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CFTC OIG Report Finds Issues in the Office of the Chief Economist

The CFTC’s Office of the Inspector General (OIG) recently released a report highlighting issues of understaffing in the CFTC’s Office of the Chief Economist (OCE), along with perceived censorship and a poor reputation. The OIG noted that OCE currently has 12 full time economists, 5 economist consultants (three of which are unpaid), and is planning to hire two economist consultants. While the OIG report calls the current staffing level an “improvement,” it notes that “it is not enough in our view to assure a robust research environment.”

The report is a follow-up to a February 2014 report issued following an investigation into a 2012 complaint from the Chicago Mercantile Exchange charging that the OCE improperly granted access to non-CFTC economists to certain proprietary trading data for use in academic research. As a result of the complaint, the CFTC suspended all non-full-time economists’ access to non-public data and halted certain portions of the OCE research program. According to the report, from the receipt of the complaint until January 2014, the overall number of OCE economists dropped from 39 to 11. The report found no evidence of illegal disclosures. However, it “concluded that delays in the publication of economic research reports were unacceptable, identified potential legal deficiencies in the Agency's current publication processes, and recommended that the Agency' s processes in this regard be both legal and prompt.” The OIG report suggested that “[t]he principle point is that an economic regulatory agency is potentially blocking itself off from the future input of highly qualified academics to assist the agency in its tasks.”

The follow-up report noted that OCE has reestablished the research program and improved the pre-publication review process, but has not restarted the visiting academic program. While OCE was allotted $200,000 in 2015 for this purpose, it chose to spend the funds in a different manner. The report noted that the Chief Economist was reluctant to hire outside academics because of a perceived drain on the resources of full-time employee and damage to morale due to the belief that the full-time economists would need to devote significant time to “handling administrative tasks on behalf of visiting academics.” According to the report, the Chief Economist suggested that “the administrative and morale costs of permitting data access to outside academics exceed the benefits of independent, peer-reviewed academic research relevant to markets regulated by the CFTC.” The OIG reported that the full-time economists did not share the same concerns, but rather felt that “if visiting academics were allowed to return and research independently, the Commission might attempt to further limit full-time economists' opportunities for long-term academic research.”

Additionally, the OIG discovered an impression among OCE economists that OCE “is now censoring research topics that might conflict with the official positions of the CFTC.” While some of the perceived censorship occurs by the economists own topic selection, the OIG cited reports “that the Chief Economist has declined to permit research on certain topics relevant to the CFTC mission, including position limits.” The report noted that two former Chief Economists (who collectively worked under six Chairs of the CFTC) felt that the Chairs “supported the Office's ability to publish conclusions that were contrary to current Agency policy.”

The report noted that “eight visiting scholars, many from top universities, will be entering the CFTC as unpaid consultants within the next three months,” a plan that the OIG says “certainly appears feasible as it is not unusual for academic economists to work in OCE for no pay, in exchange for the unique market research capabilities available only at CFTC.” However, the OIG noted that OCE “struggled” to fill four full-time economist positions, at least in part due to a lingering “negative view of the agency resulting from the OCE research program shutdown in 2012.”