The NFA has announced that they approved their Fiscal Year 2014 budget. The budget, for the fiscal year which starts on July, 1 2013 is for $74 million, an 18% increase above last year. The NFA claimed that “one reason for the significant rise in spending is due to the registration and monitoring of new swap dealer (SD) and major swap participant (MSP) Members.” They added that they are also hiring additional staff to handle the increase of oversight requirements.
Additional oversight also come as the NFA announced earlier this year that they were applying recommendations from the Berkeley Research Group (BRG), and independent audit committee that evaluated the Self Regulating Organization (SRO) after its failure to prevent the MF Global and PFG frauds. The BRG recommended greater training of NFA members and monitoring policies.
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The NFA also added that “the influx of about 1,000 new commodity pool operator (CPO) Members after the CFTC last year eliminated numerous widely held CPO exemptions” would further lead to higher expenses for the upcoming fiscal year. Similarly, they mentioned that “the CFTC amended the definitions of CPO, commodity trading advisor and introducing broker to include swaps. If these entities engage in swap activities, they will be required to register with the CFTC, which will result in a further increase in NFA membership.”
As a result, it was stated that the additional regulatory responsibilities as well as abovementioned training and monitoring would lead to “the need for additional staffing”. On this, the NFA anticipates the hiring of about 100 employees for the coming fiscal year and attributes the budget’s increase to mainly be due to additional headcount. They added that the SRO is expanding its Chicago office and leasing new space in New York.
Commenting on the budget increase, David Hawrysz, NFA’s senior vice president, CFO and treasurer stated “given NFA’s current expansion, there are many more variables to consider when constructing the budget. For that reason, the Fiscal Year 2014 budget process was especially challenging.”