FR 2021-01145

General Summary

The document describes a notice from the Commodity Futures Trading Commission (CFTC) regarding the fees imposed on self-regulatory organizations such as registered futures associations and designated contract markets. These fees help the CFTC recover costs associated with overseeing and enforcing rules within these organizations. The collected fees are deposited into the U.S. Treasury as miscellaneous receipts. The fee calculation is based on an average of actual costs over the prior three fiscal years, considering factors such as trading volume and program intricacy. Payment of these fees is required to be made electronically by a specified deadline.

Significant Issues and Concerns

A primary concern with this document is the complexity of the fee calculation formula. It could be challenging for individuals without a financial or regulatory background to comprehend. The formula accounts for direct program costs, overhead, and volumes of trading, which might be difficult to parse and could lead to misunderstandings or miscalculations.

Furthermore, the reliance on historical data for future fees might not adequately represent recent changes in trading activities or regulatory needs, potentially leading to fees that are not aligned with current realities. There is also a lack of transparency concerning the distribution of indirect and overhead costs, which might lead to disputes over fairness among different organizations.

The decision to deposit fees as miscellaneous receipts into the Treasury is noted, yet the document does not explain what these funds are specifically used for, possibly leading to concerns over fiscal transparency.

Public Impact

For the general public, this document highlights the structured approach the CFTC takes in ensuring that the rule enforcement programs are adequately funded without burdening taxpayers. By recovering costs from self-regulatory organizations, the CFTC seeks to maintain the integrity of futures trading markets. However, the complexity of the fee calculations may breed skepticism among those unfamiliar with the financial intricacies involved in market oversight.

Impact on Specific Stakeholders

The impact on self-regulatory organizations is more pronounced. Organizations with smaller trading volumes might benefit from a lower fee alternative due to the volume adjustment in fee calculations. This method can help balance the financial burden relative to their market participation.

For larger organizations with higher volumes, the fees may more closely reflect their actual oversight needs, which aligns the cost with the level of service provided by the Commission. Nevertheless, these organizations may still voice concerns over the transparency of how overhead and indirect costs are determined.

Overall, the Commission’s notice seems intent on fairness and equity, ensuring that fees are adjusted based on size and activity. However, stakeholders might seek greater clarity on how fees align with services received and how efficiently the fees are allocated once deposited into the Treasury.

In the document provided by the Commodity Futures Trading Commission (CFTC), there are several financial references concerning fees charged to designated contract markets (DCMs) and the National Futures Association (NFA). These entities, known as self-regulatory organizations, are billed to cover the costs of the CFTC's oversight of their rule enforcement programs.

Summary of Financial Allocations

The CFTC intends to recover the costs associated with its oversight program by charging fees. The fee determination for each entity is based on a formula that considers actual program costs and, in some cases, trading volumes. For instance, the example of the Chicago Board of Trade indicates an actual three-year average cost of $40,525. Alternatively, a fee calculation based on trading volume results in an amount of $183,313. However, the CFTC charges the lesser amount of $40,525. This approach shows an effort to calculate fees fairly based on historical program costs while considering market activity levels.

For the NFA, which does not engage in trading, the document notes that its fee is determined solely by the actual costs spent on oversight, amounting to $569,735. Thus, the financial structure ensures that fees are reflective of the actual oversight costs and not artificially inflated by market volume considerations.

Financial References and Identified Issues

The methodology for calculating these fees may appear complex, and the document acknowledges that it incorporates direct program costs alongside an overhead rate. Overhead costs include personnel, rent, communications, and other general expenses. The formula's reliance on these indirect costs might not be transparent to all stakeholders, potentially leading to concerns about fairness or cost distribution among different organizations.

An adjustment in fee calculation based on contract trading volume could favor smaller organizations, as they may be charged a lower fee compared to their oversight's implied costs. This adjustment aims to align fees with an organization's share of overall market activity, rather than purely on incurred costs, potentially benefitting newer or smaller entities with less trading volume.

Finally, the document states that fees collected are deposited in the U.S. Treasury as miscellaneous receipts. This transfer could be seen as lacking transparency regarding the subsequent use of these funds. Also, while electronic payment is mandated, the document provides limited guidance on managing exceptions or addressing payment issues, which could be problematic for organizations encountering these circumstances.

In summary, the financial references in the document outline the complex, multifaceted approach adopted by the CFTC to ensure that its oversight program is funded adequately without imposing undue burdens on the organizations it monitors. However, the complexity and reliance on historical data might introduce challenges in understanding or accepting the fee structure's fairness and relevance in a rapidly changing market environment.