The Commodity Futures Trading Commission, or CFTC for short, is a federal agency that operates independently to oversee the derivatives markets in the U.S. This includes things like futures contracts, options, and swaps. The CFTC aims to ensure that markets are competitive and efficient while also safeguarding investors from manipulation, unfair trading practices, and fraud. It was created back in 1974 with the Commodity Futures Trading Commission Act.
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The CFTC is made up of five commissioners who are chosen by the president and need Senate approval. They each serve staggered five-year terms. The president picks one commissioner to be the chair, and there’s a rule that no more than three commissioners can belong to the same political party at the same time.
These commissioners are involved in various committees that deal with agriculture, energy and environmental markets, global markets, market risk, and technology. There’s also a committee meant to enhance cooperation with the SEC, but it’s currently not active. The committee members come from different sectors, including specific industries, traders, futures and commodities exchanges, consumers, and environmental organizations.
The Commodity Exchange Act, which was passed in 1936 and has been updated several times, governs the trading of commodity futures in the U.S. This act lays out the legal framework for the CFTC’s operations. Thanks to this act, the CFTC can create regulations that are found in Title 17, Chapter I, of the Code of Federal Regulations.
Who Needs to Sign Up with the CFTC?
All middlemen and organizations that represent others in futures, swaps, and options transactions need to register with the CFTC. This covers things like commodity pool operators, advisors, futures commission merchants, introducing brokers, and swap dealers.