CFTC to Track Traders With Barcodes; Admits it Regulates Futures Markets by Fax

We were [half] joking yesterday in our post about the CFTC's budget woes, when we said, "we're sure [Gary Gensler] will get his budget money and finally upgrade the Win98 box used to run the position limits calculator". From Reuters (emph. ours):

(Reuters) - Regulators seeking a barcode-like system to keep track of thousands of traders and millions of swaps contracts face an uphill battle to do it quickly and efficiently, firms that will be impacted by the new framework said on Friday.

The U.S. Commodity Futures Trading Commission is crafting an identification system for the swaps industry -- one that it wants to mesh with similar ID systems under consideration by securities and systemic risk regulators in the United States and Europe.

The numbers and the databases behind them will be a key part of the market infrastructure, and must be accurate and secure, said participants at a roundtable held to collect input from those who would be assigned a ID and organizations vying to collect the data.

"If you launch something, it must be bulletproof from the start," [apt metaphor, with CFTC Commissioner Chilton poised to "pull the trigger"] said Paul Janssens, product manager with the Society for Worldwide Interbank Financial Telecommunication, or SWIFT, which records most global money transfers.

Currently, the financial services industry has a hodgepodge of many identifiers that regulators are trying to mesh.

The CFTC sees the ID system as a "crucial regulatory tool" for monitoring risk, preventing market manipulation and enforcing position limits, said David Taylor, part of the rule-writing team that put together the CFTC's proposal, which is open for industry comment until February 7.

Cost is an issue for the regulator, which currently collects some of the data for its oversight of the futures market by fax.

The CFTC is struggling with how to pay for the new staff it needs with its budget frozen by Congress, and may run out of room to store data by October because of cutbacks to its technology budget, Commissioner Scott O'Malia said this week.

Thanks to the computer technology industry being largely unregulated, there has been a 350,000 times reduction in the cost of storage over the last 30 years, costing less than $0.002/MB today.

So, it's virtually inconceivable that the CFTC can't afford an extra hard drive or two. But yes, if you're regulating the markets by fax, telegraph and other assorted eighteenth century innovations, the invoices for filing cabinets can add up (the "C" does stand for "Commodities", right?).