2nd UPDATE: CFTC Issues Shutdown Plan; Only 25 Workers Would Stay

The Commodity Futures Trading Commission on Friday said it would keep only 3.7% of staff working in the event of a government shutdown--only 25 people to conduct a "a bare minimum level of oversight and surveillance" of markets, the agency said in a plan released Friday.

The CFTC posted a plan online for the possibility of a government shutdown that could be implemented Saturday, if lawmakers fail to come to an agreement on a budget before the current stop-gap measure runs out Friday at midnight.

Commissioner Bart Chilton said after the plan was posted that the CFTC "will not be able to staff key market surveillance and oversight functions" during a government shutdown.

"The costs for lack of oversight during a shutdown--both in terms of economic loss and possible market harms--could be enormous," Chilton said in a statement.

Chilton, a Democrat, said the CFTC was entering "dangerous territory" and criticized lawmakers for "playing a game of chicken" and putting the economic recovery at risk.

Commissioner Jill Sommers said a lot of people have put a lot of work into making sure the agency has an appropriate contingency plan.

"The day-to-day surveillance of the markets is a function of the exchanges and they look at data on a real-time basis and we provide oversight and will continue to provide oversight," said Sommers, a Republican.

Sharon Brown-Hruska, who was on the CFTC from 2002 to 2005, said exchanges regulated by the CFTC have continual oversight through self-regulatory mechanisms and the whole system is designed to withstand worse things than a temporary government shutdown.

"There are checks and balances that are built into the systems that govern exchange trading," said Brown-Hruska, who is now with NERA Economic Consulting.

Brown-Hruska said there is no imminent danger because Washington regulators aren't at their desks.

"It may slow them down on their rule-writing and thinking about the future but, from an oversight perspective, it's not essential," Brown-Hruska said.

A spokesman for the CME Group Inc. (CME) said they were monitoring the situation and awaiting decisions by lawmakers in Washington.

"Although we do not anticipate any immediate impact to CME Group markets, the situation obviously remains fluid," the spokesman said.

A spokeswoman for IntercontinentalExchange Inc. (ICE) said ICE's exchanges have independent self-regulatory functions.

"Our ability to conduct market surveillance and compliance functions would not be affected in the event of a government shutdown," the ICE spokeswoman said.

The CFTC's shutdown plan said the "vast bulk of the agency's operations will cease," but that certain employees would remain in place because "the complete absence of any oversight or surveillance by the CFTC would create an imminent risk to the protection of property."

A limited number of people have to stay, the plan said, to "ensure, to the extent practicable, that a bare minimum level of oversight and surveillance of the futures markets, clearing operations, and intermediaries is maintained."

Staff at the agency said essential employees already know that they are required to stay in the event of a shutdown. The plan also said the agency could call furloughed employees back to work, if it deems it necessary during the shutdown.

The CFTC won't pull the plug on staff communications devices, such as BlackBerrys, in the event of a government shutdown, but employees won't be able to check email or use phones to do any work while on furlough.

"Employees who are not excepted will be instructed to power off and securely store all BlackBerrys and laptops prior to the lapse in appropriations, and will be informed that they cannot access any such devices while on furlough," the CFTC said in its Friday notice. Previously scheduled meetings and hearings also will be canceled.

-By Jamila Trindle, Dow Jones Newswires; 202-862-6684; jamila.trindle@dowjones.com

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