News Article Budget constraints could force the U.S. futures regulator to outsource enforcement of planned new trading rules to an industry- funded body, a senior official said Thursday. The CFTC has alerted the industry-backed National Futures Association that it may be asked to shoulder some oversight of the over-the-counter derivatives market handed to the government agency by the Dodd-Frank financial reform law. The CFTC has estimated that 300 to 400 new firms will register with the agency when it assumes oversight of the OTC market. Publication DowJones Date January 13, 2011 Cross

SEC Litigation Release The SEC filed an injunctive action against CytoCore, Inc., the former chairman of its board ("Chairman"), and the company's CEO and CFO, alleging that they engaged in violative conduct relating to trading in the company stock and as to the Chairman's compensation. Among other things, the SEC complaint alleges that the Chairman acted as an unregistered broker by receiving transaction-based compensation for soliciting investors in the company. Document Number SEC LR-21811 Date January 13, 2011 Cross References (links may require a Cabinet subscription) SEC Complaint

Commentary Economist Craig Pirrong dissects the Antitrust Division's recommendation that the CFTC adopt tougher rules to prevent "powerful entities," i.e., swap dealers from achieving majority ownership in DCMs/SEFs. Pirrong concludes that the DOJ position reflects a "fundamentally flawed analysis of the economics of derivatives trading and clearing . . . and "exhibits glaring deficiencies in its understanding of the economics of competition in trading and in clearing." He argues that the focus on control of a dominant entity by dealers "seems to reflect politics, rather than economics."

Commentary Economist Craig Pirrong compares the CFTC's Proposed Rule on Core Principles for Designated Contract Markets, which would among other things regulate the pricing of exchange services, to the FCC's net neutrality rule proposal, which would regulate the terms on which the operators of internet services can offer and price access to their systems. Observing that the CFTC's imposes constraints on the terms on which operators of exchanges can offer access to their trading facilities, Pirrong concludes that this proposal is "yet another troubling example of the expansion of the CFTC's

SEC Press Release The Securities and Exchange Commission has charged a Greensboro, N.C.-based investment adviser firm and its owner with defrauding investors in two hedge funds by secretly diverting millions of dollars to themselves through various self-dealing transactions. Date January 7, 2011