Dan Newhouse, a Representative in Congress 
        from Washington
    Question Chairman Massad, I would like to get your perspective on 
allegations by U.S. aluminum producers that Chinese aluminum 
manufacturers are culpable of dumping, and responsible for suppressed 
prices of aluminum here in the United States.
    The Administration is considering instituting antidumping duties to 
assist aluminum producers here in the United States. While I appreciate 
the attempt to assist domestic producers, I worry about the effect 
duties may have on aluminum prices and availability here in the U.S., 
and the impact it will have on aluminum users and consumers, especially 
given that currently, domestic demand vastly outweighs domestic 
production. Can you comment on the status of this effort to impose 
tariffs, and does the Commission's economic division have an 
alternative point of view on this issue? Also, can you comment on what 
you perceive the impact of tariffs would have on prices and 
availability of supply for domestic aluminum users?
    Answer. The Commodity Future Trading Commission's Office of the 
Chief Economist provides economic analysis on the Commission's 
underlying regulations, as well economic support and advice on policy 
issues facing the Commission. Price discovery is an important function 
of these markets and our surveillance of the markets considers broader 
economic factors influencing price. However, the agency, and its 
economic division, does not predict or forecast prices based on factors 
such as the specifics of trade negotiations or tariff levels, nor do we 
have jurisdiction with respect to such matters.

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