What is the Commodities Futures Trading Commission?

The Commodities Futures Trading Commission is a government agency that regulates commodity futures and the options market in the United States.

The Commodities Futures Trading Commission (CFTC) is the main federal agency in the U.S. that protects options markets and commodity futures from market manipulation and fraud. The CFTC regulates these markets to promote competition and improve the integrity of the American financial system. The Commission has many new challenges today with the rise of different technologies and cryptocurrencies that will shape American markets for the foreseeable future.

History of the CFTC

The futures market in the United States goes as far back as 1848 when the Chicago Board of Trade was founded as a cash market for grain. Prior to the Commodities and Futures Trading Commission, most futures trading happened in the agricultural sector. The CFTC was formally established in 1974 under the Commodities Future Trading Commission Act of 1974. It was given the full backing of the government to regulate commodity futures and options markets in the U.S. Since its establishment, the CFTC guided the U.S. economy in commodity futures and options markets throughout several economic booms and depressions. Today, the Commission is dealing with the increasingly complex financial technologies that dominate both commodity futures and options markets.

Key provisions and features of the CFTC

Market oversight: The CFTC’s primary role is to oversee the commodity futures and options markets to ensure integrity. The Commission conducts extensive market surveillance and they are on top of all trends, crises and major events that occur. By supervising the markets, the CFTC ensures that smaller businesses and individuals are not abused by large corporations. Additionally since these markets often impact the price of everyday goods, the CFTC ensures prices stay at reasonable rates for the American public.

Regulation and protection of whistleblowers: In addition to oversight, the CFTC heavily regulates commodity futures and options markets. It sets the guidelines for companies on what they can and can’t do in the markets. Whistleblowers can tip the CFTC if certain corporations or individuals are violating the markets illegally – it then ensures whistleblowers remain protected; this directly helps improve the integrity of the markets.

Enforcement of rules: The CFTC can enforce rules and regulations. In cases of fraud, market manipulation and trade practice violations, it can take legal and financial action against companies. In these scenarios, many small businesses and individual investors are harmed. The CFTC tries to recompense these harmed groups by penalizing the violators. With the full backing of the government, it can penalize even the largest corporations

Who must comply?

The U.S. derivative markets include businesses and individuals that engage in futures, options, swaps and more. All of these financial activities come under the direct regulation of the CFTC. The CFTC sets guidelines on what is and what is not permissible in the derivatives market.

Companies and individuals that are active in the derivatives market will need to register to get accredited. This allows the CFTC to provide a network where anyone in the market can be searched for. This directly reduces fraud and illegal activities that occur in the markets.